What Causes Out Of Stock And How To Prevent It?

For many retailers and manufacturers, out of stock is the worst-case scenario, because it can easily lower customer satisfaction and decrease sales revenue. However, if monitoring your in-store products and inventory carefully and strategically, you can still prevent it in the first place. Here are several causes and solutions to keep your stock up to date. 

What causes out-of-stock?

There are several reasons for out of stock products, and some of the most important points are:

Inaccurate data

There can be a chance that you are relying on the wrong piece of information. For example, your employee might enter the wrong data about the items on the shelves, or there are some discrepancies between data entered in the system and the status in real life. 

The mistakes can come from human or system errors. These causes can be just accidental, however, they can cause bigger problems if not identified and solved quickly.

Late re-order

Sometimes, although we know that we have limited products on stock, we still forget to order on time and instead take last-minute action. Unless you are lucky, the products are highly likely to arrive late, thus causing out of stock. 

This is because there will always be unexpected factors that lead to such delays, such as weather conditions or mechanical issues of the delivering vehicles. Therefore, timely order placing is very important to avoid such a situation. 

Poor management and communication 

This is another reason that leads to products being out of stock. Poor management and communication problems create a bad impact on the workflow of the company. Any misunderstanding between the employees, managers, customers, and logistic providers can cause a delay in restocking the products. Being unclear in the date, quantity, and method of delivery are the number one causes of such poor communication.

How to prevent out-of-stock?

Integrate an inventory management system

To increase accuracy and speed up the process, you can consider using technology to help you in handling out-of-stock situations. An inventory management system is often integrated into a point-of-sale (POS) system where you can easily monitor sales records and inventory status in one place. Based on such systematic records, re-stocking products can happen after a click, thus preventing stockout conditions.

Train your staff

If you have a retail store, it is important to train your staff about specific situations that can happen regarding stockout and inventory management. Remind them to closely keep track of particular products that have high demand in the store. “Prevention is always better than cure”, so make sure to avoid out-of-stock conditions by training your staff in the first place. 

Implement demand forecasting

You should implement a correct demand forecasting strategy to prepare your inventory beforehand. However, in reality, research has shown that up to 73% of retailers actually face difficulties in inventory forecasting. 

So what needs to consider when making a demand forecast? Firstly, it is essential to understand the approximate time it often takes between the moment you order something and when it actually arrives at your store.

Another important factor to consider here is the seasonality of your place, including the weather conditions, possible seasonal materials, and the current demand of that particular products or delivery company (if you hire a third-party delivery one). Make sure to also consider public holidays when demands can sharply increase.

Stay organized

During the inventory control process, you have to stay organized. Even with the help of technology, people can still easily make mistakes. Make sure to keep your POS inventory system clean and easy to keep track of.

It also helps if you display the products in your store in a neat and tidy way. This will avoid missing products or breaking them in store, thus helping to prevent out-of-stock or any mismatch with the inventory and delivery systems.

Conclusion

Out of stock can happen in any business, so retailers should always take this into consideration to maintain a good shopping experience for customers. We hope that this article has provided some useful information about how to handle this situation appropriately and prevent it from the very first place.

ConnectPOS is a point-of-sale system that has helped many retail businesses in their activities, including handling out-of-stock situations. Contact us if you have any questions.