How to Reduce Stockouts and Overstocking
Inaccurate inventory counts, forecasting errors, supplier and manufacturing delays, and logistical problems are some of the most common causes of stockouts. But there are many preemptive actions a business can take to get ahead of the problem, beyond implementing an inventory control system.
- Increase inventory accuracy.
Inaccurate inventory
counts can inadvertently lead to stockouts. To keep inventory accurate, it's
important to reduce human error. Companies can avoid inventory discrepancies by
regularly monitoring and updating stock levels, but doing so manually is likely
to introduce the occasional error. It's more effective to use an inventory
management solution that allows workers to scan items when they're received and
picked to fulfill orders so inventory data can be updated and shared throughout
a centralized system in real time.
- Enforce a regular cycle counting practice.
Routinely shutting
down shop to take a full inventory count is useful but not always practical.
Cycle counting — the practice of counting and checking a small selection of
SKUs according to a set schedule — can be much more effective. It allows
inventory teams to audit inventory amounts and ensure actual counts match up
with what's listed in a spreadsheet or inventory management software.
3.
Set
reorder points.
To prevent stockouts,
good timing is essential. A reorder point tells inventory managers when to
order more inventory to avoid running out of stock. Reorder points can also be
understood as the minimum quantity of a specific product needed on hand at any
time. Go any lower and there's no guarantee replenishment will occur in time to
fulfill an order. Calculating ideal reorder points for each product — and
setting automated reminders — can help companies better manage their inventory
controls and ultimately minimize stockout events. Inventory management software
can be used to automatically establish reorder points and create alerts.
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