In Part 1 of this two-part series on how to avoid inventory stockouts, Scrubbed provided practical tips on using inventory management software to identify stockout trends and causes, generating an ABC Analysis report to identify your worst and best performing products, and merging other data with this essential report to get a better sense of your inventory position.
In Part 2, we offer three more tips that can help you reduce the odds of inventory stockouts—especially for your most important products—so you can avoid losing sales and customers.
1. Contact Vendors about Open Order Discrepancies
Sometimes, you’ll find that the open orders in your records don’t match the open orders in the vendor’s system. Miscommunications, encoding errors, and the sheer volume of vendors and orders all can contribute to this problem.
The key to resolving open order discrepancies efficiently is knowing which vendors you should contact first to make the biggest impact. To identify the top priorities, run a report from your inventory management system to see all pending orders, then sort the vendors according to the metric that is most important to you—such as total product quantity, total orders, or total value. Contact the highest-ranking vendors first and work together to tally up the open orders and resolve any discrepancies.
By cleaning up your open orders, you’ll gain a more accurate view of your inventory position and you’ll be able to conduct more accurate inventory forecasting with better results. You’ll also develop a better line of communication with your vendors going forward.
2. Perform ABC Cycle Counting
In Part 1, we reviewed how the ABC Analysis report helps identify your most important inventory items, which are tagged as “A.” Once you have this critical information, you can perform cycle counting more effectively.
It’s a better use of your resources to perform more frequent cycle counting on your A items vs your C items. By conducting cycle counts throughout the year on A items, you’ll have more accurate information than if you only do a yearly count for accounting purposes.
ABC cycle counting also ensures that for your most important inventory items, the data you have on their real life (“shelf count”) and paper life (“record count”) matches. This way, you’re sure the number you see on your dashboard is as accurate as possible. And with matching data, you’ll find your item replenishment estimates will improve.
3. Use Forecasting Alongside ABC Analysis
In the ABC Analysis dashboard example we provided in Part 1 of this series, you can use the average monthly sales data column to monitor if the quantity on hand for a particular SKU will meet the average customer demand. If you use a separate tool for forecasting the next month’s sales per SKU, merging this data with the ABC Analysis report makes for a more powerful output. Using forecasted sales for the next month can guide you in making more accurate purchasing decisions than just using a simple average.
With global e-commerce expected to grow to $7 Trillion by 2025, optimizing inventory management is critical for companies that want to take advantage of this opportunity. By following practical, proven tips for avoiding inventory stockouts, you can capture a greater share of the e-commerce business or any retail market by improving customer loyalty, increasing year-over-year sales, and reducing the cost of lost sales.
How Scrubbed Can Improve Your Inventory Analysis
Scrubbed has extensive experience providing outsourced finance and accounting services to retailers, so we understand how important it is to manage your retail inventory effectively. Our team regularly works with a variety of inventory management solutions, creating data dashboards and visualizations that help our retail clients assess their inventory position, reduce stockouts, optimize sales, and boost profitability.
Watch our webinar on improving inventory management in 2023 for more tips!
Need help with inventory management and analysis? Book a consultation with us!