Why is it important to ensure continuous Availability of stock in stores?

Go to a grocery store and most likely you’ll see hundreds of different items stocked on seemingly endless shelves. It is typical practice that retailers keep stock of hundreds, sometimes thousands, of items for sale.

Grocery store owners keep so much variety of products on stock because their business recognizes the importance of product availability. When a customer comes to buy, he or she often would prefer to get all that’s needed from one place. It follows that the store that has the most items available would attract more customers. 

Meeting customer requirements is a basic mission of the firm. Business is not only about generating demand but also about fulfilling it. It seems logical, offhand, that firms should have complete stock 100% of the time. 

Making products available entails costs, from the design, manufacture, storage, and delivery of an item. Firms are sensitive to investing in capacity or in keeping more inventories to anticipate unforeseen demand. On the other hand, firms are also conscious that product un-availability could mean lost sales and possibly lost opportunities, sometimes to the point that it can determine the long-term survival of the business. Unless one’s product has quality characteristics unmatched by others or has a monopoly in utility, impatient customers will switch to competing brands if their brand of first choice is not available. 

Executives would attempt to balance product availability against anticipated market demand. They would try to match supply at the moment of demand. Inventory and extra capacity would be the buffer against uncertainty.   

The responsibility of this ‘matching’ of product availability against demand rests with all of the management disciplines of the firm. Each discipline, notably sales, marketing, administration, and operations, has a role to play from understanding and generating customer demand or to the sourcing of needed resources for the production and delivery of finished product. The following ideas serve as a suggested guide in sustaining product availability at least cost versus demand: 

Go S&OP. Sales & Operations Planning (S&OP) means cooperative and synchronized planning between company disciplines toward supplying the right products at the right quantities to meet revenue and cost objectives. Various software tools and philosophies notwithstanding, S&OP is basically a meeting of the minds between managers of various backgrounds toward the common goal of meeting customer needs.

Clear Policies, Accurate Records. When a computer says a product is on-stock at warehouse A when it really is in warehouse B, it is likely there’s going to be an adverse effect to somebody’s customer order. Most mix-ups of this sort are traced to poor record keeping or unclear policies or procedures. Data is the lifeblood of management planning and it is vital that there should be clarity and accuracy in the information flow.  

Gain Control. The systems that produce and deliver a product should be reliable but before they can be reliable, they should be in control. This sounds simplistic but many firms today have problems with control. In a lot of instances, a lack of information visibility is the main cause. 

Continuous Improvement. A system in control will allow a firm’s managers to define its operational limits. Once a firm knows what its systems are capable of, managers can begin to identify the causes holding back those capabilities and improve against them. Knowing one’s limits and improving against those limits sets the stage for steadily reliable and flexible delivery. With reliable and flexible operating systems comes reliable and flexible responsiveness.   

Build Rapport. This is not just for within the organization but beyond it. Suppliers, freight-service providers, and contractors are essential partners of the business, and this partnership should translate tangibly and visibly. This is basically because any system’s effectiveness wholly depends on how well one’s ‘partners’ deliver. Availability would be doubtful if a company can boast 90% manufacturing efficiency but 50% transport reliability.  

Product availability is not necessarily having items available 100% of the time but rather having items available when the customer needs it. It is a matching game of timing the preparation of an item nearest to when the customer seeks it. It requires planning (S&OP), clarity and accuracy in policies and data, consistent control, continuous improvement, and constant rapport with business partners. 

What kind of exceptions are we talking about? In essence, in the context of product availability, there are two main types of exceptions we need to worry about: forecasting & inventory.

Inventory exceptions

The goal of the supply chain team is to maintain the optimal level of inventory. Therefore, when we talk about inventory exceptions, we look for the following:

1) There is not enough stock to satisfy customer demand – If you do not address this, you will lose sales and disappoint customers.

2) Too much stock - If you do not take action, you will lock up invaluable working capital which could be invested elsewhere. This needs to be reviewed daily as your risks can change.
Forecast exceptions

The goal of a good forecast is to try and anticipate future demand as closely as possible to the realised demand.

If the forecast is drastically different from the actual demand, this is what we could consider ‘exceptional’. For example, we may want to look out for the following:

1) The forecast differs massively from what you expect

2) The demand history data you need is either incomplete or may not be trustworthy (e.g., last month’s sales were huge compared to every other month and you don’t understand why!) 

What is the importance of ensuring product availability?

Why is it important for the retailer to maintain stock level?

What data you analyze to ensure the availability of stock?

How can availability enhance sales?