Overstock and stockout

Overstock and stockout

A streamlined inventory that does not succumb to stockouts is the optimal state for most retail businesses. Cin7 ForesightAI gives you the data to achieve this state over time by making wise replenishment decisions.

Prerequisites

  • This is a Cin7 ForesightAI report and requires an add-on to your subscription.

  • ForesightAI reports require at least 6 months of sales history in Cin7 Core.

Overstock

When you have more stock than you need for future sales demand, you are overstocked. Cin7 ForesightAI can help you avoid carrying more stock than you need.

Optimal stock levels

ForesightAI analyzes your past sales history to provide sales forecasts up to 24 months into the future. It then calculates your supplier lead time and recommends a safety stock level.  

Sales forecast + Safety stock = Optimal stock level

Your optimal stock level is enough stock to meet sales demand while between purchase orders. When your stock levels go above the Optimal stock level, you are overstocked.

For products that are overstocked, ForesightAI can estimate how long before you can sell this excess inventory (based on forecast sales). 730 days is the upper limit of this calculation.

Losers

ForesightAI reviews your product performance and classes them as a Winner, Chaser, or Loser. Losers are products that don't sell well and are often overstocked. These items are dead stock that take up storage and cost you money over time. The optimal stock level for a Loser product is zero. We recommend avoiding overstock for other segments (Winners and Chasers) as well.

Stockout

A stockout is when you are out of stock or don't have enough stock to meet your daily sales demand. There are several reasons stockouts occur, such as:

  • You ordered the wrong products

  • You did not order enough products

  • Customer demand was higher than expected

  • Supplier failed to deliver, or delivered with a significant delay

When customers can't buy what they want, this not only causes you to lose money in the form of lost sales, but leaves customers shopping elsewhere or sharing their negative experience.

Cin7 ForesightAI reviews your sales history for periods where you had no stock (or not enough stock to meet the daily sales demand). Based on these historic insights, ForesightAI can detect when you might face a stockout in the near future (up to 3 months ahead). ForesightAI will estimate the duration of the stockout and the amount of lost sales revenue and profit.

Replenishment for inventory health

Smart replenishment is essential to keeping your inventory at that optimal level where you avoid both overstock and stockouts. The optimal reorder schedule orders from your suppliers with just enough time to bring items back into stock before your on hand stock hits zero. With thousands of SKUs, multiple locations, seasonal product demand, and more, this can be difficult to plan perfectly.

 

See inventory health in Cin7 Core

See your inventory health at a glance from your Dashboard.

The Over/under stock dashboard widget displays the current number of SKUs in stockout, overstock, and healthy states in each location.

The Inventory health dashboard widget displays stockout and overstock percentage, plus the amount of revenue lost to stockouts via lost sales.

You can also check out the Stockout Report and Overstock Report, where you can see a detailed breakdown of your SKUs in each location and from each supplier.

Was this article helpful?

Have more questions? Submit a request