Should all out of stock products be treated the same? The simple answer is no. Data shows that the fastest moving 2% of products offered in a store represent 15% of the total lost sales from stock outs. It makes complete sense too. If you run out of mincemeat in the middle of the summer, the lost sales is at most one or two cans. However, if you run out of something like eggs or milk, or even a popular cereal, lost sales could be cases of product.
So what can you do?
We would like to introduce our “300 Plan.” While we wish we named the plan after the heroic soldiers from Sparta; 300 is actually 2% of the products carried in a store with 15,000 line items. This simple three step plan focuses your stores time and effort on preventing, or at least reducing, the number of times each of these top demand products is out of stock.
Step 1: Create a “Top 300” NEVER OUT backstock.
- The extra space required in your back room is space well allocated. Even worse than having a shelf out of stock is being completely out of stock on a fast-moving product. Use the backstock to fill the shelves when needed, and then reorder based on the backstock inventory, not the inventory on the store-front shelves.
Step 2: Place priority of stocking time on OOS & Low Stock “Top 300” items.
- Your stocker’s time is limited. They are not only worried about stocking, but assisting customers to find items, or bringing something a customer forgot to the register for them. By placing an emphasis on the time remaining on the Top 300 items, these products should rarely actually go out of stock.
Step 3: Identify “Top 300” items on the shelf.
- Most employees can probably make some good guesses at which products sell the most. But do they actually know them all? Rather than make your staff memorize a list of 300 different products, identify them on the shelf with a sticker or different colored price tag. Something that stands out. That way any employee walking the aisles can quickly see if any of your constant demand items are running low or are completely out of stock.
That’s it. Not too bad right? Even so, if a “Top 300” plan seems like too much work, at least try a “Top 200” or “Top 100” plan. See how things go, and then maybe work your way up to 300 items.
Remember, this is step 2. If you haven’t read step 1 on reducing your full store out of stock rate by carrying more product, and not rotating when stocking, you can read it by clicking here.
Also, click here to view the “Comprehensive Guide to Retail Out-of-Stock Reduction In the Fast-Moving Consumer Goods Industry” report published by GMA, FMI, & NACDS. The chart above comes from this valuable report.