Navigation In Inventory Stockouts - The Soul Of Business

To understand inventory stockouts and how to navigate through inventory levels, we must understand what’s stockout is. A stockout means when inventory runs out, preventing the purchase or shipment of an item, which lowers sales and diminishes revenues. Pain associated with stockouts may include clients' final farewell as well because over 90% chances are, he is not coming back to you for another shopping disaster.  Shortage in inventory can prove to be like King Tut’s curse that destroys everything. If there is no proper indication, precise prediction and final planning you’ll not be able to replenish the stocks with an adequate number of units before the selling season starts. And the stockouts of the products will remain unchanged. Now, Inventory Stockouts or Stockouts are the same things. When your inventory finishes it means your products are stockouts or inventory stockouts, and currently unavailable to your customers.

DO YOU KNOW?

• 66% of buyers feel that supply chain problems won't ever be resolved.
• In 2021, the supply chain hurt 87% of Americans.
• Because of inventory stockouts, 60% of purchasers are unable to buy a product.
• 82% of them worry that the supply chain may interfere with their plans for important events.
• 61% of them feel annoyed, 46% impatient, 45% nervous, and 34% furious about inventory stockouts.
• After COVID-19 broke out, 75% of businesses experienced poor operations during inventory stockouts.

KEY TAKEAWAYS

• Latest statistics on inventory stockouts
• What are inventory stockouts and stockouts?
• Why does inventory stockouts known as poor performance in the finals?
• What are the measures to avoid stockouts?
• What are Reorder Point and Safety Stock? How to calculate Safety Stock?
• Why inventory management in warehousing is important? How to do it?
• The conclusion

Why Inventory Stockouts is a Great Distress?

Inventory stockouts certainly put a very negative effect on customers' buying experiences, therefore you should put all of your efforts into preventing them. Stockouts cause aggravation and disappointment for both businesses and the buyers who are prepared to buy and may require your goods right now, but not getting them because they are out of stocks. It ultimately results in a loss of revenue and tarnishes the reputation of your brand, and greater chances are that the customer will never come back. Poor customer satisfaction and unfavourable customer reviews can make or break your business.

Customers may submit unfavourable evaluations on your website or independent review websites if they frequently notice that your product is sold out. These reviews are visible to prospective clients, who can consider your company unreliable. Your bad evaluations give your competitors an added advantage, that sells your product’s alternative. Because they know where are you falling short and they can start promoting the alternative of the product that’s stockouts at your end.

And the bad news is that the solution to inventory stockouts is not simple because there is no universal solution to inventory management that goes well with all kinds of businesses, and inventory navigation in stockouts. Depending on the industry and current supply chain infrastructure, every business experiences a particular set of risks and advantages. However, one way to go forward is by automating their inventory management system at the warehouses where their units are getting stored, just like AWL India, which has all its warehouses automated with the latest warehousing technology and supply chain processes. Put replenishment strategies in place to ensure that inventory arrives on shelves at the proper time and location to prevent stockouts.

So, what to do?

Before you jump onto solutions, let's understand first, why does inventory stockout happen? What is the cause of stockouts in inventory? Honestly, there are numerous causes of stockouts. Products going out of stock can be caused by a variety of factors, including underestimating client demand, significant supplier delays, not having enough money to buy additional inventory, etc. Stockouts are frequently unavoidable and many times beyond the control of businesses disrupting the inventory levels impacted by delivery problems, production delays, human mistakes, or unpaid invoices. If these kinds of delays occur frequently, you should think about changing suppliers or looking for other ways to improve supply chain management, such as working with a third-party logistics (3PL) provider like AWL India which is Gurgaon based logistics provider and warehouse management services in PAN India, utilising technologically advanced tools to assist with inventory forecasting.

Now, let's fix it!

For direct-to-consumer brands, a situation where inventory is out of stock must be avoided. If your products aren't easily available, customers can quickly hunt up alternatives. You may lose potential and returning customers permanently, which would affect your customer lifetime value in addition to reducing sales and averaging order value. What you can do to prevent stockouts from harming your business’s performance? Let's find out!

