Seven ways to cut out-of-stocks
Through a special arrangement, presented here for discussion is a summary of a current article from Frozen & Refrigerated Buyer magazine. A long-time Harris Teeter executive, Mr. Harris is a former chairman of the National Frozen & Refrigerated Foods Association and a member of the Refrigerated Foods Hall of Fame.
Even if a vendor shorts you on an order, management doesn’t want to hear that — out-of-stocks are always your fault.
No matter what, you’re going to have a little heartburn every Monday morning when you look at the out-of-stock reports from the weekend. But here are a few ideas that might help you.
- Keep good records. Know how much you sold the last time an item went on deal, and whether there were other factors to consider, like a snowstorm or a competitor opening or closing. While computer-assisted ordering is all the rage now, it doesn’t take everything into consideration.
- Set some benchmarks. What worked for me was forecasting a 10-week supply for a one-week BOGO. For a temporary price reduction, it was five weeks.
- Don’t hide out-of-stocks on the shelf by facing up the holes with adjacent items. Maybe the district managers won’t notice the problem when they go through your stores, but you leave yourself open to the out-of-stock being missed during the next ordering cycle. Then your problem will be far worse.
- Be especially vigilant of your private label. Big brands may have inventory in their warehouse to help you out quickly, but private label vendors most often pack based on your order. You might wait for a week before a truck can show up.
- Scorecard your stores and your vendors on service levels. I always told my dairy buyer I wanted at least a 95 percent service level on the shelf across the department. That’s not always possible, say, on yogurt in January. That’s when shoppers are going on New Year’s diets at just the time vendors are discontinuing some items and adding a bunch of new ones. You don’t know what to order and the manufacturer doesn’t know what to produce. It’s always a mess.
- Ask vendors to be honest about their capacity and potential shorts, so you both can plan better. Close communication is especially important when there’s a problem upstream, such as raw materials shortages or production problems. In some cases, you may want to ask vendors not to focus production entirely on the top sellers so you can keep a few of the No. 4s and No. 5s in stock.
- Don’t minimize the potential bump in sales when FSIs drop in your market. This is especially true when you and/or your competitors run ads on the products at the same time.
What are the most common mistakes category managers make that lead to out-of-stocks? Can you add any tips for limiting out-of-stocks to those mentioned in the article?