e-Commerce

Alerts and Triggers on Inventory Re-Order Points and Stockouts

Aditi Sinha

November 24, 2023

5 min read

Banner introducing Alerts and Triggers on Inventory Re-Order Points and Stockouts

What is Inventory Stockouts?

Inventory stockouts occur when a business or organization runs out of a particular product or item in its inventory and is unable to meet customer demand for that item. In other words, there is insufficient stock or inventory to fulfill customer orders or meet internal needs. This can result in various negative consequences for the business, including lost sales, dissatisfied customers, and disruptions in operations.

Stockouts can affect any organization that maintains an inventory of products or materials, from small businesses to large corporations, and across various industries including:

  1. Retailers and E-commerce Businesses: This category includes both physical retail stores and online retailers. They may experience stockouts if they struggle with accurate demand forecasting or ineffective inventory management, resulting in empty shelves or out-of-stock products on websites.
  2. Manufacturers and Distributors: Manufacturers can run into stockouts if they deplete essential raw materials or components needed for production. Distributors, on the other hand, may face stockouts when they lack sufficient products in their warehouses to fulfill orders from retailers and customers.
  3. Wholesale Distributors: Wholesale distributors specifically encounter stockouts when they don't have enough inventory to meet orders from various retailers and customers.
  4. Restaurants and Healthcare Facilities: This group encompasses restaurants and food service establishments as well as hospitals and healthcare facilities. They can experience stockouts of ingredients, menu items, medications, or medical equipment, which can lead to menu limitations or patient care issues.
  5. E-commerce Challenges: Online retailers and e-commerce platforms may encounter stockouts if they struggle to maintain adequate inventory levels or face delays in the delivery of goods from suppliers.

5 common industries which face the problem of inventory stockouts

How do Organizations Solve Inventory Stockouts today?

Today, the way organizations track, measure and track their inventory is on color-coded Excel sheets and BI dashboards such as Tableau, Metabase, Redash, Power BI etc. This is a very “reactive” way of dealing with issues related to inventory because:

  • Manual Tracking and Analyzing: Manual input of data and analysis leads to errors in data about stockout being missed out
  • Delays in solving issues: A lot of times dashboards and Excel sheets lead to a lot of data crunching to get to a list of actionable tasks to take leading to more time spent on searching for issues instead of solving for them.
  • No way to track issue resolutions: With Excel and dashboards, the way people go about co-ordinating and tracking resolutions is through phone calls, WhatsApp chats, and slack threads to co-ordinate with their procurement team.
  • No mechanism to collect data for long-term RCA: There is no way to collect data for doing long-term root cause analysis and how to mitigate issues long term.

Illustration on how organizations use dashboards and sheets to solve inventory stockouts

Why Set up Systems for Monitoring, Alerting, and Triggering for out-of-stock inventory?

Setting up systems for monitoring, alerting, and triggering is essential to reduce inventory stockouts for several reasons:

Getting the right data at the right time

Setting up monitoring and alerting provides real-time information on inventory levels and demand, enabling businesses to identify and respond to potential stockouts as they happen.

Proactive Solutions

Monitoring and alerts allow you to take corrective actions before stockouts occur, preventing disruptions and lost sales and enhancing customer satisfaction by ensuring products are available when customers want them.

Business Impact

Proactive inventory management reduces rush orders and carrying costs, resulting in cost savings and improved resource efficiency. Satisfied customers lead to repeat business, positive word-of-mouth, and increased sales.

Trigger Examples you can set up

Problem Alert Action Impact
Stock below Reorder Point Inventory Managers or Merchants get an Alert when an SKU has breached its Reorder Point. The Inventory Manager (or) Seller/Merchant can reorder the SKUs according to Projected demand. Improves the product's availability and reduces lost business opportunities due to stockouts.
Inventory Stockout Sellers/Managers get alerted when a product/SKU is facing an OOS or Stockout event. Delist the Product (or) show stockout messages with replenishment dates to customers. Replenish the stockout Products/ SKUs. Increased transparency by providing back-in-stock dates improves user reactivation/retention and prevents loss in revenue.

