What is Low Stock?
When the stocks in the inventory go below the normal range or reorder point, it is known as low stocks. There can be multiple reasons for low inventory. Some of the potential causes that lead to low inventory include breakage and loss, supply chain issues and improper storage of the products.
Significance of Low Stock
A low stock count can majorly affect a business as it impacts the company’s capability to satisfy customer demand. It helps a business to determine the following factors:
- Discrepancies in forecasting and inaccurate inventory reporting
Inventory shortages are generally caused due to expected uprisings in customer demand. However, sudden low stock brings attention to inadequate demand forecasting and inaccurate reporting of the inventory.
- Poor stock replenishment
A low stock count highlights poor stock replenishment. It features issues with the product flow through the supply chain affecting fulfilling customer demand.
Prerequisites of Low Stock
Companies can verify a low stock by using an inventory management system. It highlights which inventory is below reorder level and may run out of stock shortly. Accordingly, companies can order products to meet the demand of consumers and increase customer satisfaction.
Use Case With Low Stock
Low stock affects a company’s sales revenue and customer loyalty when their demands are not met. Consider the XYZ company is selling candle boxes. Due to sudden demand rise or inadequate inventory records, it is now running low on candle boxes to offer to customers.
To make sure it doesn’t affect the revenue, the XYZ company has to conduct periodic inventory counts and replenish stock.