One of the main reasons for inventory availability is to provide customers with the best possible level of service. However, many managers spend their time worrying about finding the balance between product availability and supply Chain costs.
Why should you keep stock?
Your inventory availability is important to meet customer demand. However, the actual level of inventory you should have is affected by the following factor:
- Fluctuation in supply
- Supplier restrictions on issues such as minimum order quantities
- Current inventory strategy
- Contractual service level agreement with customers
- Purchasing economies of scale and cost optimization
- Minimizing delivery costs
- The level of service the customer expects
Do you keep enough stock?
While keeping excess stock can decrease your profitability, lower it can negatively affect your service level. As a result, a company that cannot meet the demand on time cannot compete today.
That’s why, we’ve summarized the 5 most common factors that a company has availability issues:
1. The shelves that should be full are too empty
The first and most obvious indication that a company has a availability problem is empty shelves. Buying large quantities just to make the empty shelves look full is not a reason to keep inventory.
According to inventory management firms, this may indicate that something is wrong. Especially if the empty shelves are only in a certain part of the warehouse, this may mean that there is more stock in other locations.
2. Excessive pre-order
For many companies, pending order is a hedge against the risk of out of stock. Although customers want the stock to be ready in a corner for an unusual situation, if the pending order becomes a habit, this can seriously reduce customer satisfaction.
If the same products result in a pending order every month, it must be questioned why there is never enough inventory in the first place!
3. Excessive commitment to air freight and express delivery
Sometimes it is necessary to invest in air freight to ensure that sufficient inventory levels are available in a short time to meet demand. However, the additional cost involved in shipping by air or using express courier services can significantly lower your profitability.
As a result, it is not a long-term solution to ensure availability. As with pending orders, products that need to be purchased regularly should be investigated in urgent orders.
If a company realizes that it has an availability problem the first time customers report it, there is a real problem. By the time this point is reached, it is usually too late to do anything about it. However, every customer complaint should be reviewed to determine the true source of the problem.
5. Low sales figures
Customer complaints give the company an opportunity to correct the existing problem in the future. But often, availability issues push the customer to make other decisions. In the short term, this will result in missed sales opportunities.
More importantly, the risk of the customer never coming back increases significantly. Hence, availability issues have a profound impact on sales figures. If you are having problems determining the optimal stock level and need support, you can contact inventory management companies for inventory management solutions.