Forecasting

What is a stockout?

Stockouts, out-of-stocks, OOSs; whatever you call them, running out of stock is an everyday scenario for retailers everywhere. You may think going out of stock is great news – it means your items are popular, which is the primary goal, right?

The thing is, when you’re frequently going out of stock of your major product lines and not replenishing in time, it can have mammoth impacts on your bottom line. You could be losing valuable profits right under your nose and not even realizing the extent of your losses.

Stockouts can occur at any time, and anywhere in the supply chain – but it’s the most damaging to revenue and brand reputation when it occurs right as the customer is about to buy.

What causes a stockout?

There are many reasons you may run out of stock of certain products. Unexpected surges in demand are the toughest to prepare for as a retailer, as they could be due to trends or events you would never see coming (such as going viral on social media or TV, a sudden change in weather, or a global pandemic) – and before you know it, you’re fresh out of stock of your best items. Supply chain issues, such as delays in delivery or a pile-up at the port, can also cause stockouts – as well as being too slow to replenish, human or technical error, or simply not having enough visibility of everything in your inventory.

Inaccurate reporting and insufficient demand forecasting, perhaps due to manual calculations or disconnected systems, can also leave retailers in the lurch with no wares to sell their customers.

Left unmanaged, this can erode brand reputation. UK-based apparel retailer Goose & Gander discovered first-hand how lack of inventory data was affecting their customer service.

“We had zero visibility and we were frequently overselling stock, but it would sometimes take a couple of weeks for us to realise. We’d then have to get in touch with customers to explain that we didn’t actually have the stock to be able to fulfil their order. We were issuing lots of refunds – and customers were understandably very unhappy with the level of service, as were we.”

Olly White, Director at Goose & Gander

During the pandemic also, stockouts were disastrous for retailers – up by 250% (Adobe, 2021) – with 37% of consumers who said they’d simply shop elsewhere if they couldn’t find what they wanted. With no reliable way of predicting incoming demand, or getting adequate warning of particular items about to stockout, it’s too easy to let stock run dangerously low until customers are inevitably left disappointed and disillusioned.

What can I do to avoid stockouts? 

Replenish your inventory with time to spare.

A data-led system such as Inventory Planner will not only warn you of when items in your inventory are close to going out-of-stock, but make recommendations on which items you should repurchase and when, so that your stock levels remain up-to-date and completely optimized.

Use in-depth inventory data.

When it comes to getting on top of what’s exactly in your warehouses, data is king. Gaining full visibility of how much stock is in your warehouse, what’s about to go out-of-stock and what’s overstocked will allow you to see where your inventory is trapping cash flow, as well as highlighting other insights such as your best-sellers, slow-movers and how much revenue is forecast to be gained or lost due to these items.

Implement reliable, data-driven inventory planning software to forecast demand.

“With Inventory Planner, we’re able to keep ahead of our inventory needs so that our out-of-stocks stay low and our growth rate is a lot higher.”

Bryan Chu, Bells of Steel.

In this modern e-commerce climate, things change quickly and unexpectedly. Rather than fumble in multiple spreadsheets which are time-consuming and error-prone, your best bet is to implement dynamic, inventory planning software that uses in-depth knowledge of your historical sales in order to accurately predict demand. Inventory Planner also factors in supply chains, seasonality, marketing shifts and promotional periods to ensure your demand forecasts are razor-sharp. Easily avoid stockouts and keep your inventory (and your revenue) flowing, with access to the right intelligence to move your business forward.

To learn more about how Inventory Planner can help you avoid stockouts and transform the way you manage inventory, try our free 14-day free trial.