Stockouts and overstocking: two sides of an insidious coin

By Oleg Mikhailenko
Published in Solutions
June 24, 2022
2 min read
Stockouts and overstocking: two sides of an insidious coin

One thing that smart merchants never overlook when it comes to running their ecommerce business is the question of how much stock to maintain. While it’s true that running out of inventory can be disastrous, having too much stock on hand can be equally cumbersome. Understocking and overstocking can both cause significant problems to your bottom line, and unnecessarily stress your business. The question of how to balance supply and demand shouldn’t be one that you’re losing sleep over. So how do you make sure that the balance doesn’t tip too far one way or the other? Read on to discover a couple of simple tips and tricks that will help keep you ahead of the game.

What is overstock?

As a rule, it’s ideal to have a relative balance, but supply and demand can be difficult to reconcile. Although you definitely have the option to skew more on the inventory side if you want to have a bit of a backlog or a bit towards the exclusivity side if you want your products to feel special and if you’d like to make a bit more profit, it’s best to keep these opposing but complementary forces in a tight dance. If you have too much product to serve too little demand, that means you have overstock inventory. That leaves you paying for the manufacture and storage of merchandise that you just can’t move quickly enough for it to be profitable. You might have to start downstocking meaning that you box up all the items that aren’t selling well and ship them to a discount store or other alternate retailer.

How do you define stockout?

Stockouts represent the opposite problem. Too much demand for too little supply leaves your warehouses empty and your customers frustrated and wondering if you’ll be able to deliver consistently. In an increasingly tough industry, it’s difficult to justify items being out of stock for more than a couple weeks that won’t leave your customers looking for their fix elsewhere. Especially in this day and age, where consequences from the Covid-19 pandemic have left the global supply chain reeling, stockouts can sneak up on you. It’s important to maintain a healthy level of safety stock to avoid any issues.

In conclusion

You may be wondering exactly how to make sure you’re neither caught in an overstock order or out of product for weeks to come. Not to worry. P2Pseller’s got your back. Our information and inventory tracking software enables you to calculate the amount of safety stock you should have on hand at any given time, and automatically reorder product once you hit a certain threshold without overordering. Register a free account with us today to browse the full extent of our offerings, without any commitment required on your end. We’d love nothing more than to have you on board.


Tags

#stockout#overstocking#warehouse#safetystock#logistics
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Oleg Mikhailenko

Co-Founder, CEO P2Pseller

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