The Crawl-Walk-Run Approach to Fixing Out-of-Stocks

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When retailers or their suppliers seek to address the pressing issue of out-of-stocks, they often jump into running a demand-driven supply chain and then experience frustration when they don’t get the results they envisioned. One common reason for that is that they are often deploying sophisticated supply chain solutions that offer advanced features like demand planning, inventory optimization, demand sensing, and even demand shaping. Implementing and managing so many aspects of a demand-driven supply chain at once makes it difficult to get the intended results. It’s classic example of the old aphorism: trying to run before learning to walk or even crawl.

In ReposiTrak’s experience in working with numerous retailers and suppliers, companies are more successful if they follow an incremental approach to fixing out-of-stocks. Successful companies start with a solution that provides out-of-stock reporting and then progress to more advanced functionality like automated replenishment and demand planning. By following a crawl-walk-run approach, they can realize financial gains and achieve success each step along the way of their journey

In fixing out-of-stocks the first step is always for the supplier to have daily visibility into the number of its products that are available for sale on the retailer’s store shelf. That may seem very basic, but it’s essential. Point-of-sale data and store inventory balances are the key data components in any demand-driven solution.

By receiving reports on what products are being sold and the remaining number of those products still in the store, the supplier can take action. On the basis of that information, the supplier can determine inventory replenishment and then schedule deliveries to the store.

When suppliers become diligent about replenishment, they can reduce out-of-stocks significantly. In fact,  nearly four out of five suppliers using ReposiTrak’s out-of-stock management reporting solution experienced an average 40 percent reduction in their out-of-stocks involving more than 25,000 SKUS across 9 different retailers and  12,000 stores.

In matching supply to consumer demand, visibility is just the first step in fixing out-of-stocks. And that’s why companies after improving replenishment with out-of-stock management reporting move onto more advanced solutions like demand-planning that can take into account demand spikes, promotions, or changes in consumer taste in developing a forecast.

But by starting out with out-of-stock reporting, suppliers and retailers begin the process of working together to keep store shelves stocked. Not only will there be less frustration in trying to master the operation of a demand-driven supply chain, the retailer and supplier will get an initial boost in sales from reducing out-of-stocks that will encourage them to keep working together.

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