4 ways to deal with stock-outs

There is no doubt that one of the most difficult and essential processes in all logistics is to maintain "perfect" inventory levels so that the entire distribution and, therefore, supply chain runs smoothly. Among the various factors that can cause stock-outs are external factors that often come unexpectedly, such as transportation strikes.

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.