Stocking Out Causes and How You can Avoid Them

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Retailers almost always list stock outs as one of their worst nightmares, and with good reason. In addition to leading to lost sales, out-of-stocks also diminish customer satisfaction and negatively impact customer loyalty. It’s frustrating when you don’t have the products your customers want, and you don’t want them to feel let down.

Out-of-stock problems, however, may be solved in a number of ways. By increasing your business’s understanding and product knowledge, and improving your shop’s processes, you can help prevent stock outs.

In order to help you achieve this, we have compiled a list of 5 common causes of stock outs, along with tips on how to handle them:

1. An inaccuracy in the data

The process of dealing with inventory can easily lead to inaccuracies. The reality is that retailers rely on paper inventory numbers (or on screens) that don’t always match what they have in stores because of shipment variances, misplaced products, returns, and stolen goods.

Merchants can make mistakes like reordering wrong quantities or products when they perceive that they have the item in stock when they actually don’t. What can you do to address this issue?

The following are some points to consider:

Modernize your inventory management system

It is  very important to modernize your inventory management  system to cope up with technology. An electronic inventory system (ideally cloud-based) is a necessary first step in avoiding discrepancies. The process of keeping track of products using pen and paper can be time-consuming as well as error-prone.

When you’re running your business, it’s best to use a point-of-sale or inventory system that takes care of updating inventory levels as you ring up sales, so you don’t have to worry about updating your database and stock levels manually.

Ensure that your platforms are integrated

Don’t forget to connect all your retail platforms if you’re selling through multiple channels. Your POS system typically needs to be integrated with your ecommerce site. The new inventory management software is mostly integrated with the POS and ERP systems.

Keeping your catalogs in sync and updating stock levels after every sale helps ensure that all your catalogs are accurate. As a business owner, you want to discourage selling items online that aren’t physically available at your store or warehouse.

Stock counts should be conducted regularly

If you are not tracking and updating your inventory levels, you will never have accurate numbers. Even with modern inventory management systems, you must keep an eye on your physical inventory.

Make sure you include physical inventory counts in your inventory management system. This way, you can verify that the information you have on paper corresponds to what actually exists in your store or back room.

2. Failure to reorder within a reasonable timeframe

There is a simple problem here: you are selling out of in-demand products faster than you can restock. What can you do to prevent it? Here are a few suggestions:

Create a demand forecast

Essentially, this is a process of anticipating demand so that you can get the products on hand when needed. It is possible to forecast demand for your products on your own by using your judgment and factoring in the turn of stocks, sell through, historical sales data, and other factors including promotions, seasonality, economic conditions, etc. You will get some insight into how products will perform by crunching these numbers.

Keep an eye on consumer trends

The historical data is great, but pay attention also to what’s happening with your market’s consumers. Do people seem to be gravitating towards any new products? Have you noticed any resurgent fashion trends? Make sure you stock up as soon as possible.

Decide on the reorder points

If you know how often your merchandise will run out and how much you should stock at any given time, you can create re-order points to ensure that you are always ready to order. You should use POS software or an inventory management solution that allows you to set reorder points, so that you receive notifications when stock is running low.

3. Ineffective management of people, processes, and technology

Even if your inventory plans and tools are robust, you will run into stock out issues if you lack the right employees to implement them.

Customers may assume that you don’t have the merchandise on hand if your staff is not replenishing the shelves when you have sufficient stock in the backroom. You may have a great inventory system, but if you don’t train your employees how to interpret the data, then you cannot make the most of it.

Invest in three areas to prevent this from occurring: people, processes, and technology:


Be sure your staff receives better training, so they’re not only familiar with your system but also aware of what insights and data they should use moving forward. Provide vendors, technology partners, or consultants with the training to ensure that the employees are properly trained.


Assign people to complete each step in your business flow, then outline the inventory process at your store. Which employee is responsible for receiving items at your store? Does your shelf need to be restocked? Which staff members are responsible for reordering products at a given point? Write everything down on paper and send it to your employees so they can work accordingly.


Take advantage of tools that can simplify your inventory-centric tasks (and those of your team).

4. A poor relationship or lack of communication with your suppliers

If suppliers are not dealt with properly or are not communicated with effectively, missed orders or delays can result, and this can then lead to stock shortages.

What is the best way to avoid all that? Getting all orders on paper and meeting deadlines is the first step, then make sure everyone understands each other. As early as possible, you should also communicate any problems with your suppliers.

5. Working capital is insufficient

A lack of funds for buying new inventory causes some businesses to run out of stock. Getting your cash flow back on track might be a challenge if you fall into this category. You can try these things to free up working capital based on the financial situation of your company:

Liquidate surplus products

Are you dealing with excess stock? Put them on sale or bundle them with high-performing products to move inventory as soon as possible.

Increase sales

Can you improve your cash flow in another way? Find ways to increase your store’s revenue and sales. Can you improve the products you offer? Will your promotions need to be more appealing? In order to increase your sales, how can you entice your existing customers to do more business with you?


Stock out can prove to be very damaging for your business. For the reasons mentioned in this article about major causes of stock out levels, be sure to run all the above scenarios on your business and find out what is causing your stock levels to deplete.

Even better, use a smart inventory management soft like Inventooly to keep an eye on your stock levels and be informed 24/7 if your inventory requires your attention. Inventory management can prove to be a hectic task but with Inventooly at your disposal you can be stress free and work on something more productive

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