Running a successful wholesale business means ensuring customers always have the products when needed. But it’s not always easy to predict how much of a particular product you should stock - and if you don’t order enough, you could be faced with an out-of-stock situation. The good news is that there are steps you can take to help prevent out-of-stocks and keep your customers satisfied. This blog looks at the 15 best strategies to manage your inventory and avoid out-of-stock scenarios.

From understanding customer trends to smart stock levels, the tips provided here will give you the best chance of succeeding in your wholesale business. Read on to learn how you can stop out-of-stocks from happening.

What Is a Stockout?

A stockout, also known as an out-of-stock situation, occurs when the inventory of a particular item is completely depleted. In a wholesale business, stockouts can result in lost sales, customer dissatisfaction from poor inventory management, and potentially damaged business relationships. Thus, preventing stockouts is a critical aspect of an effective inventory management solution.

Top 5 Causes of Stockouts for Wholesalers

Wholesalers deal with a lot of complexity when it comes to an inventory management system. Here are some common causes of stockouts for wholesalers:

Incorrect Forecasts

Erroneous forecasts are a leading cause of stockouts. Forecasting demand entails estimating the future demand for your products, which informs your inventory purchases. If demand is underestimated, you may not order enough inventory, which can lead to a stockout situation. On the other hand, overestimating demand can result in overstock and tied-up capital. Achieving accurate forecasts is a delicate balancing act, requiring a deep understanding of market trends, historical sales data, and customer behavior.

Moreover, accurate forecasting is not a static process; it should be dynamic and adaptable to changing market conditions. Sudden shifts in consumer behavior, market trends, or global events can drastically impact demand. If your forecasting strategy isn't flexible enough to accommodate these changes, it may result in erroneous forecasts and subsequent stockouts. Regularly updating and adjusting your forecasts based on recent data can help mitigate this risk.

Erroneous Records

Inaccurate inventory records can significantly contribute to stockouts. If your records show more inventory than is physically available, you might not order the necessary stock in time. Furthermore, discrepancies between your records and actual inventory can lead to confusion and mismanagement. Such inaccuracies often stem from human error, theft, damage, or misplacement of goods.

Regular inventory audits can help identify and correct discrepancies, but they can be time-consuming and disruptive. As an alternative, many businesses implement regular cycle counting, a strategy that involves counting a small portion of inventory daily. This approach minimizes disruption while ensuring your records stay accurate. Also, the use of inventory management software can automate the process, minimizing human error and enhancing efficiency.

Supply Delays

Supplier delays are another common cause of stockouts. A supplier failing to deliver goods on time can lead to a gap in your inventory. These delays can be due to various reasons, including manufacturing problems, raw material shortages, transportation issues, or even geopolitical events. Unfortunately, many of these factors are out of your control.

Despite these challenges, you can mitigate the risk of supplier delays by diversifying your supplier base. Relying on a single supplier for a product can leave you vulnerable to their delays. By diversifying, you can switch to an alternate supplier if you face disruptions. Additionally, maintaining open communication with suppliers and closely monitoring their performance can help anticipate potential delays.

Unexpected Demand

Unexpected spikes in demand can quickly deplete inventory, leading to stockouts. This can be due to seasonal fluctuations, sudden changes in consumer preferences, promotional activities, or even viral trends. While these demand surges can be profitable, they can also strain your inventory if not properly managed.

Accurate demand forecasting can help prepare for predictable fluctuations in demand, but unexpected spikes are inherently difficult to anticipate. To mitigate this risk, consider maintaining a safety stock—extra inventory to cover unexpected demand. While this strategy requires additional investment, it can protect against stockouts during unexpected demand surges.

Operational Issues

Operational issues can also lead to stockouts. These issues may include transportation delays, warehouse mismanagement, or inefficient distribution practices. If your inventory doesn't reach the right place at the right time, it can lead to a stockout—even if you technically have enough stock.

To prevent logistics-related stockouts, focus on optimizing your global supply chain. This can involve investing in more reliable transportation, streamlining warehouse operations, or implementing a more efficient distribution strategy. Leveraging technology, such as warehouse management systems or real-time tracking software, can also help identify and address logistical inefficiencies.

15 Best Ways to Prevent Stockouts in Your Wholesaler Business

Preventing stockouts involves a combination of effective inventory management practices, strong supplier relationships, and diligent monitoring of customer and market trends. By implementing these strategies, you can minimize the risk of stockouts and ensure your business continues to meet customer demand effectively.

Keep accurate inventory data

Inventory accuracy is paramount to prevent stockouts. Regular inventory audits ensure that your digital records match the physical inventory. Discrepancies can be due to misplacement, theft, or human error during data entry. Use barcode scanners or RFID technology to reduce manual errors and ensure accurate inventory tracking.

