How retailers solve out-of-stocks with better data-sharing

A persistent problem across the supply chain, stock-outs are a notorious source of revenue loss for retailers. According to NielsenIQ, out-of-stocks caused retailers to lose 7.4% of sales in 2021, totalling a combined $82 billion dollars in lost revenue. This is a huge cost for retailers to deal with – not to mention that it can affect supplier relationships and cost retailers and brands their customers’ loyalty.

Retailers can minimize out-of-stocks by leveraging and sharing their data to create a more holistic view of the supply chain and enable smarter inventory management.

By using a data-driven approach, retailers can collaborate in real-time with suppliers to better track the inventory received from their suppliers across distribution centers and through to individual store locations. 

Here, we’ve outlined the true cost of stock-outs, and the five ways integrated data processes can generate high ROI for retailers and their suppliers alike. 

The case for prioritizing out-of-stocks

Whether out-of-stocks are due to inaccurate forecasts, supplier shorts, or phantom inventory, remedying them is a top priority. Stock-out situations are among the most detrimental issues a retailer can face.

• 7.4% of sales were lost because of stockouts in 2021 in the US
• Out-of-stock situations double when promotions are involved
• Around 4% of total lost revenue per year around the globe is from OOS events
• Around 5-15% of marketed products are out of stock at any given time

A common misconception is that out-of-stock situations don’t last long and the loss of sales isn’t great enough to warrant the effort to remedy the issue. However, this couldn’t be further from the truth: While 75% of stock-outs last less than three days, it’s the 2% of stock-outs lasting more than 10 days that cause over half of lost sales.

The greatest cost: loyal customers

Today’s consumers have endless online and in-store options to choose from, which makes managing out-of-stocks a serious concern for retaining customer loyalty. When customers find empty shelves and head to another store instead, competitors win the sale. This can ultimately open the door for loyal customers to change their preferred retailer or brand. 

When customers can’t find the product they’re looking for in-store, they will:

• Turn to online shopping — Approximately $34.8B is lost to online stores like Amazon
• Go to another brick-and-mortar store — $36.3B is lost to brick-and-mortar competition
• Not buy at all — Which  causes nearly $26B in lost sales

The more often a customer’s preferred product is out-of-stock, the more likely they are to switch to a store that has their items regularly in-stock. 

Minimizing out-of-stocks helps you keep loyal shoppers while increasing the chances of new customers becoming regulars.

Data accuracy is the best way to avoid out-of-stocks

Out-of-stocks can occur for multiple reasons, including:

• The bullwhip effect – A small change in demand forecasting (caused by inaccurate info such as out-of-stocks) can cause more significant issues throughout the supply chain. According to the bullwhip effect, a +/-5% change in consumer demand at the retail level, can cause up to a +/-40% change in demand planning for suppliers, making it hard to get an accurate pulse on the market and allocate inventory accordingly.
• Supply chain disruptions – It’s no secret that in today’s retail environment, disruptions from weather to pandemics to geopolitical situations can keep products from getting to shelves.
• Inventory allocation – It’s not just about how much your suppliers produce – it’s about determining exactly how much of it needs to go to each store, depending on that store’s unique demand patterns. This is a difficult problem to get right, especially when balanced with the desire to avoid excess inventory and waste. 
• Retail voids – Without accurate inventory data, products may be in-stock but located on the wrong shelf, missing tags, or hidden in the backroom – causing a loss of sales.

The good news is that with ample inventory data and strategic supplier communication, retailers can turn out-of-stocks into a thing of the past.

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5 ways sharing data with suppliers reduces out-of-stocks

Granting suppliers access to retail inventory data provides an opportunity for effective communication and collaboration – leading to more success for everyone. Here’s how modern data-sharing improves supply chain performance:

1. Data transparency fosters proactive supplier relationships

Building a retailer/supplier relationship that’s based on credibility and trust starts with transparency. The more inventory data a retailer shares, the better suppliers can stock their shelves.

Due to inflation, lower margins and sustainability concerns, many suppliers have been opting for a leaner approach to stocking shelves (versus the old “stock it high and let it fly” mentality). For this reason, knowing how much extra inventory to have on hand is of great importance for avoiding out of stocks.

Since retailers are limited in time to consistently track inventory levels and identify out-of-stocks, the best thing they can do is empower their brands with the necessary data to sufficiently plan orders and extra inventory. 

Data-sharing between retailers and suppliers ensures that both parties are on the same page for inventory levels, distribution planning, and related promotional campaigns.

2. Timely data & communication ensures the success of seasonal and promotional planning

Timely communication of data between retailers and suppliers is critical for forecasting and planning inventory levels around seasonal shopping trends. Retailers in college towns, for instance, share inventory data with suppliers to better prepare for the uptick in back-to-school shopping sales – guaranteeing ample products on the shelves for students in the area.

Retailers share data to communicate with suppliers about:

• Identifying and planning promotions based on seasonality, shopping trends, and inventory levels
• Creating a plan for stock-out situations ahead of time, working backwards to ensure adequate inventory levels through promotional periods
• And solving ad-hoc inventory issues immediately and replenishing stock when items are in highest demand

Promotional planning is a great way to boost sales and reach new customers, and data-sharing ensures that enough inventory will be available to meet the increase in demand.

3. Data sharing makes the most of advertising spend

When done well, advertising campaigns benefit both retailers and their suppliers. When using inventory data to guide advertising decisions, brands can run ads and promotions based on facts and not guesswork. 

Unfortunately, as much as 30% of a brand’s advertising budget is wasted where product isn’t even in stock. This is a waste of a retailer or supplier’s advertising dollars, and can be a source of frustration for customers who can’t find what they were promised. 

With inventory data tied to advertising, brands and retailers can keep products stocked, while also using sales data as a key measurement for marketing campaigns and ROI.

4. Data communication increases supplier efficiency 

When suppliers have access to inventory data from retailers, they don’t have to spend hours compiling on their own. Instead, they can focus on the actionable insights that benefit everyone, such as spotting potential out-of-stocks faster to keep shelves fully stocked year-round.

Take SunButter’s case study as an example. Before using Crisp, SunButter had staff spending hours sifting through spreadsheets from retailer portals, meaning they had to choose which accounts to prioritize and leave others behind. And this cost them valuable sales opportunities along the way.

Once the team had data access, SunButter employees freed up 10 hours per month and were able to shift their focus to tasks of greater importance such as adding new SKUs to strategic retailer locations.

One retailer thought that the out-of-stocks were happening due to SunButter being short on supply. SunButter was able to use data to track the orders and shipments and discover the true cause: that the order hadn’t been picked up by the buyer. By using data with Crisp, SunButter has successfully saved $250K in avoided stock-outs in the past year alone.

5. Data communication builds trustworthy retailer/supplier relationships

Sharing inventory data with suppliers lets them know how to position themselves for success. While you don’t have time to figure out supply and demand for every brand and SKU in your store, you can empower suppliers to accurately stock your store by relying on real-time inventory data.

As a result, not only will you build trust with suppliers, but they’ll also use this data to generate new ideas for promotions, shelving, and distribution to enhance sales across the board.

The foundation of every solid retailer/supplier relationship is trust. While this trust is fostered and earned over time, access to inventory data ensures that both parties can act out of the best interests for all involved – without relying on old-school, manual inventory methods.

Stop worrying about out-of-stocks

When retailers share data transparently with suppliers, they become partners working towards a common goal: more sales and reduced out-of-stocks.

Ready to see how Crisp brings your inventory data to life (and eliminates out-of-stock situations along the way?) Book a demo here!