- 03 Mar 2022
---The most common fulfillment challenges in dropshipping
First things first, let’s define stockouts. Also known as out-of-stock events, stockouts occur whenever a given item’s inventory is exhausted. Stockouts are really bad. There are some negative consequences of inventory, as listed below.
1. Customers will cancel their orders.
Some customers will see that you’re out of stock and cancel their orders. When this happens, your company loses revenue, sometimes even to a competitor.
2. Customers will leave forever.
When customers realize you don’t have an item in stock, you may never hear from them again. Usually, this happens when brand new customers stumble across your store and you have nothing in stock.
3. You may receive negative reviews online.
When a company gives customers a bad experience, they are at risk of receiving negative reviews on sites.
How To Prevent Stockouts
Avoiding stockouts is really important. This is easier said than done.A misstep can lead you down the road to having too much inventory, or far worse, not enough.With this in mind, let’s talk about some things you can do to prevent stockouts from occurring in the first place.
1. Implement responsive supply chain management techniques.
If your business is especially prone to stockouts, look into responsive supply chain management. You may be able to better refine your internal processes to meet changing demands.
2. Focus on more accurate demand estimation.
Want to prepare for demand? Get better at estimating it!
Better demand estimation makes life a lot easier for companies.
3. Keep an eye on market trends.
Good demand estimation will help you prevent stockouts, but you need to pay attention to your industry at large. If you’re in a growing industry, you may see an increase in demand for your products even if you do nothing differently.
4. Vet your logistics companies carefully.
If you’re not careful, logistics companies can indirectly cause stockouts. Let’s say your courier company damages your stock. Then you might not have enough to sell. If your warehousing company is careless, you could end up paying the price in lost revenues.
5. Find a fulfillment company with inventory management software/reminder.
Lastly, if you want to prevent stockouts, you need to keep an eye on inventory levels. If you don’t store your own inventory, it can be easy to lose track of how much you have on hand. For this reason, if you use a third-party fulfillment company, make sure they have a system that lets you track inventory levels.
What To Do If You’re About to Run of Stock
If you’re very close to a stockout, here are four things you can do that will immediately improve your situation.
1. Cut your ad spending.
With a stockout looming, the first thing you should do is cut your ad spending. There is nothing as damaging as running out of stock while ads are still running.
2. Temporarily increase price.
Some sources recommend temporarily increasing the price of your products to reduce demand. This is another way to handle the risk of stockouts.
3. Close listings on sites like Amazon or eBay.
If you have listings on Amazon, eBay, and other sites like that, take them down. That way, people won’t be placing orders that you can’t fill in a timely manner.
4. Order some emergency stock for the next time.
Last but not least, go ahead and order additional stock. Hopefully, you won’t run out before the stock arrives and you can just keep emergency stock for next time.
What To Do If You Run Out of Inventory Anyway
let’s say you’ve already run out of stock. Now what?
You can immediately take these five steps to ameliorate your situation.
1. If you’re in a big rush, ship some of your inventory by air freight.
By far, the fastest way to get some stock back in your warehouse is through air freight. By having some of your inventory shipped by air freight, the idea is that the revenues you would gain by having inventory back in stock earlier than normal would be enough to offset the cost of the air freight itself.
2. Close listings on sites like Amazon or eBay.
We mentioned this above, but it bears repeating. If you’re out of stock, close your listings!
3. If you run your own store, use a pre-order or backorder system so you can keep revenue coming in.
You can’t always take backorders on other eCommerce sites, but you always can on your own. It’s a good idea to have a backorder system in place so you can keep earning revenues while waiting on new inventory to arrive.
4. Bump up your ad spending as soon as the inventory is back in stock.
As soon as the inventory arrives, bump your ad spending up higher than normal. Doing so can stoke demand and help you recapture some of the revenues you lost during the stockout period. That way you can pick up as if nothing ever happened at all.
5. In all communications to the customer, be honest, upfront, and decent.
By stocking out, you have inconvenienced your customers. That’s okay. It happens sometimes. But you have to be honest about it!
Put up a page, send out an email, and generally do whatever you need to do to make sure your customer is taken care of. If you do an exceptionally good job of taking care of your customers, the minor stumble of a stockout might even make them like you more.
Running out of inventory isn’t the end of the world. There are ways you can handle stockouts if they happen, and even more ways to prevent them.