What does a good triggering mechanism for solving out-of-stock inventory look like?

Graphic showing good trigger mechanisms for solving out of stock inventory

Monitoring and Alert Setup

  1. Appropriate Monitoring Frequencies: Configure monitoring frequencies for inventory stockouts that balance the urgency of the issue. Real-time alerts should be reserved for critical stockouts, while less urgent situations can trigger less frequent notifications to prevent alert fatigue.
  2. Accurate Thresholds: Define precise stockout thresholds based on historical data and typical demand patterns. Understand what constitutes a normal inventory level to avoid unnecessary alerts.
  3. Priority Levels: Establish priority levels for stockout alerts based on their severity. Categorize alerts, such as critical stockouts (Priority 1), moderate issues (Priority 2), and lower-priority concerns (Priority 3).
  4. Standard Operating Procedures (SOPs): Develop clear SOPs for addressing inventory stockout alerts. These SOPs should outline step-by-step processes for managing stockouts, including identifying the issue, assessing its impact, and initiating replenishment.

Contextual Stockout Alerts

  1. Preferred Communication Channel: Send stockout alerts through the preferred communication channels of relevant stakeholders. This may include email, SMS, or a dedicated inventory management platform.
  2. Clear Alert Titles: Ensure that stockout alert titles provide context by explaining the stockout situation and its potential impact. Recipients should immediately understand the urgency and nature of the issue.
  3. Inclusive Resources: Embed relevant links or resources within stockout alerts. These resources can guide users on how to resolve the stockout quickly, access inventory data, or initiate replenishment orders.

Tracking and Resolution

  1. Proper Assignees: Assign the right person in the procurement team the issues so they can solve it proactively.
  2. Alert Tracking Mechanism: Implement a tracking mechanism to monitor the status and resolution progress of stockout alerts. This helps maintain accountability and ensures that actions are taken promptly to address the stockout.
  3. Service Level Agreements (SLAs): Set SLAs for the resolution of stockout issues. Include buffer time within SLAs to account for unforeseen delays and complexities in the resolution process.
  4. Escalation Protocols: Define escalation protocols for stockout alerts. If stockouts remain unresolved within the defined SLAs, ensure that alerts escalate to higher authority levels for timely intervention and decision-making.

Locale.ai can help: Proactively Monitor and Manage your Inventory

Comparison between dashboards and Locale for managing inventory
Comparision of Locale.ai with the traditional way of dealing with stockouts: dashboards

Locale is an operations automation and issue tracking platform to save you from wasting hours with reports & dashboards. It connects to your data, identifies moments that need your attention, and alerts the right people at the right time to resolve the issue. With Locale, you can:

1. Monitor Inventory & get alerted on your preferred channel

Instead of discovering it hours or days later. Locale constantly monitors your data and flags the most important issues.

Graphic showing Locale alerts on user's preferred channels

2. Auto-assign the issues to the right person in the procurement team

Locale ensures critical issues are directed to the right person and avoids unnecessary delays.

Graphic showing auto-assignment of right person in the procurement teams

3. Auto-escalate unresolved issues and track for resolution

With Locale, every alert becomes a ticket someone resolves. Each ticket has its own SOP and is escalated if not solved in a specified time.

Graphic on auto-escalating unresolved issues and tracking resolution

4. Measure the performance and do a root-cause analysis

Do a root cause analysis of your issues by getting insights on which problems are occurring the most and the resolution percentage of your team members.

Graphic on measuring the performance of your ops team

Locale helps you manage inventory like a boss with AI-based Alerting, Escalation, Resolution, Playbooks and Analysis. Get AI-Watchdog to Simplify Inventory Stockout Management and Sign up Now!

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