If you went to an automobile dealer and the salesperson told you, “Sorry, we’re all out of cars,” what would you do? Without a doubt, you would go to another automobile dealership.
Prior to the July 4 holiday, I was shopping at a supermarket for a planned family cookout. Upon entering the produce department, it was evident that several displays were depleted. I immediately had a bad feeling about my shopping list.Out-of-stocks, which can originate at various levels of the supply chain, can cause millions of dollars in lost sales annually.
As I approached the corn display, I was surprised to see it was totally empty. I asked a nearby clerk if it was going to be restocked soon and was told, “Sorry, we’re all out of corn until our delivery tomorrow.” All out of a popular summer favorite for the holiday at 1 p.m.?
Besides the sweet corn, several potato varieties were unavailable, the mushroom section was just about wiped out and the cherries that were on ad were down to only eight bags remaining in the display.
Having a retail supermarket mentality, and especially as a former director of produce, this scenario disturbed me.
An “out-of-stock” is an item that a customer wants to purchase but is not physically available to them at the time of shopping. Out-of-stocks cause millions of dollars in lost sales annually.
When customers are asked why they did not make supermarket purchases of items they wanted, the majority respond by saying that the items were not on displays.
Retail businesses surrender approximately 4 percent of sales due to items not made available for consumers to purchase. With some retailers, that number is even higher. It may not sound like much, but with stringent budget pressures these days, a mere 1 percent improvement could make a great difference in achieving the numbers.
One of the most important functions of a produce department is to keep fully stocked at least the top 20 popular items that customers want to buy the most. Nothing is worse than customers seeing holes and breaks throughout the department while shopping.
Out-of-stocks can originate at various levels of the supply chain, from the grower, shipper and wholesaler to the distribution center, warehouse and, of course, the supermarket.
Here are some basic causes of out-of-stocks and how to avoid them:
Careless ordering — Making out a rush order will cause out-of-stocks every time. Not considering all the essentials like sale items, holidays, special promotions and weather opens the door to running out of product. Prevent it by taking time to calculate specific items on hand as well as checking past history and current trends. Plan and write solid intelligent orders to do ample business.
Stocking oversight — A delay in replenishing displays will rapidly lead to an empty hole. Keep close attention to fast sellers, especially basics like bananas, tomatoes, potatoes and peppers. Always be ready to restock your most popular items repeatedly.
Space allocation — A small display will sell less product, and if it contains a top-20 item, it will quickly lead to an out-of-stock. Avoid allowing every item to be allotted the same amount of display space. Expand on those that customers want the most.
Inaccurate data — Incorrect inventory counts at the warehouse or store level can distort the numbers required in ordering product. Buyers and produce managers need to double check and concentrate on accuracy. This applies to product suppliers as well as retailers.
Layout compliance — Failing to follow the company produce plan-o-gram layout can lead to possible out-of-stocks. Each item is assigned a specific amount of allocation space. If space on faster-moving items is less than shown on the layout plan, that item could easily lead to an out-of-stock. Adhere to the size of item space according to the company plan-o-gram.
Inventory and shrink control — These programs are necessary, but can also lead to running out of product. When management hangs tough on reducing inventory assets, produce managers frequently become overly cautious in writing an order. This can cause item shortages. Be sensible and smart by using skills in accommodating programs as well as satisfying customers’ needs.
We have been wrestling with stubborn out-of-stock situations for many years. It’s understandable when weather plays havoc on crops and causes a supply disruption. Outside of that, each level of the supply chain has to be more diligent in getting the goods to consumers.
This is where the responsibility lies on everyone. Reducing out-of-stocks can mean the difference in meeting sales and profit budgets, but mostly in satisfying customers.
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