THE PROBLEM
Stockout is a top roadblock for scaling direct-to-consumer brands
THE PROBLEM
Too much (overstock) or not enough (stockout)
- Too much inventory? Run a promotion.
Promotion is successful? Now you're out of stock and wish you had ordered more. - Unexpected demand and not enough inventory? Order more, but by the time it arrives, customers have moved to another retailer or brand with inventory in stock.
The Cost of Stockout
Sales And Revenue
sold, resulting in lost revenue.
Brand Loyalty
customers leave for
competitors, and the brand
loses market share.
Invested Capital
cannot be invested in the
business or in products that
sell quickly
Ranking Position
stockouts decrease ranking position.
“Flieber always helps us balance the inventory levels across all locations at the time of purchase, so that we avoid being overstocked in one country while stocking out in another.”
The hidden cost of spreadsheets
Spreadsheets feel inevitable. Especially for many brands that depend on spreadsheets to manage forecasts and inventory.
If done correctly, your spreadsheet can track every SKU across every channel. The result is ending up with tons of data points, a forecast, and a plan.
But in the time it takes for you and your team to complete this, how certain are you that there is no cell with an errant formula or number?
Q: What’s the cost if there’s an error or miscalculation?
A: Could be a $20k or $200k mistake.
Why demand planning is so challenging:
Even the most sophisticated retailers struggle to get it right. The reason? Lack of data visibility, sales volatility, and complex supply-chains.
A product in high demand today, may be in low demand tomorrow (if you stocked up, you are left with overstock), and a product in low demand, may take off (and you will stock out).
How can you depend on data that keeps changing?
Historical sales data is a good starting point in predicting future sales, but how can you account for previous stockouts (how much you would have sold had the product been in stock?), outliers (like COVID-19), recent trends, and other data points?
There’s no ‘set it and forget it’ in inventory planning.
Let’s say a market change impacts sales or a supply chain disruption delays a PO.
You must be ready to turn on a dime to adjust inventory quickly, no matter the time or it will impact your margins.
- Demand Planning - Leverage previous sales history along with artificial intelligence (AI) to get the forecast as accurate as possible.
- Plan Inventory Needs - Identify warehouse inventory, current open orders, current sales data, historical sales data, inventory history, promotions, lead times, and other parameters that impact inventory.
- Timely Replenishment - Execute purchases and transfers at the right time so that inventory arrives before you run out of stock.
- Adjustment - Unexpected demand or shipment delays? Accelerate the delivery of open purchases, decrease marketing promotions, or increase prices to stretch current inventory further.