So, once it happens... What can you do about it? If you want to know the ways in which you can maintain an optimal availability rate and cope with a stock out, take a look!

Assess breakpoints

Once a stockout has occurred, it is advisable to analyze the points that have led to the depletion of safety stock. The main causes are poor sales forecasts and lack of internal and external communication, but external factors such as delayed shipments from suppliers or difficult-to-prevent changes in market trends also play a part.

To do this, you need to communicate with the rest of the staff to understand what happened. In this way, you will get a clearer picture about the causes of the stockout and can start taking action as soon as possible to avoid being out of stock for a longer period of time. 

Establishing a good replenishment policy

If it has been shown that the current replenishment policy is not sufficient to ensure optimal availability rates, it is best to employ the necessary improvements to start stocking the inventory as soon as possible. The measures to be reviewed to avoid stock-outs are as follows:

Inventory forecast

Undoubtedly, not making a good demand forecast is one of the most common causes that leads to stock-outs, especially if there are sudden peaks in demand, even if they are not seasonal. For this, you should study the inventory distribution data to detect its growth and adjust the stock to it with reliable suppliers.

Define rotation type

Along with demand forecasting, it is necessary to analyze how much time the goods spend in the warehouse until they are shipped, particularly if the product needs to be shipped well in advance. It is classified as high, medium and low.

Calcular plazos de entrega

Los plazos de entrega deben de ser los más cortos posibles para poder cubrir la demanda. Para conseguirlo, se debe mantener una comunicación eficaz con los proveedores, informando cualquier incidente presente y asegurando de que los pedidos lleguen a su destino.

Automate tasks

Today, a wide variety of tasks in logistics departments can be automated thanks to logistics software. To avoid stock-outs, there are 2 major groups of logistics software to consider for implementation: Warehouse and Transportation.

On the one hand, a warehouse management system or WMS can encompass several solutions that streamline and mitigate human errors such as stock management, picking route optimizer, among others. On the other hand, there is the TMS or transportation management system in which its modules can plan loads, carriers and routes in the most efficient way possible to reduce delivery times and costs.

Offering the customer alternatives

One of the most impactful consequences of stock-outs is the loss of customers, whether they are consumers or other companies that will look for another supplier. In this case, if you have an alternative item that meets the same needs, you can offer it to your customers as a possible solution.

However, the characteristics of the alleged replacement, such as its quality and its effect on profitability, must be taken into account. If high priced alternatives are offered, it may deter customers from purchasing it but still make a good profit margin. On the other hand, if a cheaper product is offered, profitability may be reduced and the customer may end up more dissatisfied with an item of lower quality than desired.

En todo caso, es cuestión de analizar bien si es posible ofrecer reemplazos dependiendo del sector en el que se opera, los productos en sí y el tipo de clientes al que va destinada la mercancía. Si bien puede afrontar una rotura de stock de manera casi inmediata, el problema persistirá si no se detectan los errores que causan el agotamiento de existencias.

Conclusion

When a stockout occurs, there are few ways to provide an almost immediate solution, such as offering alternative items to the customer. Otherwise, if you act quickly, you can discover the reasons for the stock-out and start implementing good procurement practices to deal with a stock-out in the future.

At Hedyla, our logistics solutions are customizable, since you can add the modules you want to obtain a tool that will have all the logistics processes under control.

Meritxell Vázquez

SEO & Inbound Marketing
Video Game Design and Production graduate currently training in Digital Marketing with a focus on SEO and Inbound Marketing.

Creating articles of value and supporting communication to the technology sector.

hedyla.com

To this end, there are two ways to fill inventory in a distribution channel: Push and Pull. Knowing their definitions and their advantages and disadvantages is crucial to choose the right strategy according to the industry you work in and your needs.

If you want to know the differences between Push and Pull distribution, their benefits and drawbacks and for which cases one strategy or the other is intended, read on.

Push Distribution

In a Push distribution system, it is the manufacturer or supplier that decides how many units of product are manufactured and distributed. First, they aggregate all the lower level storage points to historical demand and then perform demand forecasting to determine quantities. Next, replenishment inventory is shipped through the warehouses from the originating supply facilities.

This method makes the first nodes of the supply chain responsible for replenishing the stock, manufacturing the efficient amount of goods to be able to ship them to their distributors and avoid excess inventory.

Push Advantages

One of the advantages of this method is that high inventory levels can be maintained by predicting demand to generate a safe stock level. This is a producer-centric strategy. Therefore, for products that have peaks in demand at specific times of the year or are in high demand throughout the year, such as the food sector, such an approach is effective.

Push Disadvantages

However, one of the most notable drawbacks of Push distribution is that, as this decision is made by the lowest nodes in the supply chain, it is far removed from the actual demand being demanded by current customers. For this reason, it suffers from a notable lack of transparency and visibility into the needs of those customers.

That is why it is difficult to adjust to peaks in demand that are difficult to predict and provide good service, usually causing stock-outs. In addition, it requires good management to maintain a good product flow.

Pull Distribution

In contrast to Push distribution, Pull distribution consists of the lowest node of the supply network, the end customers and retailers, deciding how much stock to order to meet their needs. The factories or manufacturers then receive this order and start producing around a direct demand. 

After the other processes, inventory managers can choose between two techniques: reorder point (ROP) or distribution requirements planning (DRP). The decision to choose a Pull technique depends on how stock moves through the channel and the level of control needed.

This mode of distribution plays between the risk of stock shortages and excess safety stock due to demand variability, so it is essential to maintain a balance between inventory levels.

Advantages Pull

Among the benefits of the Pull distribution strategy, one is that it has limited inventory, as it is produced when a customer places an order, so it is a reactive mode of operation and stands out as a customer-centric methodology. For example, this occurs in cases of customized and higher value products, such as cars with the Just in Time method.

Pull disadvantages

However, this Pull distribution mode has several drawbacks that work against it. For example, if a node in the supply chain makes inventory management errors, this can lead to overstocking and increased operating costs, losing money. It is also possible to cause customer dissatisfaction if there are damages or delays in their order.

Another disadvantage is that picking times will have a big impact on throughput because most of the requests will be very rushed orders with a high level of stress. Therefore, a picking optimizer helps to improve warehouse routes and increase the productivity of the warehouse, as picking is one of the most intensive and costly activities, representing up to 55% of the total expense of the warehouse operation.

Conclusion

There are obvious differences between Push and Pull distribution from which to choose one strategy or the other depending on the sector in which you operate and the type of products you offer. Since each of them has its benefits and drawbacks, the question is to study them well in order to choose the most appropriate and efficient one to have and maintain an optimal inventory management.

At Hedyla, we adapt the solutions according to the strategies and needs of a warehouse, for that reason our WMS (Warehouse Management System) is flexible according to each case. 

Meritxell Vázquez

SEO & Inbound Marketing
Video Game Design and Production graduate currently training in Digital Marketing with a focus on SEO and Inbound Marketing.

Creating articles of value and supporting communication to the technology sector.

hedyla.com