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Causes and Solutions for Stockouts

Stockouts occur when product demand exceeds available inventory, which can lead to lost sales and customer dissatisfaction. Causes include unforeseen increases in demand, poor sales planning, inadequate inventory control, and supplier delays. To avoid stockouts, companies should improve demand forecasting, monitor stock indicators, and automate processes with management systems.

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18 views6 pages

Causes and Solutions for Stockouts

Stockouts occur when product demand exceeds available inventory, which can lead to lost sales and customer dissatisfaction. Causes include unforeseen increases in demand, poor sales planning, inadequate inventory control, and supplier delays. To avoid stockouts, companies should improve demand forecasting, monitor stock indicators, and automate processes with management systems.

Translated by

ScribdTranslations
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

OUT OF STOCK

Stockouts are the unmet demand due to product shortages.


in stock.

Stock breakage, therefore, occurs when the inventory available


the company is insufficient to cover the amount of products they want
buy - that consumers demand.

Causes of stock breakage


Some of the causes of stockouts are the following:

Unexpected increase in demand: A sudden rise in the


demand for a product can lead to stock breakage. This situation
would affect the company's production chain, given the popularity of
certainly good. Therefore, I would require an assessment to determine the
increase in demand. That is to say, it is important to know whether it is due to factors
cyclical or structural to make the appropriate adjustment.
Defective sales planning: This refers to poor forecasting.
of the company's sales level. Unlike the above, in this case it
due to foreseeable increases in demand.
Deficiency in management: The lack of communication between departments
it can cause delays in production. This is due to not communicating with
advance a order or the existence of bureaucratic processes for
formalize the purchase orders.
Poor inventory control: This point refers, for example, to the lack of
periodic stock update. An error of this type could indicate that the
the amount of required products is in stock, when in reality it is not
it is.
Delays in delivery from suppliers: This could indicate a
volume less than ordered or delays in transportation.

Consequences of stockouts
Some of the consequences that this may cause for the company are
the situation is:

Loss of sales: Clearly, the income generated from


the unmet demand.
Customer dissatisfaction: By not finding the products they want,
customers leave without meeting their needs or desires. This could
to signify the decrease in the number of customers.
Loss of credibility: The decline in credibility would cause damage
important to the brand. This would create a reputational damage that could be
fatal, depending on the competitiveness of the business environment.
Logistics costs: The company will be forced to reduce delivery times.
delivery to resolve the situation. Therefore, requiring a service of
Faster transportation will require a higher price.

How to avoid stockouts?


Some of the measures that can be considered to reduce the risk
stock outage are:

Sales planning: First, the model must be optimized


sales. That is, to improve or employ a demand model that allows
anticipate market variations with greater margin. Likewise, it must
to predict the seasonality of the sector. That is, the trend of the
demand throughout the year.
Stock planning: Utilize and monitor the minimum stock and
of security. This allows for improved response capacity against
variations in demand.
Reorder point: Optimize this indicator to avoid potential delays
in the delivery of suppliers. This refers to the moment when
They place orders to minimize storage costs.
Optimize the management system: Promote and streamline internal processes
for sales planning.
Scheduled break: A possible break can be scheduled, provided that
when the customer is flexible with the delivery. This strategy could have
relevance when there is insufficient infrastructure for the
storage.

Efficient management strategies for


avoid stockouts
Carry out an adequate forecast of the
demand
In a highly variable environment like the one that is
face logistics today, we have to try to
limit uncertainty in forecasts of
demand and adjust the supply to the maximum.
In fact, in this area one finds one of
the Big Data applications with the most potential in
logistics.
To achieve a solid demand forecast and, in
to a certain extent, to prevent stock shortages, it is necessary to:

It is clear that in every prediction there must be a margin of


estimated error.
Identify the life cycle in which the products are located: it
It is more natural for them to go through the stages of market introduction.
(novelty), growth, maturity, and decline.
Predict activity peaks on key days and take into account the
seasonality of the sector.
Calculate the forecasts for the nearest time periods
possible, since the distant future is more uncertain than the next.
Being able to operate with a reduced lead time helps a lot in this.
sense.

To have a computer system that


vertebra the processes in the chain of
supply
The implementation of specialized software in the
business management has revealed itself as
a powerful strategy for control and optimization
of the logistics flows. Due to the high
complexity of processes, normally is
requires an integration of different types of
systems.
In this line, highlights the ERP (Enterprise Resource
Planning as a backbone element connected to
more specific systems like software for
warehouse management or management programs
transport fleets.
One of the main objectives being sought after
with the use of these systems is to control the levels
of available inventory at different locations
from the supply chain (they can be
warehouses, but also physical stores, by
example)
It is also essential to establish alerts that
indicate the moment when it should be carried out
replenishment of certain references. These
programs also minimize errors
humans in process management.
Control the KPIs in stock management and
act based on the data
Keep track of key indicators in management
inventory management is essential to avoid incurring in
inefficiencies that may lead to stockouts. At
Regarding this, we highlight the following strategies:
Control the reorder point: it refers to the moment when there is
to issue a restocking order to the supplier. The reorder point
It must be under continuous review, as it determines the level of stock.
minimum that the company can maintain in order to avoid stockouts.
Mark the quantities that need to be acquired based on
indicators such as inventory turnover, the index
recovery (sample for how long the company has)
stocks), and the occupancy of storage space.
Having sufficient safety stock to mitigate deviations
that can produce the demand or the suppliers, but without incurring in
an overstocking of the inventory in the warehouse.

Adopt a perpetual inventory system


Sometimes, stockouts occur for porn
be able to locate the products within the
installation, even being available in the inventory
from the company.
This is one of the complications that are resolved.
implementing an SGA that allows to operate with
a perpetual inventory system: the solution
ideal for those companies that have a
complex and high number of references.
In this sense, the warehouse management software
guarantees access to stock data in
real time, being able to control what is in the
warehouse and where it is located.

In addition, computerizing the database of the


inventory allows analyzing the history and viewing the
stock fluctuations to identify products
key for the company.

The use of
an SGA limits human errors and prevents stock breaks
Automate intralogistics processes and
reduce the deterioration of goods
In every inventory there are losses, that is to say,
loss of merchandise due to deterioration, poor
conservation, errors in handling and even
for theft or robbery.
This is a matter that needs to be controlled.
so that the losses do not lead to stock shortages.
However, it is possible to implement measures
that they are reduced to the maximum, such as:
Establish limited access to the inventory database. This
It is easy with a WMS like Easy WMS from Mecalux, as it is possible
manage access to the system by the work team and
prevent unwanted manipulations.
Automating load handling greatly improves safety.
of all movements and avoid accidents that may cause damage to the
merchandise and personnel. In addition, the use of machines also reinforces
the respect for FIFO or LIFO merchandise flows.
Automatically control the identification of references and the
data dumping into the system. For example, this is achieved with
elements such as the PIE (Entry Identification Posts), which
they guarantee the reliability of the data shown by the SGA.

Ultimately, despite the saying that goes "the


the most profitable stock is the one I don't have
it is a regulatory element necessary for the proper
functioning of the supply chain.
Avoiding stockouts then becomes
a clear objective of any company that wants to
protect your profitability. New technologies
like warehouse management software
Automatic systems are facilitating their
achievement.

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