How to reduce out-of-stocks in 4 steps
Retailers can only sell what they have in stock, so running out of inventory must be avoided at all cost – with no product, there are no sales. Moreover, running out of stock during crucial time frames or in a consistent fashion will have a trickle-down effect on merchant-customer relationships as well. Shoppers will get frustrated with sellers that are constantly running out of stock, particularly if it happens during the holidays or other peak periods, and will seek alternative merchants that have their favorite goods in stock on a consistent basis.
Of course, it is no easy task to keep products stocked without running the risk of maintaining too much stock. When merchants have too much inventory, their capital essentially gets frozen in the unsold goods. Then, to make room for new inventory, they must offload excess inventory through margin-damaging sales. The key is being able to find a middle ground between running out of stock and having too much of it, and it all starts through better supply chain usage and inventory management.
Here are four steps retailers can take to reduce out-of-stock instances:
1. Keep one record of inventory
Customers are making purchases from a variety of retail locations, from physical stores to online shops to mobile apps, which can put some strain on inventory management. Retailers need both a birds-eye view of where their stock is and a detailed, store and shelf level as well. This enables them to make the smartest fulfillment use of their inventory and can help them avoid running out of stock through greater transparency across all sales avenues.
Many out-of-stock issues arise from lack of clarity – merchants are not sure how much stock they have and where exactly it is, which leads to misuse and misappropriation of stock.
2. Improved shrink management
All of the inventory tracking technology in the world will not do a better job of reducing out of stocks if that merchandise is getting stolen in the first place. Whether it is by employees or customers, theft makes it very difficult for merchants to accurately track inventory and place orders ahead of time to minimize running out of stock.
Merchants need to make use of anti-theft solutions to ensure customers are not stealing product. Additionally, retailers need to ensure they have strict inventory check-in and scan-out processes. This will help sellers quickly identify when goods go missing and allows them to react proactively.
3. Avoid using legacy software
Retailers have encountered myriad challenges over recent years when it comes to managing their inventory, and the advent of omnichannel shopping has only made inventory allocation and usage a much more complex task. Yet some sellers are still using decade-old technology to try to keep track of everything – as Entrepreneur magazine noted, some retailers even use consumer-grade spreadsheet programs such as Excel to try to keep track of inventory across multiple channels and sales points.
There comes a time in the lives of retail businesses when they need to stop trying to fit square pegs into round holes. While investing in new solutions may be an expense, it is often worthwhile in the long run and will make many processes much easier and more manageable.
4. Utilize RFID technology
RFID technology can greatly improve inventory management by eliminating some human elements. RFID tools can better detect and report when and where items are being moved through automatic reports. With RFID tags, stock can quickly and accurately be checked in and out, which prevents errors such as a warehouse employees forgetting to log out an item that has been purchased.