The availability of spare parts is the first factor to ensure customer satisfaction. In this sense, spare parts stockouts are the number one enemy of quality service. Many service companies are striving to pursue a higher spare parts availability rate to ensure customer satisfaction and repeatability. Some managers even require parts personnel to "we have what customers want" and increase spare parts inventory to increase the spare parts inventory rate. .
However, the spare parts availability rate is not linearly related to the inventory. It is wrong to increase the spare parts availability rate by increasing inventory. When you start to increase inventory, you can increase the spot rate. If you continue to increase inventory, the marginal benefits brought by it will gradually decrease, and the marginal cost will continue to rise. , leading to inventory backlog, occupied funds, and may even lead to out-of-stocks.
Out-of-stock is a hidden cost that is difficult to quantify. Not only are business opportunities lost, expedited air transportation will also add a lot of additional costs, reduce customer experience, cause customer dissatisfaction or even loss, and cause immeasurable losses to the brand and reputation, leaving companies Losing the future and avoiding out-of-stocks can help companies increase customer stickiness, improve brand, reputation and customer return rate.
The main reasons for accessories being out of stock are as follows:
a. Inaccurate demand forecast
Many companies rely on the experience of planners to predict market demand, with very low accuracy. The demand for service parts is highly random, and seasonal fluctuations make demand forecasting more challenging, often resulting in out-of-stock or excess inventory.
b. Supplier issues
Suppliers play a vital role in the inventory management of downstream service providers. Supply or transportation delays, minimum order quantity restrictions, procurement task compliance and discount promotions, etc., will all cause inventory plans to deviate from the optimal level.
c. Poor inventory management
The service provider lacks systems and data, has chaotic management, has no records of incoming and outgoing goods, accounts are not consistent, and out of stock is almost inevitable.
d. Lack of safety stock
Set up safety stock as a buffer to provide a safety net for the company's inventory to ensure that demand can still be met when there are errors in forecasts and to ensure the desired spare parts availability rate. Accessories planners in many companies don't know how to set up reasonable safety inventories. Without enough "food" reserves, there will be out-of-stocks in unexpected circumstances.
e. Excess leads to shortage
Overstock and out-of-stock are "twin brothers". The more serious the excess and sluggish inventory is, the greater the probability of out-of-stock. All excesses begin with shortages; all shortages end with excess.
5 effective ways to prevent inventory shortages:
1. Use data and inventory management systems
Inventory management systems can help you understand your company's inventory levels, just like a GPS for parts inventory. You can know at any time which parts are in increasing demand and which parts are in short supply and need to be replenished. Through data analysis of market trends and mathematical statistical methods, we can determine the demand and standard deviation of each accessory, what percentage has increased so far, and how much inventory will be needed during the same period this year and next year. Use inventory planning software to better avoid stock-outs.
2. Set up replenishment point ROP and conduct regular inventory counts
The function of the replenishment point of the quantitative ordering system is to automatically execute the replenishment process when the inventory level reaches a certain threshold. For regular ordering systems, the three-box inventory model can be used to calculate healthy inventory levels to avoid stockouts as much as possible.
Quick turnaround and inventory accuracy of high-value parts are important to prevent stock-outs. The purpose of inventory counting is to ensure that inventory accounts are consistent and to prevent differences from accumulating over time.
3. Evaluate the delivery time of accessories
Don't assume that the delivery time of parts is the time promised by the supplier. Keep statistics on the actual delivery time and the stability of the delivery time. Set up appropriate safety stocks to avoid shortages due to delivery delays. Cooperate with suppliers to Shorten delivery time.
4. Maintain reasonable safety stock
Setting up safety stock is a specialty of inventory planners. How to ensure a certain safety stock without increasing the risk of sluggishness requires planners to have a deeper understanding of the role of inventory.
5. Cooperate with third parties to achieve inventory synergy
Reliable suppliers and logistics partners can shorten delivery times and provide reliable warehousing and logistics solutions. Out-of-stocks often occur on infrequently used slow-turnover parts. Inventory coordination needs to be carried out according to the 20/80 rule instead of storing all parts, which will cause a lot of sluggish losses.
Service providers focus on fast-turnover parts, stocking more and enough to ensure a high availability rate; suppliers store high-value, zero-turnover parts, while OEMs focus on storing slow-turnover parts and shorten delivery times through inventory collaboration and logistics optimization. Ensure timely supply.
In addition, identifying out-of-stock patterns, ensuring timely and effective remedial measures after out-of-stock, maintaining effective communication with major customers, regularly handling sluggish inventory, and ensuring a healthy parts inventory structure are all conducive to avoiding inventory out-of-stocks.
