MHO: Out of Stock Situation

Photo taken from here

The common problem encountered by many others players in Fast-Moving Consumer Good Industry (FMCG) are the ‘Out of Stock’ situation in retail outlet, not that stock is ‘sold-out’ but stock is ‘sleeping’ in the back-yard, simply no one replenished the stock on-shelves. There are few reasons for it;

1. Retailers throwing price – giving a very good discount price, or, in another words, selling very cheap, and can even be at cost price; this is treated as one of the promotion strategy to pull crowd to the outlet; however, since it is sold on a loss, retailers are reluctant to replenish the stock for you, and intentionally slowing the replenishing process.

2. Out Stock Situation even when there’s no promotion activity in the outlet, this is because merchandiser (people who replenish your stock for you) work during the day, and they covered quite a number of outlets during the day; they do not work at night.

1. Outlet where merchandiser covered in the early of the day may have gone out of stock in the evening. This does not mean merchandiser do not do their work; this is a situation is inevitable.

2. Outlet having heavier traffic at night because consumers shop after works, thus stock is moving fast during late evening, if the outlet already suffers from ‘stock replenishing’ issue, the situation is worsen; furthermore, most of the merchandiser do not work at night (unless company subscribes to 3^rd party merchandising specialist and instruct them to do so)

• Situation is worsen especially when retailers are throwing price with the mindset to reduce loses (refer No.1)

What can the company do to alleviate the impact?

a) Hiring more promoters, and place in outlets where stock is fast moving; so that promoters can also help to replenish stock (specially at night – promoters can start on Noon Shift)

b) Getting 3^rd party merchandising specialist to assist in replenishing the stock; but can come far more expensive

c) Re-schedule current merchandisers’ to cover important outlet at night – this also means paying ‘Over-time’ for the job done by merchandisers.

d) Apart from all above, company can spend money for Additional block display so that stock is piled up on the pallets (usually 4ft x 4ft or 4ft x 8ft); so that when shelve is Out of Stock, consumers can still pick it up from block display (but this may not solve the OOS situation in store level)