7 deadly sins of stock-outs

1. Grave errors

1.Poor forecasting

2. Supplier performance issues

Are your suppliers always letting you down? Did you find they are always late? Or do your suppliers fail to deliver exactly what was agreed? Supplier performance issues can not be ignored. And they certainly should not be accepted!

3. Volatile demand

Volatile demand is no excuse for availability issues. You must do everything you can to close the gap between forecasted and actual demand. After all, wherever there is a misalignment between supply and demand, this represents a cost. Where demand outstrips supply, the cost is a lost sale. Where supply outstrips demand, the cost is waste. Therefore, be vigilant and remain responsive to shifts in demand!

4. Unreliable data

The importance of good master data cannot be understated! Yet how often does your system tell you you have plenty of stock on hand while the shelves remain empty? stock on hand, order volume, minimum order quantities, and lead-times as well all other key master data is correct and up to date, you are making important decisions in the dark!

5. Fire fighting

Do you find yourself fixing problems that should never have existed in the first place resulting in a sub-optimal way of working. After all, when you are putting out fires, you are distracted from doing anything else. The result: more stock outs!

6. Broken communication

How many inventory issues could have been avoided if everyone had communicated a little better? While operations, sales, finance and management all have a vested in inventory, they often only speak when there is a problem. If everyone in the process was engaged in open dialogue, many of the factors that cause stock-outs would be eliminated.

7. Human error

Even the most competent of inventory managers make mistakes. Whether these mistakes are made in a random moment of madness or are the result of poor knowledge, it only takes one missed or short order to impact availability!

Commit these sins at your peril!

It’s all too easy to succumb to the sheer complexity of modern supply chains. However, you must avoid these 7 sins at all costs.

After all, stock-outs not only have a direct impact on sales, they are often wrapped in hidden additional costs. As highlighted by the Association for supply chain management, the consequences of a stock-out don’t end there:

“Not only is there the cost of losing out on a sale, but there is also often an additional cost associated with having to process a backorder as well an administration cost to review the item and place another order.”

And this is all before you factor in the long-term costs of losing a customer!

Immaculate inventory management will be your only saviour!

But what can you do to mitigate the risk of stock-outs?

In reality, it will never be possible to avoid stock-outs altogether. There will always be some factors that you cannot foresee. However, there are steps you can take to drastically reduce stock-outs.

Given that poor inventory management is the common factor in all 7 of these deadly sins, this is your starting point on your optimisation journey. The goal here is all about finding the perfect balance between working capital, operating costs and the optimal service level.

But to keep stock-outs at bay, you not only need robust process-based tools that support effective decision making, but your team must also have a complete understanding of how these decisions will impact the wider business.