An efficient inventory management by a company implies that it maintains adequate verification of each of its products at all times. If this does not occur, companies may find themselves in situations of stock out, which will be explained below, also detailing their causes, consequences and possible preventive measures.
What is Stock Break?
The stock out is a concept that represents a state of insufficient stocks for a certain product of a company, which results in the company's customers not being able to purchase it. Therefore, the demand of the customer or customers in question remains unsatisfied due to poor stock management by the organization.
The fact that situations of stock break in a company can imply Negative effects in the performance of their activity. For this same reason, it is essential that this type of situation be foreseen sufficiently advance, in order to carry out the necessary actions to prevent its appearance.
What Causes a Stock Break?
As main reasons that can cause the presence of stock out, we highlight the following:
- Provider Issues: A company can have problems with its suppliers of different kinds. Among them, we can mention delays in the delivery of orders by suppliers, insufficient quantity or volume of orders, defects in terms of quality that lead to returns of orders...
- Lack of interdepartmental communication: The internal communication between the different areas of each organization must be clear and fluid, and not only for the problem of stockouts, but for the general good running of any company. If communication within an organization is not managed properly, this can lead to problems in the inventory stock management
- Execution of bad planning: Among the circumstances whose existence lead to affirm that a planning has not been carried out correctly, are the Lack of knowledge about shopping habits of consumers, not taking into account the seasonality in the demand for certain products, establish safety stocks too low, limited expected demand levels, among others.
- Lack of software or tools to automate processes: Having tools for the management and automation of business processes can help the process simplification such as the establishment of the minimum stock, stock control, etc.
Consequences of Out of Stocks
It was already mentioned above, but in this section we want to specify the negative consequences that stockouts can have for a company, which are:
- Loss of current customers: Obviously, if a client cannot satisfy his need as a result of stock out of the product he wants, it is very likely that turn to another company that you do have the item in question.
- Loss of credibility on the part of customers: This effect is closely related to the first one. The displeasure caused by the rupture of stock can mean that the credibility that the client granted to the company in question is seen reduced.
- Stress at work and internal conflicts between employees: Out-of-stock situations are crises that must be solved by the organization's workers. This can result in interdepartmental conflicts (being collaboration between departments a fundamental aspect for organizational success) and in high stress levels of the employees.
How to avoid Stock Break?
Among the measures that a company can take to avoid situations of stockouts are:
- optimal order batch: In the orders placed with suppliers, companies incur a series of costs. The optimal order amount is the number of units of the product requested from the suppliers that minimizes said costs.
- Security stock: Also called safety stock, it is a concept that refers to the storage of a minimum number of units of a product. With this, they are intended meet unexpected demand levels of the articles.
- optimal reorder point: Related to the optimal batch, it is the time point in which the order should be placed to a certain provider. This will allow you to place orders sufficiently in advance.
- Good selection and adequate relationships with suppliers: In addition to the convenience of selecting suppliers with a favorable reputation, the relationship that is developed with them should aim to retain them.
- Better coordination between different departments: Since the interdepartmental communication It is a fundamental aspect, both in stock management and in other business activities.
Companies can encounter different situations during their operation, which can have significant negative implications on their performance. One of them, and which we hope to have explained in the best possible way, is the stock out.
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