Implement a regular cycle counting practice

Cycle counting involves regularly counting a subset of your inventory rather than counting the entire inventory simultaneously. This ensures ongoing accuracy and allows you to correct discrepancies before they lead to a stockout. Divide your inventory into segments, and schedule counting for each segment throughout the year.

Specify reorder points

Reorder points are the inventory levels at which you should place a new order. They should be set considering your average lead time and safety stock. By setting and adhering to reorder points, you can ensure you always have enough stock on hand.

Define lead times

Lead time is the duration between placing an order and receiving it. Understanding your suppliers' lead times helps set accurate reorder points and prevent stockouts. Also, consider factors like holiday periods or potential delays due to custom checks, particularly for international suppliers.

Enhance forecasting abilities

Forecasting helps predict future demand based on past sales data, market trends, and promotional activities. Improving your forecasting methods can help you anticipate and meet customer demand more effectively, reducing the likelihood of stockouts.

Use demand planning

Demand planning software uses historical data and sophisticated algorithms to predict future demand. Incorporating this into your inventory management process can help you stay ahead of demand curves and prevent stockouts.

Maintain safety stock

Safety stock is extra inventory that accounts for unexpected demand or supply chain disruptions. Keeping safety stock can protect you from stockouts during unforeseen circumstances.

Use automated inventory management software

Automated inventory management software can track inventory levels, set reorder points, and even automate purchasing decisions. This reduces manual errors and helps ensure you maintain adequate inventory levels.

Specify stockout patterns

Analyzing past stockouts can help you identify patterns and address the underlying issues. For instance, if certain products consistently run out, consider increasing their safety stock or adjusting their reorder points.

Follow customer trends

Customer buying patterns can indicate upcoming demand changes. By monitoring these trends, you can adjust your inventory levels proactively and prevent potential stockouts.

Focus on supply chain management

Keep an eye on your suppliers and logistics providers. Delays or disruptions in your supply chain can lead to stockouts. Regular communication and monitoring can help you promptly anticipate and respond to these issues.

Maintain healthy relationships with suppliers

Strong relationships with suppliers can lead to better communication, improved reliability, and faster problem-solving when issues arise. Collaborate closely with your suppliers to ensure they understand and can meet your needs effectively.

Implement consignment inventory

Consignment inventory involves a supplier providing you with stock but retaining ownership until the items are sold. This reduces your financial risk and can help maintain adequate inventory levels without tying up your capital.

Get rid of surplus stock

Excess stock ties up capital and takes up valuable warehouse space. If certain items are overstocked, consider liquidating them through sales or promotions. This can free up resources and make it easier to manage your remaining inventory.

Let customers know

If a stockout is inevitable, communicate with your customers proactively. Let them know when the item will return and offer possible alternatives. Open communication can mitigate customer dissatisfaction and maintain trust in your brand.

How Can Thrive Technologies Help?

Thrive Technologies' Tiltmeter is a breakthrough solution tailored to enable wholesale distributors to identify sudden shifts in actual lead times. It sends automated alerts to teams, prompting them to modify the planned lead times for inventory procurement. This potent tool plays a pivotal role in safeguarding against the adverse effects of stockouts, including lost sales and accumulation of surplus stock.

Tiltmeter® Supply: Proficient Detection of Lead Time Changes

Tiltmeter® Supply markedly amplifies the efficiency of wholesale inventory procurement by keeping a close watch on the correlation between Purchase Order (PO) receipts and order dates. Its automated notifications keep sales and procurement teams abreast of changes, thus enhancing the precision of current purchasing timing and quantities. In the dynamic business environment, Tiltmeter® Supply proves to be a game-changer by identifying changes in lead times as short as 30 days, a vast improvement over the conventional six-month period with standard ERP systems.

Minimize Dead Stock and Lost Sales

Tiltmeter's advanced alert system serves as an early-warning mechanism, notifying teams about shifts in lead times. This empowers buyers to update the existing lead times incorporated in purchasing computations promptly. By doing so, it aids in curtailing the buildup of excess stock and avoids potential missed sales due to abrupt alterations in supplier lead times. In essence, it fortifies your wholesale business against the detrimental impacts of stockouts.

Final Words

Preventing stockouts is crucial for maintaining customer satisfaction and optimizing sales. By using the strategies outlined above, you can greatly reduce the likelihood of experiencing stockouts in your wholesale business. Tools such as Tiltmeter® Supply can provide an added layer of protection against sudden lead time shifts and help you stay ahead of the curve.

Preventing stockouts is a complex task that requires close management and regular monitoring to ensure success. With the right strategies and tools, you can reduce the risk of inventory shortages in your wholesale business.