Improve Your Turn-around Time

For your customer, turn-around time (TAT) can be the period between the booking made and receiving the order. But for you, the turn-around time is the interval between your purchase order and the supplier's actual delivery date. This has to be highly significant. Your inventory is just kept on hand to cover the supplier’s TAT. After all, your business wouldn't even require inventory storage if they could teleport things into your warehouse with zero days of TAT. But that’s not easy and almost impossible in most cases if you’re the seller and you’ll have to manage your warehouse’s inventory as well. Your goal is to reduce TAT as much as you can to satisfy consumer demand and shorten the time between purchasing stock and collecting money. By doing so, you can keep your inventory's stock levels precise and prevent stockouts. Here leading warehouse logistics companies in india like AWL India come into the picture. These warehousing management companies have installed cloud computing and automation into their storage facilities which run on complete artificial intelligence and robotics.

Predict Reorder Point

These warehouse and inventory management companies pre-calculate reorder points of stocks. The stock level below which you don't want to go is known as a reorder point. The amount of time it takes to place a fresh order before your stock drops below the cutoff point is also considered when determining an optimum inventory reorder point. Or in layman's words, a replenishment order should be placed as soon as the stock level for one of your goods is about to hit the reorder point. Calculating reorder points in the inventory management system is an advantage of never having a stock shortage. It also helps in overstocking which ultimately leads to fewer spaces for required stock. Automated warehouse companies like AWL India calculate reorder points by adding up TAT required and safety stock. Safety stock is used in sudden inflation in the demand for a particular product. Safety stocks may prove to be evil if market demand predictions are made wrong by your experts.

Calculating Safety Lock

Let's practice this in a real-world business scenario. Suppose Pepsi has sold a maximum of 100 cans of cola in a store in one fine day. This is the Maximum Daily Usage (MDU) of Pepsi in a store. These 100 cans have taken a maximum of 20 days to travel from the manufacturing plant to a fulfilment facility. This is their Maximum TAT in days.

But not every day any store can sell 100 cans, on an Average the daily usage in all the stores is 50 cans. This became Pepsi’s Average Daily Usage (ADU). Also, not all the time 100 cans reach fulfilment centres in 20 days. Sometimes they get delivered in 10 days, sometimes in 25 and may be different the next time. But the Average TAT is calculated typically as 15 days.

Now the formula is simple:

(MDU x Maximum TAT ) – (ADU x Average TAT) = Safety Lock

So, lets do the maths,

(100 × 20) - (50 x 15) = 1250

This suggests that Pepsi should have 1250 cans of cola as a safety stock at any time.

Inventory Management is the Solution

Predicting future demand is the first step in inventory management in any B2B logistical company or B2B warehouse management company. These inventory management companies like AWL India must make sure the appropriate inventory levels are available to satisfy clients’ demands while not increasing the storage cost and distribution fee. It's one thing to not have enough inventory to fill orders and satisfy customer demand, but it's also important to avoid having too much unnecessary inventory, which can result in higher inventory carrying costs and cause "Dead Stock", stocks that are no longer required in the warehouse because these are either out-of-date or their trend or season is gone.

Without effective inventory management, your bottom line will unavoidably suffer. Thankfully, keeping track of your inventory by warehouse companies and storage facilities like AWL India is not difficult. These warehousing management companies use adequate automation in their inventory management systems and spend good capital on highly advanced inventory management software and other digitization processes in logistics and supply chains, required in the management of inventory and avoiding inventory stockouts. They can keep your inventory with tech-savvy and integrated inventory management capabilities in addition to powerful order fulfilment services.

Conclusion

For businesses coping with uncertainty and rising customer demands, empty shelves and inventory stockouts indicate peril. Businesses continue to not change their way of handling their warehouse management and face challenges as a result of irregular inventory deliveries. The remedies for all of these problems are rapid replenishment strategies, inventory management, and calculating and reorder points that you have read above that guarantee safeguarding businesses in the upcoming, unpredictable years.

Your business should give top importance to preventing stockouts and taking the help of leading logistics and warehousing companies to handle your inventory with their proficient team and highly advanced inventory management technology. Also, concentrate on your supply chain optimization by using these B2B logistics companies as a trustworthy transportation partners for your goods. By doing this, you can manage inventories more effectively and get ready for future demand.

Another benefit of hiring and supply chain company, your business can receive the retail fulfilment know-how, latest technology, all-time inbound and outbound logistics support and on-time delivery of your goods to your customers' doors, as such famous supply chain management firms use tech-enabled logistics and warehousing services.

Source : https://www.awlindia.com/us-en/blog-details/navigation-in-inventory-stockouts-the-soul-of-business