Out-of-stocks can be costly for several reasons, with sales being the most obvious and costly one, according to what Neil Matthews, vice president of retail security firm Checkpoint Systems, wrote on Drapers Online. With a quality inventory management system, companies may be able to weather any proverbial storm that may come from stocking issues.
Matthews cited the The Retail Feedback Group's 2012 Supermarket Experience, which showed that 50 percent of shoppers who couldn't find an item in stock went to another store to find it.
"Furthermore, out-of-stocks can harm future sales, with frustrated shoppers switching their loyalties to outlets that more reliably stock the items they are looking for," he said. "In some respects, ensuring the right garments arrive in store at the right time is harder than ever - inventory turnover is faster, global supply chains are growing in complexity and internet retailing complicates stock level monitoring. In addition, theft poses problems for retailers and results in items being out of stock."
The good news, according to Matthews, is that alongside an inventory management system, companies can readily adopt tools such as barcode scanner software, radio frequency identification and other new technology to keep track of when popular items are going out of stock. Successfully running a retail store, especially one that sells clothing, means knowing when popular items are running low and need to be restocked. Modern supply chain software can certainly help companies with this.
Be Sure the Right Metrics are Being Measured
David Goodwin, the Principal of the Retail Advocacy Group, wrote on Retail Training Services that organizations must be sure to measure the correct metrics. Key performance indicators, however, only tell part of the story.
"As retail operations specialists and retail training specialists we often work with retailers who know that the KPI's are telling them about a problem but they are unable to identify the root cause," he said. "Our first course of action is to dig-in and back-up the story told by the numbers through conducting real-world investigation, observations of on-the-floor activities, management interviews and more."
Metrics that should be looked at by automated data collection include:
- Completed sales year-to-year (or other periods of time)
- Sales as compared to the budget or target
- Gross profit
- Sales per square foot of the physical store
- Units sold per customer
- Conversion rate
While measuring these and keeping people in mind, organizations should be able to get a great look at how their company is doing.