The importance and challenge of measuring retail disruption

Have you ever been asked, at the end of your purchases at a retail establishment, if you hadn't found an item you wanted?! That's right, this is one of the ways, not always the best, of trying to estimate the level of stockouts in retail, something fundamental in a scenario of intense competition between companies.

First of all, we need to highlight that, despite the difficulty of measuring rupture, also known by the acronym OOS (Out of stock), the effort to estimate it should be encouraged, especially in retail, where the “cash inflow” of the supply chain.

Unfortunately, it is precisely at this point in the chain, where inventory maintenance is more “costly” and it is more difficult to control lost sales, that the rupture has the most impact on a supply chain, whether due to the loss of immediate revenue or future, resulting from the dissatisfaction of customers who start looking for other chains that can serve them with a better level of service.

There are some ways to try to estimate lost sales and, therefore, adjust inventory volumes to mitigate future losses. The most common mechanisms are:

• Research with consumers at the checkout of stores;
• Accounting for breakout time from zero stock alerts, which can be more or less automated;
• Audits carried out in the field to measure ruptures.

The positive aspects of research with consumers at checkout are the low cost of registering absences and the simplicity of their quantification. However, the lack of standardization of records made by professionals working at checkouts and, in some cases, double registrations are common, since the consumer can enter the store more than once during the stockout period, increasing stockouts. registered.

On the other hand, dimensioning the shortage by estimating the time in which the product broke down has today, in the electronic control mechanisms of stocks in real time, such as electronic shelves and beacons, an important ally. However, the need to estimate lost demand for a relatively short period of time still represents a significant challenge.

Finally, audits carried out by field teams are excessively expensive and only indicate the percentage of stores/products out of stock, most of the time without being able to effectively estimate the total loss of sales. Despite this, this mechanism is widely used in benchmarking processes, when a neutral assessment of market rupture is expected.

New technologies for tracking products and monitoring final consumption open up the possibility of more accurately mapping the loss of sales in a chain, which will be fundamental in a scenario of greater complexity in retail, as in the case of OmniChannel.