Logistics Warehouse: How to Avoid Stock-Outs

December 3,2024

When a seller is unable to fulfil an order due to a stock shortage, one-third of consumers will turn to competitors.. Disposer d’un stock suffisant pour répondre à la demande est donc une priorité pour ne pas perdre ses prospects ou ses clients, si ce n’est LA priorité pour les acteurs de la supply chain. Comment faire pour éviter les ruptures de stock et sortir d’un mode de gestion du « juste-à-temps » ? Tour d’horizon.

What is an Out-of-Stock Condition?

Definition of an Out-of-Stock Condition

An out-of-stock condition arises when consumer or customer demand exceeds the available stock of products or raw materials. In other words, when there are insufficient goods to meet demand.

What are the main causes of a stock shortage?

An unexpected surge in demand.
Errors in stock management or inventory tracking.
Incorrect order forecasts, resulting in insufficient supplies.
Stock-outs further upstream in the supply chain (suppliers, raw materials, etc.).

To assess whether you’re at risk of stock-outs, the first step is to calculate the theoretical stock (also known as book stock) and compare it with the actual stock (the physical stock), which may differ due to errors in logistics stock management.

Avoid these 6 common mistakes when integrating your WMS or WES and effectively tracking stock levels:

How to Calculate Out-of-Stock Losses?

To explore this further, it is possible to calculate your stock-out rate, expressed as a percentage, which evaluates the profit loss caused by an out-of-stock situation.
Here is the formula for calculating the stock-out rate:

Stock-out rate = (Number of orders that could not be fulfilled due to stock shortage / Total number of orders) X 100

The stock-out rate can also be calculated using other KPIs: the number of items out of stock or the duration of the out-of-stock condition, divided by the reference value, as in the first formula.

Please note: accurately assessing the losses caused by a stock shortage is challenging. Even the most precise calculations cannot account for all the requests that couldn’t be fulfilled—such as a user who notices an out-of-stock condition on your site and switches to a competitor, someone requesting a product in-store, or a consumer spreading the word to their community.

Solutions to Anticipate and Avoid Stock-Outs

How can we anticipate and prevent stock-outs? The key is to calculate, plan, automate, and optimise—here’s a four-step action plan.

Calculate Stock Coverage in Real-Time

Stock coverage refers to the availability of products. It is calculated based on the number of units in stock, which allows you to determine how long the existing stock will last. By calculating stock coverage, you can compare your stock with the safety stock level and trigger an alert if the minimum stock threshold is reached.

Calculating stock coverage is a basic task. However, doing so in real-time using a warehouse automation solution is fundamental. This KPI enables you to respond swiftly to unexpected demand surges. Logistics stock management systems perform continuous inventories to track stock levels and adjust them according to demand. At Exotec, this system is supported by infrastructure designed to facilitate replenishment, ensuring that stock coverage is always optimal.

Efficient Demand Planning with Predictive Analysis

In today’s environment of climatic and geopolitical instability, simply understanding your market is no longer sufficient to anticipate customer demands. To avoid disruptions, choose the right predictive analysis tools. These not only analyse historical data and seasonality but also take into account exogenous factors such as competitor activity and climatic hazards

‘ The great advantage of predictive analysis is that it provides an excellent understanding of demand and competition, enabling companies to launch more specific and better-adapted products while optimising the entire supply chain behind them. In addition to improving organisation, it fosters innovation, enhances responsiveness to market changes, and strengthens customer loyalty. ’ – Assâad Moumen, Supply Chain Manager, Wavestone
Discover our report on predictive analysis

Predictive analysis tools are powered by data libraries, with algorithms performing calculations to generate forecasts. However, their relevance largely depends on how accurately they are configured and the volume of data available. In short, no tool, however advanced, will provide a satisfactory analysis without clear direction and sufficient data.

Automate Warehouse Storage to Reduce Human Error

Automating storage and picking operations is an effective way of reducing human errors in warehouse stock management. Warehouse automation solutions consist of three key components:

In an automated warehouse, AMRs receive goods, count them accurately, and transport them to storage areas. When orders are placed, they pick the exact number of items and bring them to the operators responsible for preparing the orders. The management software tracks the real-time location of all products and orchestrates the movement of the robots.

Process orders twice as fast and reduce error rates: discover how the Qérys group improved warehouse efficiency with the Skypod automation solution.

Optimising Storage to Limit Costs

To avoid stock-outs, increasing storage capacity is another viable option. When expanding floor space isn’t possible, automation solutions can maximise storage potential by exploiting vertical space.

Exotec’s racks, which are up to 12 metres high, provide a high-density storage solution that helps reduce costs. Store more without occupying additional floor space, consolidate stock to prevent shortages, and move away from just-in-time stock management.

Discover how the Skypod system can help you manage stock and automatically replenish your warehouse: our robots prepare orders and ensure that incoming products are placed in the storage areas.