5 ways to prevent stockouts and overstocks with analytics

by | Apr 13, 2023 | Order Management, Supply Chain

Maintaining the right inventory balance is crucial for any business. Too much inventory can lead to excess carrying costs and markdowns. On the other hand, too little stock can result in lost sales and customer dissatisfaction. Fortunately, the right information can help suppliers achieve the optimal inventory balance, prevent stockouts and avoid overstocks with their retail partners. 

Here are five ways analytics can help you avoid having too much or too little inventory.

1. Understand and prioritize your top-performing items

As a supplier, it is crucial to understand and prioritize your top-performing items to prevent stockouts and meet customer needs. By analyzing sales and inventory trends, you can identify the most popular products in high demand. This information can help you make informed decisions about which products to produce more of and which products may not be worth carrying in the future. For example, let’s say you sell various clothing items and have data that a particular style of jeans is consistently one of your top sellers. You may want to prioritize this item by keeping a larger inventory on hand, and potentially even placing larger orders with this manufacturer to ensure that you always have enough stock to meet demand.

2. Analyze your weeks of supply and sell-through velocity

Closely monitoring weeks of supply and sell-through velocity can help you anticipate demand and prevent stockouts and overstocks. By tracking these metrics, you can stay informed about the movement of your products at the retail level and ensure a steady flow of product available for consumers. A high sell-through velocity indicates a product is selling quickly and may need to be restocked soon, while a low sell-through velocity suggests slower sales and a longer shelf life, which can lead to higher carrying costs and lower margins. By working closely with your retail partners and staying informed about the demand for your products, you can spot trends early and adjust your strategies to meet the market’s needs.

3. Implement location-based analysis across your items

Location-based analysis can be a powerful tool for optimizing the placement and sales of your products. By analyzing sales data by location, you can gain a deeper understanding of how your products perform in different markets and identify any trends or patterns in customer behavior. For example, a certain type of winter coat may sell particularly well in Minnesota but not as well in Massachusetts. Additionally, you can use location-based analysis to compare the performance of your products across different types of retailers, such as department stores versus specialty stores. You can also compare online versus brick-and-mortar sales and understand how these channels affect your revenue and profitability. This analysis can help you determine which types of retailers are the most effective at selling your products and adjust your distribution strategies accordingly. By leveraging location-based analysis, you can make informed decisions about where to focus your resources and drive sales for your business.

4. Prevent stockouts by honing your promotion strategy

Understanding which products are selling best is crucial for any supplier looking to optimize their promotion strategy with retail partners. By analyzing sales and inventory data, suppliers can identify which products are in high demand and tailor their promotion efforts accordingly. This effort can involve offering targeted discounts or creating targeted marketing campaigns to drive sales for certain products. Additionally, by staying informed about which products are selling well, suppliers can better anticipate demand and prevent stockouts by ensuring a sufficient supply of popular products for consumers.

5. Proactively communicate, internally and externally

Effective communication about sales and inventory trends has numerous internal and external benefits. Empowering your sales and planning teams with visibility into sales data and trends can help them better capitalize on sales opportunities and areas of potential growth.

In addition to the internal benefits, effective communication is essential for strong retail partnerships. Collaborating with retailers using data fosters transparency and trust, and helps you stand out as a strategic partner with data-backed recommendations. By proactively communicating with retailers, suppliers can help their partners make informed decisions about reordering and promotional strategies to prevent stockouts and surpluses. Ultimately, this leads to increased sales and profitability for both parties.

Looking to prevent stockouts? SPS Commerce can help.

For companies to succeed with inventory management, they must have a proactive strategy for communicating when stock levels are falling too low or too high. They need solutions to analyze what items are flying off shelves and what merchandise is performing poorly. If you’re a supplier trying to get a better handle on how to prevent stockouts, see how the SPS Commerce Analytics solution can help improve your inventory management processes.

SPS Commerce Blog Team
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