- 8% of lost sales are due to stock-outs in a typical small to medium-sized retail business
- unhappy customers disappointed by empty shelves can share this experience with 10 other people
- the purchasing manager did not order the correct products
- purchasing manager did not order the correct quantity
- customer demand was higher than expected
- the supplier did not deliver what was ordered
- the supplier delivered what was ordered but with a significant delay
- shelves were not replenished in a timely manner, which means that the “stock-outs” are not actually due to lack of products in the warehouse, but rather because they were not delivered to the shelves before the product disappeared from the shelves shelves
everyone has been there. Everyone has stood in front of an empty shelf at least once in their life, wondering why that shelf was empty. Customers and retailers alike hate this situation. Unsatisfied customers feel cheated, and this can cause them to explore other options, find other retailers that can meet their demand for the products they want. On the other side of the equation, retailers are losing money, in the form of lost sales. So how do you avoid stock-outs? How can you keep your customer demand satisfied while keeping less inventory? is it possible?
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definition of out of stock
A stock-out or stock-out situation occurs when retailers don’t have the right level of inventory and their customers can’t buy what they want. There are several reasons for stock-outs:
we can describe a stockout with the following graphic illustration. Time in days is measured on the x-axis, where the green line represents inventory level and the orange bar graph represents daily sales. As you continue to sell to your customers, the inventory level is getting lower and lower. when it reaches zero or near zero inventory, sales stop because no one can buy that product.
This situation is called a shortage or out of stock.
Stockouts occur for a limited period of time, until you receive another purchase order from your supplier and the inventory level is restored. from the time the stock-out began until this restocking time, you lose revenue related to standard sales. these are lost sales. How does Inventor calculate lost sales? First, inventoro automatically detects historical or current stock-outs. second, the period of zero sales recorded during stockouts is automatically adjusted for inventory, replaced by an expected sales forecast, which means that inventoro calculates what would have been sold if there had been enough inventory on hand. Then, after the out-of-stock, when inventory has been replenished and you start selling the product again in the normal way, Inventoro compares the actual sales before and after the out-of-stock to account for sales lost during the out-of-stock . the principle we use is shown in the following image.
real cost of a stockout
remember that lost sales during a stockout is not the only cost you have. a dissatisfied customer is a dissatisfied customer. There is a simple rule that “a happy customer tells three people; a dissatisfied customer tells 10 people”. so you have to act fast. the actual lost sales during a stockout are often only a small part of the actual impact on your business.
how to avoid stockouts
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It is standard for 92% of products to be available for sale at a typical small to medium retail business. We hate stockouts at Inventor, and we do everything we can to help you avoid them. In the 21st century, when you can use advanced technology for sales forecasting and replenishment that can be quickly integrated with your ERP or eCommerce system, it’s a shame, indeed an unforced error, to lose sales due to shortages.
try us out, so we can show you the real benefits inventoro can bring to you and your business. eliminate lost sales due to stock-outs, achieve up to 99% customer satisfaction, and do all of this while reducing inventory, on average, by 25%.
photo by wesley tingey on unsplash