Out-of-Stock

Definition

Out of Stock means that a desired item or a product is not available/in stock after receiving an order.  Nowadays, OOS refers not only to retail and wholesale, but also to e-commerce (online retail), among other things. 

Causes & Consequences

Retailers or even companies in any industry want to avoid out-of-stock situations as much as possible and keep the inventory sufficiently high because the customer should not resort to another manufacturer if the shelf space is empty. If the goods are in stock in the warehouse and are merely not in the right place or have not yet been sorted, this is referred to as a phantom OOS. Actual stock-outs can occur, for example, due to problems in production or procurement difficulties. Along the entire supply chain and in the general logistics of a company, it can fail at several points. 

The most common causes of out-of-stock situations are:

• Unexpected spikes in demand due to unpredictable events, such as the Corona pandemic and the resulting hoarding.
• Differences between perceived data and reality: Careless work in recording inventory can result in misstatements in the inventory or system.
• Problems during transportation: OOS situations can also arise due to an unplanned longer delivery time.
• Poor demand planning: when planning demand, all data must be analyzed and taken into account, such as the sales history of a product or seasonality.
• Supplier delay: Just one mistake in production or one missing raw material can affect the entire supply chain.
• Human errors at various points in the supply chain can throw the entire organization off balance and increase the out-of-stock rate.

According to a study, when customers find an empty shelf space, they tend to switch stores 37% of the time, postpone purchases 22% of the time, switch variants 21% of the time, abandon purchases 11% of the time, and switch brands 9% of the time. Out-of-stock situations can consequently lead to negative customer reactions and evaluations or even to a change of business and thus ultimately even to lower sales revenue. 

Solutions to avoid out-of-stock situations

To get to the bottom of the problem in the company and prevent an OOS situation from arising in the first place, there are tools to support supply chain management. These facilitate inventory optimization by automating predictable and recurring processes in the company's production, distribution and general logistics. Artificial intelligence is used to calculate timing and quantities and order goods automatically. The occurrence of shortages is thus prevented. In addition to a software solution, approaches such as employee awareness can also help to keep inventory levels high, specify correct order and inventory quantities, and thus reduce the out-of-stock rate. 

Along the supply chain, in addition to out-of-stock ("OOS"), there is also the term never-out-of-stock ("NOOS"). The translation of the term means something like "never out of stock". The term comes from merchandise management and refers to products that can be ordered at any time - i.e. are permanently in stock. NOOS items are mostly timeless classics, such as a white T-shirt or jeans, which have a comparatively low degree of innovation and are always in demand. The difference to seasonal items is the longer sales period: NOOS collections are a fixed part of the assortment over a longer period of time.