Out-Of-Stock Prevention for Retailers

1200x830What we do

There is often significant lag time from when an Out-Of-Stock (OOS) product is identified and when the product can be restocked.  This causes Retailers to lose potential sales.  OOS product is one of the most difficult challenges for Retailers to combat since store sales cycles for most products rarely follow a consistent, easy to anticipate trend.  Even obtaining accurate inventory counts can be a challenge for Retailers, so much so they sometimes receive ‘phantom inventory’ counts.

Until recently, the most common solution offered to Retailers has been ‘estimates’ as to when a product in certain stores is going to be OOS.  However, these approaches have often proven to be inaccurate and unreliable.

As an alternative, Management Science Associates, Inc. (MSA) works with Retailer clients to provide them with a more accurate method of identifying if a product in any of its locations is heading towards being OOS with enough advanced warning that it can be reordered before it does so, thus avoiding any missed sales opportunities.

How we do it

When analyzing historical retail sales, orders and shipments data, MSA noticed that OOS situations often occur after there is unusual consistently high sales for a product at stores, but with no adjustments made to the reorder quantity or frequency for that product.  Sales outpaced shipments during these high sales periods, and this resulted in the product having no sales in later periods.

We also noticed higher than usual reordered quantities and ‘reactive shipments’ made to stores after the OOS situations occurred in response.  These reactive shipments did not solve the problem, however, since the stores had already lost sales for the product and possibly lost customers when it was OOS.

Based on our analysis, MSA recognized that what Retailers really needed was an accurate early warning measurement that could be used as a ‘proactive alert’.  Therefore, we created a new actionable measurement that we send directly to Retailer clients along with a suggested reorder quantity to prevent product availability challenges in the near future.

MSA tracks the measurement for our Retailer clients and flags for them the stores and products that at some point in the future will become OOS if no correction is made.  The Supply Chain Teams along with the Store Managers can then make the necessary reorder adjustments to prevent a future OOS.

What data is required?

This solution requires a couple of key retail datasets: store-level Point-Of-Sale (POS) or Retail Scan Data (RSD), as well as store-level shipments or product delivery data.

For more information, contact Kevin Mason (kmason@msa.com), Vice President