There are three words that both online shoppers and retailers hate to hear more than almost anything else: “out of stock.”
For consumers, stockouts – which happen when there’s no available inventory of a particular product on hand to satisfy demand – are a source of frustration. According to a recent study, “in-stock availability” was ranked by consumers as the most important attribute of their online shopping experience.
For ecommerce companies, stockouts are a source of lost sales – as retailers miss out on nearly $1 trillion in revenues annually due to out-of-stock situations.
Stockouts are a pervasive problem across the ecommerce landscape, with recent research showing that the out-of-stock rate for online products hovers around 8%, and this figure rises to 10% for promotional items.
There are many different causes of stockouts including:
- Sudden spikes in customer demand for specific products
- Production delays by suppliers
- Inaccurate demand forecasting
- Ineffective inventory management practices including stock counting and replenishment
- Logistics issues including shipping and delivery
Although here’s no magic bullet that can totally eliminate out-of-stock situations from ever happening, you can reduce the chances of a stockout occurring by improving how you manage your inventory and your end-to-end supply chain. And a growing number of ecommerce companies are engaging third-party logistics (3PL) providers to help their businesses do precisely that.
In this blog, we will explore the three ways that a 3PL can help your ecommerce business prevent stockouts.
#1: Optimising your end-to-end logistics operations
One of the primary causes of stockouts is that inventory gets stranded or stuck in transit at some point along the supply chain. These supply chain delays became a severe problem during the COVID-19 pandemic – with 38.8% of businesses experiencing such delays in 2021 – due to over-congestion at ports, container shortages, and other issues.
3PL providers can help you overcome these supply chain delays (and prevent stockouts) by:
- Streamlining your end-to-end logistics operations. Indeed, 3PLs – particularly those like Amazon Multi-Channel Fulfilment (MCF), which has a global logistics network – can help your goods flow as smoothly as possible from your manufacturer’s facility to the upstream warehouses and fulfilment centres that you use to your customers’ doorsteps.
- Enabling you to gain an understanding of supply chain conditions around the globe, and alerting you to any bottlenecks or disruptions that may cause shipping delays – so that you can proactively plan and explore different types of transportation options (such as ocean, land, and air freight) to get your goods where you need them to go.
- Monitoring and minimising your lead times (the amount of time it takes for your product to be manufactured by your suppliers and then shipped and inbounded at your warehousing or fulfilment facilities). For example, Amazon’s transportation services – Amazon Freight and Amazon Global Logistics – will work with you to better understand your lead times and identify the right transportation options for you to leverage to move your goods across your supply chain as fast as possible.
#2: Providing storage and distribution
One of the ways that ecommerce businesses try to prevent out-of-stock situations is by maintaining safety stock (also known as “buffer stock”) that they can use in the event of a sudden surge in demand or a production or supply chain delay.
Although keeping safety stock can be an effective strategy for combatting stockouts, it comes at a cost – as it can be expensive to store this extra inventory in warehouses for a protracted period of time.
Some 3PLs, however, offer inventory storage solutions, which enable your ecommerce business to efficiently store your inventory in the 3PL’s facilities until you need it. For example, MCF provides convenient, “pay-as-you-go” storage in Amazon’s network of fulfilment centres.
By maintaining optimal levels of safety stock in your 3PL’s storage facilities, you can be certain that – no matter what supply chain conditions and constraints you face – your ecommerce business will have enough inventory on hand to meet demand.
#3: Automating your inventory management and replenishment
A chief cause of stockouts is inaccurate inventory counts – when there’s a discrepancy between the amount of inventory you think you have and the amount that you actually have. Such mistakes are more common than you’d think – with 36% of retailers reporting that they’ve experienced issues due to miscounts – and are often caused by human error.
One of the ways of preventing these manual counting mistakes (and the stockouts that result from them) is by automating your inventory management process.
A 3PL provider can help you automate your inventory management operations. Many 3PLs utilise state-of-the art inventory management tools and can also work with you to integrate third-party inventory management solutions.
With these technologies, you can gain real-time visibility and control over inventory levels across your supply chain as well as customer orders and tracking information across all your sales channels.
By automating your inventory management, a 3PL can help you make sure that you always have the right amount of the right products in the right places at the right times to satisfy demand and avoid stockouts.
Conclusion
It’s probably impossible – due to the constant, sudden shifts in supply and demand dynamics – for ecommerce businesses to ever entirely eliminate stockouts. But, as we’ve discussed in this blog, working with a 3PL can help you dramatically decrease the likelihood of out-of-stock events by enabling you to optimise your end-to-end logistics operations, utilise cost-effective storage, and automate your inventory management.
It should be noted that a 3PL can’t solve every issue that causes stockouts – including supply chain volatility, manufacturing delays, and inaccurate demand forecasting. But, if you find the right 3PL partner, they will work with you to handle any issues that arise – so that you can minimise your out-of-stock rate and maximise customer satisfaction and bottom-line growth.
