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5 Ways to Reduce Your Inventory Shortages

It may seem that increasing your safety stock is the obvious solution for stock shortages. After all, it makes sense that having more safety stock lowers your chances of a shortage. Unfortunately, this is far from reality.

Increasing safety stock is an expensive way of managing your inventory. As a result, it reduces the flexibility to purchase stocks that you really need. So, more safety stock for a particular product could result in future inventory shortages for another product. Also, this method takes away the focus on keeping your inventory levels low. Thus, you may find yourself with very low turnover rates and incorrect orders refilled.

Here are five tips to help you in reducing your inventory shortages:

i. Eliminating Uncertainty

A key cause of inventory shortages is uncertainty. Reducing the lead-time of your orders is an effective way to minimize your stock shortages. As you ship and receive faster, this will improve your firm’s efficiency. Also, a smaller lead-time means you need less inventory on hand. Forecasting the demand for your products is also a key factor in reducing your stock shortages. Long lead times may drive you to use ineffective tools, such as long-range forecasting. If your forecasting is unreliable, you will not be able to predict the required stock levels. Forecasting demand in the short-term will give you better precision.

ii. Inventory management

Having control over your inventory is important to safeguard against stock-outs. It is crucial to put a good inventory management system in place that gives you visibility. Knowing your inventory levels, you can determine when your stock needs to be replenished and reduce inventory shortages.

iii. Rethink your order-to-delivery

Cycle time reduction is a technique used to increase your order-to-deliver time. This helps in decreasing your lead-time, lot sizes, safety stock, inventory costs, and set-up time. Cycle time reduction will also improve your overall customer service by increasing the number of orders you deliver on time and the quality of products. Try to study how your company can make your cycle time more efficient while producing high-quality products.

iv. Scheduling your production

Planning your production schedule also helps in reducing your stock shortages. This tactic ensures that there will not be any breaks in the flow of your production lines. Imbalances in your production can cause bottlenecks which will hinder your productivity and performance. It doesn’t matter how many parts you have ready for a step if you’re missing parts for the preceding steps. Identifying and actively preventing these issues will take care of the reason causing stock shortages.

v. Take advantage of performance metrics

Do not forget about the value of performance metrics. Metrics can help your company improve customer experience, efficiency, profits, and overall performance. Identify which metrics you should prioritize to work on weak areas of your production cycle. Always make sure that the metrics you focus on are not the reason for the stock shortages that your firm is experiencing.


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