Eight tips for dealing with out-of-stocks and other supply chain issues.
“Oh, dearest father. If my heart’s greatest desire is not fulfilled by Christmastide, surely I will perish from this earth and my ghostly remains will wander these lands for the rest of eternity. “
This, or something like it, is what my then six-year-old daughter told me, many years ago, when she was informed that the hottest Christmas toy on the market was sold out everywhere in our fair city. The fact that there was a supply issue did not ease her pain or lessen the consumer demand element of the market economics that ran through our house. “All” of her friends were going to be getting this item for Christmas and she, she alone, would be the only one who would not have the joy and wonderment of owning this precious object – much to the chagrin of her social circle. There was rending of garments and gnashing of teeth.
So, what is a father to do? I was traveling down the interstate one day on a business trip and drove through a small town about 100 miles from where we live. With the burden of my dereliction of duty still weighing heavily upon me, I decided to see if any of the stores in this town had the coveted item. As I was driving around, I came across a mall that was built in the 1970s. It looked a bit ragged and forlorn and a little sadder than it should have.
A new mall had been built about 5 miles away that was bright and shiny. The fickle consumers moved over to the wider shopping arcades, the fancy food court, and the fountain that splashed in the middle of the atrium, pushing this retail center out of the their mind.
I went inside and, lo and behold, halfway down the mall, on the right-hand side, was a shaft of light coming from inside one of the units. It was a lone outpost of one of the toy stores chains that was still open.
I walked into the store and on the shelf were a dozen of the items that I was looking for – all priced at the suggested retail. The store manager said that their store was one of the long-term tenants of the mall and even though business had been down recently, corporate headquarters still pushed out all the products. He was fully stocked and very pleased to see me in the store.
I picked up the toy that I was looking for, plus three others for my fellow fathers who were also scrambling to find them, purchased them, and went on my merry way.
Christmas was saved! (By the way, the toy was never seen after the second week of January and the store became my go-to place for hard-to-find toys for all of my kids birthdays that year.)
This was the memory I recalled when I heard that the product shortages and supply issues that we have been facing may extend through the holiday season and affect Christmas shopping. (By the way, I know that there is a difference between supply chain issues and intentional product scarcity, but both lead to empty shelves.)
In one form, or another, we have been dealing with product issues in almost all our stores. They range from not being able to get supply items due to actual product shortages (drink cups seem a particular issue) to products not being delivered because of the lack of truck drivers (soft drinks and groceries).
No one wants empty shelves in their store. It obviously directly impacts sales because the items that you don’t have can’t be sold. But it also indirectly affects your sales since it gives your customer the impression that you are going out of business and the items that are left on the shelf may be old or unsalable.
I thought it might be helpful to share with you some of the approaches that we have taken to deal with our supply issues.
Communicate. The first thing you should do is talk to your supplier to find out the issues that they are facing. It is in your supplier’s best interest to get items delivered to you – that is how they make their money – and they should be willing to work with you to come up with creative solutions. Understanding the type of problem that they are facing will help you determine your response.
Plan. If the supplier is having issues with transportation or finding enough drivers, plan your ordering to anticipate the delays in delivery. This means that if you can only get a delivery once every two weeks rather than weekly, you need to double up on your orders to make sure that you have enough product on hand until the next delivery. Keep in mind that this may affect your cash flow as your cost per order will increase, but at least you will have items on the shelves and you may need to find additional storage space since you will have more stock on hand. You may also be able to make arrangements with the supplier to pick up your products at their warehouse instead of having to wait for a delivery.
Substitute. If the supplier is having a supply issue, meaning that they can’t get the product into their warehouse, talk with them to see if they have something in stock that can act as a substitute for what you are missing. Having a different brand of the same type of product is better than not having the product at all.
Most customers will accept a short-term alternative for their favorite brand if they understand the problems you are facing.
The same is true with foodservice supply items – what does your supplier have that can be a reasonable substitute but performs the function safely. Is it time to reevaluate how you are currently packaging your foodservice products and change to more cost efficient or sustainable packaging?
Change. If your supplier can’t help you, start sourcing alternatives. There may be other distributors that can provide you with some, or all, of the items you need. There may also be vendors that will provide you with only what you are missing – such as a specialty cup supplier.
Shop. The wholesale clubs can be a good source of products. I don’t usually recommend this alternative as it takes your time away from the store, causes your product selection to be inconsistent because you can only buy what the big stores have in stock, and may also have an impact on your cash flow. But, desperate times call for desperate measures and at least you can stay in stock.
Share. Be creative and ask your customers to help you out. I was recently in a store where they were running short of coffee cups and the operator was offering customers a fifty-cent discount if they brought in their own cup. In this case, the customer and retailer were sharing the burden to meet the customer’s need.
Reset. If you know you are going to be out of stock of an item for a while and you don’t have a suitable replacement, do a reset of your shelves to cover the gaps. You can expand to three or four facings of a product to take up more shelf space. This makes your shelves look fuller and gives the image of you being in stock. Also, make sure all of your shelves are fronted – everything is pulled up to the front of the shelf edge.
Communicate, again. If you notice that a customer cannot find what they are looking for, be sure to tell them that the product has been ordered, your supplier is out of stock, when you are expecting to receive the next delivery, and that you are sorry for the inconvenience. You can also put pictures of the missing items on the shelf with a message that you are currently out of stock. This will let your customers know that you are still carrying their favorite items and they are temporarily unavailable.
Your customers will be understanding of the situation and, once you have explained it to them, will be sympathetic. But you won’t escape the look of disappointment in their eyes – like that of a six-year-old girl.
Roy Strasburger is the CEO of StrasGlobal. Have a question or a comment? You can contact him at firstname.lastname@example.org.