If you’re in business, then you know that keeping your supply chain running smoothly is essential to your success. But what do you do when there’s a stockout?
This can be a major issue for small businesses, and it’s important to understand the implications of a stockout so you can take steps to avoid it. Let’s explore what a stockout is and why it’s such a big deal for businesses.
We’ll also give you some tips on how to prevent stockouts from happening in your supply chain.
What is a stockout?
A stockout is when inventory becomes unavailable. This means you can’t purchase an item or have it shipped – something that directly results in a loss of sales. Stockouts can cause you to lose both income and potential customers, when they become frustrated with your business.
Stockouts can also be particularly detrimental if there’s no end in sight – meaning it’s not clear when the item will be back in stock.
What happens during a stockout?
A stockout occurs when an item that’s meant to be used for a customer’s order or for a production order is suddenly not in stock. There are a few things that can happen as a result of this.
One is that the customer can be forced to wait for the product. Sometimes a customer is willing to do this. But a stockout still has the potential to seriously damage their satisfaction with your brand.
A product might also be backordered. Again, this isn’t ideal in terms of customer satisfaction. A customer might cancel – this is common if it’s a product they need immediately – and again, it’s not great for maintaining customer satisfaction.
Finally, a customer might choose to shop elsewhere entirely. If they are unhappy with your communication about available inventory, they might cut all ties and work with someone else instead.
Causes of stockouts
Stockouts can occur for a variety of reasons. Often, these are completely out of your control. Things like unpaid invoices, delivery issues, production delays, or even basic human error can impact your inventory levels. However, if these kinds of unpredictable delays occur often, you might want to think about switching to another supplier.
Sometimes, stockouts happen because you’ve underestimated customer demand or you don’t have the funds available to buy new inventory.
Impact of stockout on your supply chain
Stockouts can be seriously damaging to a business and its supply chain. If you can, you should work to avoid them at all costs.
Losing customers to a competitor
When customers can’t get the products they want when they want them, there’s a good chance they’ll go somewhere else. You’re more likely to lose your customers to competitors. The likelihood of those customers coming back to your store is extremely slim.
When customers order a product only to have it delayed due to stockouts – or have their order canceled altogether – they’re more likely to leave negative customer reviews. While getting negative reviews every now and then is just a part of doing business, too many negative reviews can harm your business over time.
Paying for canceled orders
One of the most frustrating things about stockouts is that they can lose you and your customers some money. It’s one thing for a customer to be able to see that an item is out of stock before they attempt to buy it – and another if they buy it only to find out it’s unavailable.
What are the costs of stockouts?
Stockouts aren’t just inconvenient – they can be downright devastating for your business. A stockout can cause the loss of income and even the loss of customers. If your customers are dissatisfied with the experience because the items they wanted were out of stock or backordered, they’re less likely to return to you in the future.
Tips to preventing stockout for your business
There are a few key ways to prevent stockouts for your business. The first is to make sure you have the proper inventory management system in place so that you can avoid stockouts entirely. You’ll need to think carefully about your unique situation, the layout of your business, and other factors to find the system that works right for you.
If you’re going to incorporate an inventory management strategy, you’ll need to choose between a variety of different techniques. One strategy is an ecommerce inventory management strategy. You can restock your inventory once the number of products falls below a set standard. This will let you avoid overselling your inventory so you can minimize the number of customers impacted by a stockout.
Conduct regular audits
It’s also essential that you conduct regular inventory audits. This can help you avoid overstepping your stock. While it’s time consuming, it’s an important part of managing your inventory.
Use inventory management software
Fortunately, there are several different software programs out there that can help you prevent stock outs by providing inventory data in real time. The ideal software will give you the updates, reporting, and metrics you need when you need them.
Maintain safety stock
A safety stock can serve as an insurance policy if you accidentally oversell your inventory. It’s especially essential if your company sells nonperishable items. Just make sure you don’t include your safety stock as part of your available stock – and remember, you’ll still need a place to store all of this stock, too.
First in, first out. Make it a point to sell the oldest inventory before you sell the new stuff.
How Kickfurther can help
Don’t wait around and let a stockout happen. One of the most common causes of stockouts is when you fail to keep adequate inventory on hand simply because you can’t afford to buy it when it’s being sold at its cheapest. Take advantage of seasonal discounts and buy inventory at the right time. How do you do this without piles of cash sitting around?
With Kickfurther, you can fund millions of dollars in inventory at prices that are up to 30% less than the competitors. The funds are available when you need to pay suppliers – all without a purchase order or accounts receivable, which can delay your funding. You can get funding in less than an hour, helping you cut stockouts off at the head. Kickfurther is the world’s first online inventory financing platform that enables companies to access funds that they are unable to acquire through traditional sources.
Stockouts can have a ripple effect on your entire supply chain, so it’s important to take steps to avoid them. By using the tips we’ve outlined in this post, you can help ensure that your stock is always sufficient to meet customer demand.