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What’s the cost of stockouts to your business?
It’s an innocent question. However, the response to this simple question reveals a lot about the emphasis companies pay on stock availability for their valued customers and consumers. Let me elaborate.
The most common and honest response to this question is ‘We don’t know.’ Their teams don’t track this metric at the frequency and granularity which can lead to meaningful actions.
Once they start tracking it objectively, the figures are startling and an eye-opener. They never thought they were losing as much as 20-25% of their sales due to poor stock availability!
The good news is that it can be reduced substantially through application of Agile Supply Chain techniques, focused on a Demand Sensing engine at the front end, and improving flexibility and responsiveness of the backend processes.
Let me now drop another bomb shell. What appears as the obvious cost of stockouts is just the tip of the iceberg. There are at least three more nuanced impacts on business, which can together affect competitiveness substantially.
I will cover these in my coming posts…