As Christmas approaches, a lot of entrepreneurs are busy trying to prepare for an influx of customer orders. The risk: rapidly encountering stockouts.
So, what are the consequences of understocking and above all, how can you prepare your inventory to avoid finding yourself unable to meet customers’ needs?
Understocking may be a risk, but so is overstocking. Too much of either is bad for a business and shows poor inventory management. The challenge is knowing how to find a balance.
A stockout is when an item is temporarily or definitively missing from your inventory while there is still customer demand. As a result, you are unable to satisfy customer demand, which is a nightmare for any business.
A stockout means buying an item without knowing if it will arrive on the desired day. That’s a risk that customers don’t want to take.
A stockout results in several missed sales opportunities, which in turn means lower turnover. A factor which undermines the financial stability of a business. Another impact on cash flow to note: costs relating to canceled ordersand lost customers, as orders placed could not be fulfilled.
For customers, finding yourself unable to order in a sufficient quantity or having a limited choice of items can cause frustration: no incentive to buy, disappointment at not receiving the product, and feeling like time has been wasted. As well as representing a shortfall, stockouts can lead potential customers to other retailers who will be delighted to immediately fulfill their order.
We all know that negative reviews proliferate when there is dissatisfaction in the air! And that is very bad for a business’s brand image. Customer reviews have an impact on both acquiring new customers and encouraging repeat custom. And the more frequently stockouts occur, the more the business’s reputation will be affected.
The more merchandise a business stores, the higher storage costs are. A lot of businesses reduce how much they store to reduce costs. In this scenario, you have room to store inventory, but not enough products to meet customer demand. This therefore causes needless storage costs as you are paying for unused space. These costs could have been invested in other areas of your business.
A season like Christmas entails an explosion in market demand. And finding yourself inundated overnight is never fun.Inventory errors, impact on logistics... you need to be able to deal with an increase in returns and a faster work pace, which can affect order processing quality when teams find themselves swamped. When you’re rushing, orders can soon go awry!
Now that you’re aware of the problems relating to understocking your merchandise, it’s time to implement solutions. The question to ask yourself is: how can you prevent the risk of stockouts?
Want to find out more about inventory management methods? Read this article!
As you’ll have seen, the real challenge when preventing understocking is finding the right balance!
Today, there are various all-in-one solutions on offer for managing stock in real time, like Erplain, which offers a comprehensive solution with alerts and ways to automate your inventory management operations. Try for free for 14 days!