Out-of-Stock is Out-of-Business

1. Out-of-Stock is Out-of-Business Stockout or out-of-stock is a Sin for Businesses. What is stockout and how to prevent it? This blog will tell you everything that you need to know about Stockout like its reasons, consequences, strategies, and solutions. The percentage of products that are out-of-stock when consumers want to buy them is known as the Stockout Rate, simple! The simple formula to calculate Stockout Rate is the number of goods not in stock divided by the total number of items in stock. AWL India has done extensive research and found that the usual Stockout Rate around the world is over 8%, and it keeps on increasing. 8% may sound like a fraction to some people but in bulk order processing and the long-term, it certainly results in severe revenue loss for businesses. Key Takeaways Understand the reasons why Stockout happens. What are the consequences of Stockout? What does it costing to your business? How Covid-19 pandemic accelerated Stockout Rate throughout the world? How to prevent your inventory from Stockout? Reasons behind Stockout Stockout happens because of several issues like ineffective cash flow management, lack of working capital in the company, supply chain delays, unable to produce an adequate amount of stock relevant to the demand in the market, and many other replenishment issues. Also, it’s been researched that over 70% of the Stockout caused due to retailers ordering very late or too little. The remaining percentage of Stockout happens because of non-replenishment and poor inventory management. Sometimes businesses failed to estimate the demand for their products in the market and hence the shortage happens and even the safety stock level gets too low. We have also seen that many businesses have poor order management systems and limited order processing. Apart from all these reasons, poor quality of the products, wrong lead time and last day delivery are also recognized causes of Stockout. Consequences of Stockout Customers’ satisfaction suffers if they don’t get what they want. Customers tend more inclined to look elsewhere for the items they require if you don't have them on hand, therefore Stockout might result in missed sales and a loss of revenue to your business. They are less likely to return to your products and try to hunt for alternate options for the same product. You can get some relief if you have a monopoly in the market but that’s a rare chance in today’s market. Let’s discuss the consequences of Stockout in detail. The buyer has to wait Buyers may be willing to wait if the item is extremely important to them and they don’t have an alternative. Despite this willingness, the customer's degree of satisfaction may be severely harmed. This not just tarnishes their interest in buying from you in the future but also gets uninterested in checking out your other products and services.

2. Customers’ backorder items This is even a poorer case and not as good as when the customer agrees to wait for the order. Even if the customer still orders the out-of-stock item with you hoping to receive it as soon as it gets available, the degree of client satisfaction remains lower. The customer withdraws the order This is the worst-case scenario when the customer cancels the order and starts hunting for an alternate seller especially in the case when the item is required immediately. It's still possible that the buyer will place another order with you in the future, but these possibilities are slim because of the unhappy ordering experience with you in the past. The customer starts shopping elsewhere This is the last bad thing that can happen to your business sales. Because of the poor communication or improper information provided by your sales team about available inventory for purchase, consumers get highly dissatisfied and they may be inclined to cut all ties with you and engage with other brands. And, never shop with you again! How bad is Stockout for Your Business? Let’sbe in your buyer’s shoes first to understand the consequences of the out-of-stock and why consumers today get so happy with the brands that don’t fulfil their order demands. Assume there is a customer who’s purchasing your products and had been saving up for the product s/he saw on your online/offline store. S/he is delighted after finally having enough money to purchase that exclusive product, only to discover that it is now out of stock! Yes, your customer is now annoyed, disheartened, and unmotivated to shop further with you. This is what’s going on in the consumer’s mind during the scenario of Stockout and this is costing you more than you think. Let’s understand in detail how’s is your business going to suffer because of this. Losing Sales and Business Revenue Inventory management is the most crucial process and inventory is the most fundamental asset for your organization if you’re into manufacturing and selling products. It’s a very simple and foremost point to understand. You get profitable by selling your products and if you have a shortage of products then your customers can’t buy them and your profits are reduced. Running out of specific products that are in demand by your consumers, your business loses nearly half of intended purchases. If you’re a billion dollars company or retailer, you’re losing 4% of sales every year means $40 million losses for you each year which you could have saved by increasing your manufacturing capabilities and incorporating better inventory management. Tarnishing Your Brand Image We all have this tendency to stop purchasing a particular product that we used to enjoy because now it frequently remains out of stock. And it’s not just about that unavailable product that’s leaving a bad customer experience, but also how your buyers have begun to perceive you as an irresponsible brand. A little contradictory but many times Stockout gives the impression that the product is so good that it sells out quickly, but it also gives the impression that you’re incapable of mass production and not understanding your customers’ demands. Worse, once a bad impression is made in your customers’ minds, it’s very hard to gain back the reputation your brand lost. They drive away from you and toward your competition! As a whole, if you don't move and make decisions quickly and avoid Stockout, your customers will start having a negative perception of your brand and may influence others not to purchase from you. Covid-19 Pandemic and Stockout around the World

