Submited By:

Akarsh Khanna
Submitted Anmol
By: Dubey
Amit GuptaAmit Gupta
Akarsh Khanna
Harshal Bankar
Jaydrith Das
Anmol Dubey
Jaydrith Das
Harshal Bankar
INTRODUCTION
Stockout is the term used to describe the phenomenon of when inventory for a
particular product is exhausted.
The word is interchangeable with out-of-stock (OOS). Stockouts generally refer to a
product being unavailable for purchase at retail, as opposed to elsewhere in the supply
chain.
Stockout are on an average in the order of 25 – 35% and are in stock out are higher in
fast moving items.
A.T. Kearney sees out-of-stocks impacting four key areas: loss of sales, customer
loyalty, online order fulfillment from the store and shipping costs that eventually lead
to margin erosion.
Stock-outs are the result of many factors from arbitraging labor costs and customer
satisfaction to poor communication between vendors and retailers. But regardless of
their cause, the fact remains that in-stock performance is both top of mind for most
retailers and agnostic to trade channel or class.
As per research across 29 countries, among customers who didn’t find exact items, one
third of them visit another store and less than half of those go for the substitute
Negative effects of OOS
Suppliers

1. Lowered impact of promotions

2. Distorted perception of store demand
3. Direct sales loss
4. Damaged brand reputation/brand loyalty
5. Increased likelihood for consumer to try competitor brand

Retailers

1. Decrease in forecasting & ordering accuracy

2. Increased operational costs (providing “rain checks”, unplanned restocking or looking for stock
in back room)
3. Decreased store loyalty
4. Increased likelihood for shopping at competitor stores   
5. Decreased customer satisfaction
What Causes an “Out of Stock”
Problem?
A shortage of working capital resulting from poor cash flow management on the
retailer’s part limits the values of monthly orders
An unseasonal spike in purchasing
Inaccurate inventory data that results from shipment variances, misplaced
products, returns, or stolen goods
Lack of demand forecasting due to absence of data on stock turn, sell through,
historical sales, prootions, seasonality, and the economic climate
Poor employee training on how to monitor stock levels and perform
replenishment
Inefficient processes for stocking shelves and placing replenishment orders
FINDINGS
Customers Reaction to stockouts
RECOMMENDATIONS
1. Shelf Replenishment
In an extensive report published by Grocery Manufacturers of America, researchers attributed
between 70-90% of stockouts to defective shelf replenishment practices. To combat this,
merchandisers can equip themselves with mobile software that allows them to collect data on
stock levels from multiple retail locations. Reports generated from this data aid in demand
forecasting.   

2. Supply Chain Optimization

Identify which SKUs are in high demand on a temporary and permanent basis so that
manufacturers are not scrambling at the last minute to produce an adequate product volume.
Adjust delivery cycles to meet demand based on historical inventory data and seasonal
fluctuations.
Find out if distributors have the ability to transport additional freight volumes if necessary.
Determine whether or not distributors can handle the impact of several storms in short time
frame. If not, make arrangements to temporarily use other distributors who won’t be affected
by bad weather.
CONCLUSION
No customer wants to hear, “Sorry, we are out of stock.” The costs associated with OOS
affect more than just sales - brand equity, retailer relationships, and investor confidence all
take a hit. By investing in the right tools to enhance retail execution, partnering with
optimum manufacturers and distributors, and properly training staff, producers can
drastically reduce the negative impact out stockouts.
REFERENCES
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