No matter how well your brand sells, a customer cannot purchase it if it’s out of stock. The key to preventing lost revenue (for you, your distributors, and the retailer) is taking an active role. Being out of stock on the retail shelf or restaurant wine list immediately hits your short-term revenue. More significant is the long-term consequences to your brand’s reputation and trade relationships.
Here are FIVE of the most common reasons for out-of-stock inventory and how to remedy them.
1. Inaccurate inventory management
The importance of reliable, accurate inventory data at the distributor inventory level cannot be overstated.
Suppliers can participate with their distributors’ insights and avoid inventory interruptions by actively monitoring distributors’ inventory and the inventory at the store level.
Essential metrics every winery, distillery, and brewery must work towards gathering or at a minimum have a pulse on are:
- Current on-hand inventory
- The daily rate of sales
- Projected days on hand
It is also critical that the system you’re using provides suggested orders based on these metrics.
The standard rule of thumb for “days on hand” is a 30-day supply on the distributors’ floor for domestic brands and a 45-day supply for imported brands. If you leave this up to the distributor, you’re taking a risk.
Distributors leverage sophisticated tools to keep inventory to a minimum, and suppliers must constantly do their own monitoring to assist their distributor partners so that no interruptions in supply occur.
But is it possible to monitor inventory levels on the retail shelf? Thankfully, yes!
The technology exists today for brands to assist their retail partners greatly in identifying and filling gaps on the shelf.
2. Forecasting errors
Accurate sales forecasting is a complex and often difficult task for most companies; it is particularly a challenge for adult beverage brands.
It is important to look at both your “lagging indicators” and “leading indicators” within your sales metrics. Dive into more information on this topic in our latest blog post.
The primary goal of receiving this level of data is to empower organizations to make better-informed decisions supported by real-time data and achieve more precise analytics.
Effective forecasting begins with the right data. This necessitates investing in a comprehensive data warehouse and consolidating:
- Data sources
- Distributor sales data
- Syndicated data
- Survey data points
…all within your business intelligence solution using data that is
- up-to-the minute and
- b)spans your full historical view.
This builds a foundation for accurate forecasting that will enhance communication and collaboration between suppliers and distributors
3. Not factoring in seasonality
Consumption patterns in the wine and spirits categories can vary greatly throughout the year. Most suppliers understand demand peaks for Wine & Spirit off-premise in the months of October, November, and December.
While many suppliers are well aware of the demand peaks for off-premise consumption during the holiday season, they may not always have a clear strategy for addressing the fluctuations in on-premise consumption during the holidays.
To address this challenge, brand owners should dive deeper into historical sales data, examining consumption patterns on a month-by-month basis in both off-premise and on-premise settings.
This comprehensive analysis approach identifies the specific seasonality trends unique to each category and can make for improved and informed inventory management decisions.
By understanding that certain months see higher on-premise consumption from events like Cinco De Mayo, St.Patrick’s Day, and national sporting events, plus acknowledment that on-premise demand tends to dip during the summer and back-to-school periods, brand owners can instead optimize their inventory to ensure they meet customer demands while minimizing waste.
This data-drive approach not only aligns supply more closely with demand but also enhances the overall efficiency of the supply chain and improves customer satisfaction.
4. Poor shelf management and replenishment
Streamlining the replenishment process can no longer rely on manual methods. Inventory management systems that leverage real-time data and automation play a pivotal role in establishing optimal reorder thresholds for each SKU. Employing data-driven solutions eliminates any uncertainty from the equation.
For retailers, having well-defined planograms is essential, and understanding your product placement and fair shelf index can provide valuable insights. Several key data points deserve consideration and continuous monitoring:
Shelf Holding Power: Take, for instance, a case of wine with 12 bottles. If the retailer is selling two bottles daily, it’s imperative that the shelf accommodates at least 1.5 cases of the product to prevent stockouts between deliveries.
Velocity: Different SKUs have varying turnover rates. However, maintaining consistency in monitoring can be simplified by visualizing and having easy access to your share of the shelf. Planogram data is a potent tool, and using space management tools and best practices grants genuine visibility into product performance.
Timing and Frequency of Store Deliveries: Distributors handle numerous products and might not always closely track proper replenishment. In such cases, suppliers must proactively engage in the replenishment process to ensure product availability.
In-Store Displays: Retail displays are invaluable in the brick-and-mortar environment. If the allocated shelf space falls short of meeting sales velocity, brands need to advocate for additional displays. Leveraging insights to position your product against the competition may translate into securing more facings on the shelves.
Incorporating these data-driven insights and automating inventory management processes not only optimizes product availability but also enhances overall efficiency and competitiveness in the retail space.
5. Not staffing appropriately
Your distributor partners have their hands full trying to manage inventories across thousands of brands! Therefore, critical brand owners step up and take more responsibility for ensuring inventory levels.
This requires dedicating personnel to the task. Depending on the size of your organization and the number of states in which you operate, this could be a part-time or full-time need.
An appropriate title for this position would be Sales Operations Manager. The critical tasks for such a role:
- Watch distributor inventories daily.
- Dive deep into the daily sales rate for each SKU and market.
- Provide reminders and recommended orders to the distributor purchasing team.
- Develop store-level relationships with those responsible for ordering. This should be done at the largest, most strategic placements first and then working your way down from there.
- Providing “asynchronous” communication to all parties – especially for new and upcoming programs and ongoing updates on all programs.
- Identify bottlenecks in the supply chain and continually seek to improve your systems and processes.
To minimize and eliminate stockouts, suppliers simply must take an active role. The days of leaving this up to the distributor are long gone!
Bring your brand to the next level!
Having the right products in the right place at the right time to maximize sales and profits is well within reach for any size supplier.
Andavi Solutions is the one-stop solution for taking all the guesswork out of keeping your stockouts to an absolute minimum.
We strive to provide you with dozens of educational tools like articles, case studies, videos, and webinars to assist you in your sales optimization.
About Andavi Solutions
Andavi Solutions builds an integrated suite of technology solutions to provide insights, drive superior decision-making, and generate ROI across the beverage alcohol and CPG supply chain.