Stock replenishment - While there is little anyone can do about the weather, what can businesses do to mitigate the impact of this supply chain disruption? As storms in the Mediterranean batter supplies of fruit and vegetables, retailers are left with empty shelves and angry customers.
While a shortage of salad is one thing, what about a shortage of bacon? Or worse still, a chocolate crisis days before Valentines! Stock-outs remain a constant battle and failure to manage supply issues effectively can have a huge impact on both margin and customer satisfaction.
Responding to Stockouts
In the face of a shortage, it’s vital that retailers maximise the value of the stock that is available. After all, given the missed sales opportunity that results from empty shelves, losing any additional margin is simply not acceptable!
In this article, we explore 5 steps retailers should take to mitigate the impact of stock outs and supply shortages.
Faced with a shortage of stock, it’s important that the inventory that is available is prioritised to the locations where it is required most. If you take for instance the current lettuce shortages, there is little point allocating precious inventory to locations where the item does not sell particularly well. However, in order to make optimal allocation decisions, retailers require both accurate insight into demand history as well as clear visibility over all locations.
Align promotions & special offers
Stockouts alone are bad enough, but if the customer feels like they are also missing out on a special offer, this will only add further insult to injury. As a result, retailers must manage promotional activity accordingly. Given that the available inventory is already under strain, promotions and events will only place further pressure on your operations. Consequently, operations, marketing and in-store teams must collaborate effectively in order to ensure that all promotional activity is well aligned to the level of demand that the business can actually satisfy. With this in mind, for items in short supply, any promotional activity or special offer deals may have to be amended or even cut completely.
Exploit the whole buying group
Sometimes, getting hold of any additional stock may be simply impossible. Thus, to minimise the risk of leaving customers feeling disappointed, retailers should take advantage of the other products within the same buying group that are available. For example, while lettuce may be at a premium at present, products such as spinach or rocket could offer the perfect substitute. However, it’s vital that the additional demand for substitute products is taken into account when replenishing stores as well as ordering stock. Failure to do so could result in even more availability issues!
Don't forget: keep your demand history clean
One of the biggest problems with stock-outs is that they force customers to change their purchasing behaviour. Instead of buying the item that is out of stock, the customer has to buy a substitute. As a result, the “real” demand for the item in question, as well as other items in the buying group, could be easily obscured. Given that forecasting and, consequently, re- order and replenishment levels depend on accurate demand data, failure to clean up any unusual demand patterns which result from a stock out will have a catastrophic impact in the future!
Prevention is always the best cure!
Supply chain shortages and stock outs in general present retailers with a real challenge. Unless managed effectively, stock out situations can very quickly result in lost margin and angry customers. Through following these steps, retailers can begin to mitigate the potential impact that supply chain disruption have on their operations. Regardless of how effective you are at managing a short-stocked item, however, ultimately, prevention is always better than a cure. Thus, retailers should also strive to proactively avert risk factors before they result in a problem.