Perhaps the most significant order fulfillment challenge that ecommerce companies have to deal with is preventing stockouts
, which occur when inventory of a particular product is not available to be sold or shipped to a customer.
Stockouts are every ecommerce company’s worst nightmare, as they can not only lead to a drop in sales, but can also damage customer trust and loyalty. Unfortunately, these events are all too common
, with the out-of-stock rate for ecommerce firms hovering around 8% on average and rising to 10% for sale items.
The causes of stockouts vary, ranging from sudden spikes in consumer demand to supply chain bottlenecks and disruptions to cash flow management and supplier payment issues.
To avoid stockouts, many ecommerce companies employ inventory buffers (or safety stock) – but this strategy often results in higher amounts of excess inventory and higher inventory costs.
A 3PL provider – like Amazon Multi-Channel Fulfillment (MCF) – can help you prevent stockouts (while reducing inventory costs) by driving improvements in two key areas: