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Common Causes for Stockouts (and How to Avoid Them)

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My Dad (the real-world version of your Hollywood Welshman) taught me it’s always best to keep a suit on hand. That way if a last-minute special occasion pops up, you don’t need to run to the store at 9 pm the night before searching for one that probably doesn’t fit well. He also reminded me that I’d need one for date nights, though I don’t seem to remember having many of those in college that required a suit. 

Regardless, this rule taught me the importance of being prepared. Preparation is a concept purchasers spend most of their day thinking about. It’s a bad look when a business doesn’t have an item a customer is asking for due to an ill-timed stockout. A moment like that may cost the business more than just that one sale. Customers have long memories. Stockouts don’t have to be inevitable and can be avoided as long as you keep an eye on the following: 

Inaccurate Data

A very common cause for stockouts is something that often has nothing to do with purchasers: unfiltered data. A business’s inventory is constantly fluctuating. Item counts change on a day-to-day basis. While creating orders, purchasers might accidentally reference inaccurate data and not restock items. Data could also be incorrect simply due to human error. At the end of the day, data is just easy to mess up on account of its minute details. Unfortunately, purchasers need clean data to avoid stockouts. 

During Recurrency’s 48-hour implementation process, we clean your data. We’ll organize your cluttered data and make it usable. Repeated data that is flagged for typos will be taken out to preserve accuracy. Data input is tedious but it has to be done right to maximize all business processes. The Recurrency platform is ready to take this job off your hands. 

Scheduling Complications

There are a lot of factors to consider when scheduling a product reorder. Your business’ sell rate is at the top of the list but given rampant supply chain delays, this should also be taken into account when planning. Reorders should be scheduled months in advance to make up for unavoidable delays. The supply chain crisis is no longer a surprise and all businesses should be proactively planning around it. The business with the reputation of always having stock during a pandemic will never have a slow day. 

During the winter months, weather delays can also disrupt an important shipment. Communication with your team on outstanding orders will help keep a chaotic time like a snowstorm calm. 

Inadequate Forecasting 

The final piece to the puzzle of planning reorders lies in prediction. Purchasers have to do a delicate dance of side-stepping stockouts while also not tumbling into an overstock. Once again, clean data is their best friend. Purchasers study their historical data to assess where their inventories will likely be at the time of a reorder, but even the best weatherman sometimes gets the forecast wrong and this goes for the best purchasers.

Machine learning algorithms that are able to study thousands of data sets ranging from inventory to a business’s product usage are the solution here. Recurrency’s Demand Forecasting (currently in a closed beta) does exactly this. With artificial intelligence that is built for massive data sets like your ERP, our models have shown to be smarter forecasters than humans. And our purchasing recommendations are your best chance at this sweet spot: no stockouts, and no excessive surplus stock, too. Retailers using Recurrency don’t have to buy their purchasers stress balls as the pressure is taken off them. 

Solutions

  1. Buy in Bulk: If you have ample warehouse space, consider buying in bulk rather than limping from small order to small order. Larger and less frequent orders will ensure you’re better prepared. (Also keep in mind that perishable products put limits on this solution.) 
  2. Diversify Suppliers: With supply chain delays, it’s important to not rely on one supplier where possible. Having different streams of product coming in will allow you to breathe a little easier if one falls through. It can also help out in leveraging against price increases. 
  3. Update Inventory Data: Your purchasers rely on inventory data and so it has to be clean. Don’t worry, Recurrency can handle this for you. We make it a top priority to update all relevant data before reorders are made to secure stocked shelves. Making sure your A/B/C categories are current goes a long way. 

 

Finding your sweet spot of inventory is key to maintaining and controlling your margins. Now that I’m older my warehouse (aka the closet) is well stocked for multiple occasions. Dad was right after all: one is a good start, but having the right one at the right time makes the difference.