THE IMPACT OF OUT-OF-STOCK

Imagine a situation when you need something so badly and you rushed to the nearest
mall hoping to get a hold of that something. Then again, as odds will have it, it’s no available.
It’s frustrating when the item you have set your heart on is out of stock at your local store. It is
a situation that we have all been through, at some point in our lives.

While it is true that as a consumer, it can be quite a hassle and may sometimes be
frustrating and irritating, it is still manageable. But for retailers, the effect may be much worse.
In fact, it can be devastating to your bottom line.

So how do consumers react?

Customer may react in different ways. They may either be proactive or reactive. Fact is
that consumers have options in cases of out-of-stock.

• Consumers may look and purchase the same item in another store. After all, chances are,
you’re not looking for a needle in a haystack or a one-of-a-kind item that is exclusively
manufactured and distributed by only one store.
• Consumers may decide to not buy the item at all and just look for an alternative or a
substitute.
• Changing brands is a welcome option.
• Loyal customers who are not really in hurry may patiently opt to wait as to when the item
would be made available and buy later.

In any case, the said store would be at a losing end, whether temporarily or big time. Out-of-
stock is tantamount to loss of sales. Worse, when customers would decide to shop elsewhere
next time, thereby creating more dent in your business. If the shopper switches stores, the
implication is that the likelihood of getting the shopper back is very slim.

Out-of-stock happens because of the following reasons:

• Underestimating Demand
• Lengthy Ordering Process
• Indiscreet Restocking Practices
• Floppy Forecasting Practices

Remedies to the out-of-stock problem:

• Collaboration and communication with the entire supply chain making sure there are no
gaps in between to meet the target order.
• Utilize technology to track stock inventory.
 • Reorder as soon as supplies fall on the critical level. Do not make the mistake of ordering
when supplies are already zero.
• Predict trends using forecasting techniques and analyze past data when reviewing sales
movement and developments.
• Streamline the reorder process.
• Tract customer buying habits/patterns.

Bottom line in the supply chain is to be able to provide the right product at the right price at
the right time. When retailers and supply chain systems can do this, they are more likely to
succeed as they develop customer confidence.

This is the very reason why care and utmost caution must be exercised in dealing with out-
of-stock situations. Other than effective forecasting, use of technology and streamlining the
reorder system, all concerned will be best served if they try to put themselves in the shoes of
their customers. They have to go through an emphatic endeavor to feel and experience what
emotions go into the heart of a disappointed customer. They have to feel it, experience it, and
be a customer himself, then and only then, can he succeed in developing customers’ confidence.

Reference: Mendoza, H., & Garcia, S. P. (2020). Supply Chain and Logistics Management.
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