Out of stocks, also known as oversells and stock outs, happen when you have a product sell that you cannot fulfill, or when you’ve lost a sale due to not having a product any longer. Too many out of stocks can devastate brand trust and increase customer service costs. For those reasons, how to prevent out of stocks ought to be at the top of any company’s list of priorities. Out of stocks are unique in that they’re unpleasant for pretty much everyone in the eCommerce food chain, but fortunately, by following these 5 steps to prevent out of stocks , you can save headaches company-wide.
1 | Prevent Out of Stocks by Utilizing Buffers
If you have shared inventory across multiple online marketplaces or do daily deals you may want to consider using a buffer for those items – you’ll be surprised how drastically this will prevent stock outs. There are generally two ways to think about buffers:
- When you get down to a total available quantity of X, you’ll want to only have it live on XYZ marketplace. For example, when we have only two size 9 Steve Madden green pumps in stock, they will be live only on Amazon.
- You only want to show 50% of your total available quantities to a daily deal site or on certain marketplaces.
Most Channel Management systems offer buffers as one of their tools. For example, ChannelAdvisor, a channel management system that integrates with SkuVault, allows users to define a buffer to keep a minimum quantity of your product in inventory. When the available quantity for a SKU reaches the value defined, they’ll update the quantity of your SKU at the channel to “0” so that it can no longer be purchased by consumers. By maintaining a product buffer, you’re able to ensure that you won’t oversell a product because it will automatically be removed from a marketplace once it gets below a certain quantity.
2 | Forecasting and Reordering
Ideally, if you have high velocity products that are on multiple online channels, then you’ll want to make sure to reorder and receive before you run out, thus avoiding lost sales. You can forecast out and use that to determine your reorder point by going off your sales history, current order quantities, and on-hand quantities.
Even without forecasting, your reordering strategy can prevent stock outs by a simple reorder point notifying you when to reorder items. You can do this manually, or use a warehouse management software like SkuVault. SkuVault has replenishment reporting, which lets you know when your inventory levels dip below the desired quantity. Whatever method you use to forecast your inventory needs and determine when it’s time to reorder will be a step towards preventing out-of-stocks because you’ll know exactly how much inventory you have on hand and be ready to order more before you run completely out.
3 | Reducing Human Error
In order to keep your inventory accurate, which is a must for reordering purposes and to prevent out of stocks (and really just a must in general), you need to reduce as much human error as possible. Anything that makes things easier and quicker for the user is essential – we really can’t stress this enough.
- Scanning is a must – anytime you have users typing there are going to be mistakes.
- Using incentives to pay your employees is great for productivity, because it forces quantitative measurements to be taken of their work, and they know their actions are being tracked. This tends to drastically reduce errors as well as increase efficiency. No joke: we conducted a study where we tracked the average picking time at a company and compared it on the weekdays to the weekend. On the weekends, the employees at this facility were told they could leave when the day’s work was completed. Not surprisingly, but certainly depressingly, they were literally twice as fast on the weekends.
- Clear, concise labeling – never underestimate the benefit of your employee being able to easily distinguish between products and sections of your warehouse.
4 | Cycle Counts
Organized inventory is accurate inventory, and accurate inventory is less susceptible to out of stocks. Regular cycle counts will help you maintain and improve upon the state of your inventory and your warehouse. Improving cycle count procedure could really have its own article (Oh, wait! It does!), but we’ll just go over the main points here.
- Try to cycle count quarterly, so as to minimize the time spent / tears shed / horrible ordeal of physical counts
- Cycle count in some sort of order through your warehouse, and make sure it’s part of your (or a trusted employee’s) daily routine
- Maintain an accurate inventory with a warehouse management system, aka WMS, such as (shameless plug!) our fine, web-based application SkuVault, or, at the very least, check out these tips on how to maintain and manage your warehouse without software.
5 | Quality Control
After picking, but before packaging / shipping, have someone in your warehouse responsible for quality control. If the wrong items are being removed from inventory, you are losing accuracy, which can be reflected in what is live online, and can cause more out of stocks. The ultimate defense against human error, this not only prevents the wrong items from being sent out, but will prevent out of stocks as well.
If you’re selling on multiple channels or running a busy warehouse, out of stocks happen, but with a little planning they don’t have to. Take the steps to prevent out of stocks to reduce customer service costs, to uphold brand and customer trust, and to just plain and simple make your life easier.