3. Consumers and businesses have suffered shortages in a wide range of goods, from toiletries to cars, since the virus outbreak began in 2020. COVID-related supply interruptions have been noted by numerous economists and policymakers around the world as a potential source of the rise in prices of goods. However, there has been little empirical evidence of the magnitude of shortages across various categories of consumer products, as well as whether they have an impact on retail prices and inflation dynamics. Our new study, which looked at significant retailers with both online and physical storefronts, provides a more detailed picture of the nature of product shortages and their link to price increases. Take Right Measures and Prevent Inventory Stockout Over 40% of buyers feel that Stockout lessen their shopping interest and experience. But there are some ways that you can go along to avoid Stockout and stop hurting your consumers’ sentiments and your business profits. Taking correct measures to better understand your business and products, as well as optimizing your procedures will help you avoid Stockout. Let’s know in detail. Incorporate Artificial Intelligence-driven tools. In the last decade, AI-driven technologies have evolved and revolutionized the sphere of the commercial world. We all use Artificial Intelligence in some form or the other. Using AI-driven applications can also ensure that your business has a central repository with all of your inventory information. You just need to adopt the latest technology and keep updating it with time to avoid running out of supply. Automated inventory replenishment, supplier management, sales tracking, workforce automation, and other digitized functions are available in many supply chain consulting platforms available today. When you have comprehensive monitoring of all your processes in one place, inventory management through Artificial Intelligence software becomes your piece of cake. Boost Your Logistics As a result of frequent lockdowns, change in export/import policies around the world, and port limitations, a smooth supply chain became the priority for businesses around the world. The scenario became intense when oil prices and consequently prices of the goods increased. To avoid international constraints, strive to obtain your components or products locally or nationally and should also engage in a solid supply chain procedure, which includes distribution and transportation, to ensure that everything runs well and there are no logistical delays. Maintain Organised Operations While automation can keep track of inventory in a virtual sense, physically organizing company processes properly is extremely beneficial too. Despite its insignificance, having organized systems at work is one of the most important techniques to avoid Stockout. Organizing inventory operation physically not only ensures that no merchandise is lost due to theft or damage but also allows you to physically view and visualize the inventory, which can help you avoid Stockout. Spend some time-cycle counting to determine if what's on the systems corresponds to what's in the store. Predicting Resilience Précised demand forecasting can completely revolutionize your supply chain management companies in india. Researching and scrutinizing the data to know which of your products has been in high demand will assist you in boosting the production and ensuring that manufacturing is running smoothly to avoid any Stockout. Over 70% of businesses find it difficult to estimate inventory demand as they are not upgraded with complete automation in inventory management and product manufacturing. Today’s technology and advanced software can help you get every demand and supply insight so that you can easily analyze your further business’s actions and steer clear of human error.

4. Manipulate the Market's Demand While this may appear unethical for some businesses, it isn't. If you know that demand for a product is increasing and that you’re going to run out of inventory soon, you can manage demand by raising the price somewhat. Some may find it contradictory but the truth is that businesses make more money from the inventory after raising the prices of the commodity and mass production stress is not exerted on production as well. Perform regular analysis to see which products are going out of stock and can be used to raise the price. Also, create reorder points so you know when to replenish your best-selling stock. The only suggestion is that don’t do it too frequently and not on all products. Examine your previous sales and come up with pricing that won't drive your customers away forever. Conclusion Inventory management is critical no matter whichever industry you belong from in long-term performance and profitability. You can run a report on inventory trends, automate reorder points, view inventory counts in real-time at the SKU level, and make predictions. With sophisticated and accurate inventory management software in place, stock control tactics can be formulated to assist you in maintaining a healthy inventory turnover and keeping your stores stocked with the proper amount of items.