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You already know what stockouts are, and we created this content to communicate with you, someone who is already familiar with the issue, to highlight the severity of this problem. We also aim to point out a simple and practical solution to this issue, which is becoming increasingly common in companies today, but should not be.
This solution is clearly available through Implanta IT, which specializes in identifying weak points in inventory control and providing accurate diagnostics along with optimized solutions for your business, minimizing or virtually eliminating stockouts. Implanta IT, que é especialista em detectar pontos falhos no controle de estoque e oferecer um diagnóstico assertivo juntamente com soluções otimizadas ao seu negócio, minimizando ou praticamente zerando a ruptura de estoque.
Continue reading to understand why you should address this issue now, as the solution your company needs is just a click away.
What is a Stockout?
A stockout in the indirect channel, which includes distributors and resellers, refers to the lack or scarcity of a product at the point of sale (POS) when a consumer wants to make a purchase. This unavailability of an item usually occurs due to factors such as supply chain issues, errors in demand forecasting, long lead times, among others.
The impact of this issue on achieving sales targets is very serious. The unavailability of products to consumers often results in the loss of that sale and potentially future sales, as well as negative feedback about the business. Customer frustration leads to dissatisfaction and even loss of loyalty.
For companies, this means not only failing to meet market demands but also a direct impact on expected revenues and financial targets. Therefore, understanding and effectively managing stockouts in the indirect channel is crucial for achieving sales success and maintaining consistent customer satisfaction.
Main Causes of Stockouts
Stockouts in the indirect channel can be attributed to several causes affecting product availability at distributors and resellers. Some of these causes include:
- Issues with demand forecasting.
- Supply chain failures.
- Long lead times.
- Communication breakdowns between manufacturers and distributors.
- Use of outdated information.
- Lack of integrated systems.
- Poorly forecasted seasonal variations.
Understand the Explanation and Importance of These Causes:
Issues with demand forecasting are frequently cited, where inaccurate estimates lead to a misalignment between supply and actual demand.
Additionally, supply chain failures are not uncommon, including delays in transportation, storage problems, or even disruptions at intermediate levels of the logistics chain.
Long lead times also contribute significantly, especially when the time needed to restock inventory is longer than expected, resulting in extended periods of product unavailability.
Communication failures between manufacturers and distributors are a major cause of this problem. Without effective communication, orders made without concrete data will result in products missing from the shelves.
The use of outdated information is a consequence of lacking integrated systems that can directly relay to the industry how daily sales routines at the POS are, providing the exact dimensions of item consumption, all exits, and seasonalities. Integrated systems, which Implanta IT has extensive expertise in, are successfully used by numerous clients to resolve stockouts.
Furthermore, these communication failures can lead to misinterpretations of stock needs or changes in production plans, exacerbating the problem.
Other factors include poorly forecasted seasonal variations and delays in administrative processes, which directly impact restocking capability and the maintenance of adequate inventory levels in the indirect channel.
Operational Consequences and Additional Costs
In addition to the problems caused, stockouts also lead to significant operational consequences for companies in the indirect channel.
Due to the need for urgent stock replenishments, additional costs will arise, often at higher prices due to the urgency, directly impacting profitability.
Increased transportation costs are also common, as it will be necessary to expedite the shipping of products to fill the gap left by the unplanned stockout.
Adjustments in production schedules are also frequently required to accommodate the replenishment of products and minimize the impact on operations.
These consequences not only increase operational costs but also compromise the efficiency of the supply chain. Moreover, they affect the company's ability to meet market demand, damaging its reputation and relationships with customers and business partners.
Impact on the Manufacturer-Distributor Relationship
Among the many serious consequences for everyone involved in the production chain, stockouts also have a strong impact on the relationship between manufacturers and distributors. Often, this results in a deterioration of trust between them.
When distributors face repeated stockouts, they question the perceived reliability of the manufacturer in providing products consistently, which undermines the long-term partnership.
Additionally, difficulties in maintaining adequate inventory levels can hinder collaboration between the parties. This negatively affects the effectiveness of joint marketing strategies planned to boost sales and promote products in the market.
The lack of product availability at distributors can compromise the ability to meet consumer demand, and consequently, reduce profitability for both parties involved in the distribution chain.
How to Reduce Stockouts
To address the issue of stockouts at distributors, certain steps need to be adopted. One of the key measures is to improve demand analysis processes by using accurate and precise information to obtain a more accurate forecast.
To achieve this, implementing advanced management systems and software helps optimize inventory levels. These tools enable continuous monitoring and automatic adjustments based on reliable and concrete sales data and seasonal variations.
With the right platforms, it is not necessary to manually calculate to identify stockouts. The correct system will always have these and other data readily available for interpretation and use.
All companies and industries that invest in and utilize technology to their advantage experience greater development compared to those that do not, as they have access to reliable data for making informed decisions.
A Key Solution for Your Company
Implanta's Distribution Visibility
The best way to analyze and manage inventory to avoid all types of stockouts is by investing in systems and technologies, especially with the significant contributions of artificial intelligence today.
For this to happen, it all starts with collecting data quickly and reliably, directly from the inventory of vendors and distributors.
This is one of Implanta's main focuses: developing and implementing software with artificial intelligence that provides the industry, among many other advantages, with Distribution Visibility and Demand Forecasting.
The Distribution Visibility system collects all crucial data about sales to end consumers directly from the distributors' ERP systems, allowing the industry to have complete visibility of its products in the supply chain.
In this way, companies can track daily their Sell-Out and the inventory position of resellers and distributors.
To get more information about Implanta’s solutions and make the best use of data intelligence, simply contact our experts..
