What is 'out of stock

The out of stock, also known as stockout, occurs when the supplies of an item in the warehouse or at the point of sale run out.

Poor inventory management leads to the risk of reduced sales and turnover, and if it continues for a long period, it can cause damage to the retailer's corporate image and lead to customer loss from an economic standpoint.

To avoid these unpleasant situations, it is very important to maintain a safety stock in the warehouse, also called buffer stock, so as to be secure in case there are variations in demand or there is a delay in the delivery of goods.

What causes stockouts?

A stockout is not always due to a retailer's inefficiency or poor warehouse management. Very often it relates to the following causes:

• Sudden increase in demand: the requests for a certain item increase unexpectedly, catching businesses off guard;
• Incorrect demand forecasting: when activities make wrong forecasts about consumer demand for a product and take less stock in inventory;
• Inventory inconsistency: stockouts can also be caused by incorrect accounting in the inventory, thus between the inventory data and the actual presence of goods in stock;
• Delay in transportation;
• Delays in deliveries from suppliers.

How to avoid stockouts?

In every retail store and in every modern market, unfortunately, stockouts occur. To achieve more accurate forecasts and avoid stockouts, it is important to always keep in mind that:

• In any demand forecast, a margin of error must be anticipated;
• It is very important to know perfectly the life cycle of each product;
• It is necessary to plan the required actions to identify peak demands related to seasonality and manage them successfully.

Therefore, to avoid stockouts, it is important to always have control of the inventory and have a broad view of the goods in stock in the warehouses. By doing so, it is possible to minimize errors and waste for a potential surge in demand.

There are inventory management activity indicators that help identify negligence in storage processes and avoid stockouts. In this regard, to better monitor inventories, it is important to know that:

• The reorder point: is used to prevent stock depletion by alerting you when supplies are running low;
• The inventory turnover ratio: Indicates how frequently goods enter and leave the warehouse and is useful both for calculating the quantities of product stocks and how much space they occupy;
• Buffer stock: It is the quantity of goods on hand for unexpected contingencies.

Inventory management is a crucial process to keep track of materials moving through the warehouse. The goal of inventory management is to effectively manage merchandise, to avoid stockouts and ensure product availability at sales points for consumers.