Automating Out of Stock Products

Detailed Image Out of Stock Example

Back in 2010 I wrote a post about Managing Out of Stock Products. There are some great comments on that post. They stood out to me so much that I still recall almost four years later that the prevailing theme was: why don’t you automate it? Well, a few months ago we finally did.

The main hold up in 2010 was the accuracy of our inventory system. Since then we’ve made several initiatives and now have the system at the point where it’s as accurate as it’s every going to be (that is to say, it’s still not perfect but it’s close enough). Back in 2010 this also wasn’t that much work to maintain. By the end of 2013 it became burdensome for my business partner Greg who does the ordering and our operations manager Charlie who manages incoming shipments. So, it became worthwhile to invest in the programming time and effort to automate the system.

Now if an item goes out of stock based upon any type of inventory adjustment (generally a customer purchase), the product is automatically marked out of stock on our website. If we have an incoming shipment from that distributor we use the estimated delivery date in our database as the estimated date that the product will be back in stock. If we don’t, it’s just set to five days out and then manually adjusted as soon as we know more.

When the product is received in our warehouse and added back into inventory, the website is updated automatically and the product is no longer marked as out of stock.

From a customer perspective, if they buy something out of stock the system is still automated like it was back in 2010. They’re kicked an email notifying them that the order is on hold until the estimated ship date that’s in our system. The difference now is that products are marked out of stock instantly instead of a lag of up to a day. This almost eliminates the customer service emails where we have to say “Sorry, your order was supposed to ship today but it won’t until next week because we just realized we’re out of stock”.

When a customer orders more than we have in stock (say they order 20 and we have 15), the order is automatically held until we contact the customer. Sometimes they want to wait, sometimes they want the 15 and want a refund for the 5, sometimes they want the 5 sent at a later date. There are too many scenarios to automate. We reach out to the customer right away and then handle it however they prefer.

The system has been in place for a few months now and it’s been a huge overall success. Big time savings for Greg and Charlie. Our website is more accurate. Our customers are more informed. Customer service related to out of stock products is down. Maybe most importantly, it will scale. Whether we run out of 1 product or 10 or 100, there isn’t much difference in the work involved.

It’s one of those seemingly minor improvements that really makes a big difference in the long haul. I’m glad we finally made it happen!

9 comments on Automating Out of Stock Products

  1. Dave says:

    Nice job! We also had to come up with a bunch of different scenarios, but certainly have more room for improvement. Do you do any barcoding for inventory coming in/orders going out, or is still a manual count?

    • Adam McFarland says:

      Thanks Dave. Good question. We don’t do any barcoding. Everything is a manual count. Unfortunately a good percentage of our products don’t have barcodes on them and much of the ones that don’t would be difficult to code on our own (towels, applicator pads, sponges, etc that don’t come in packaging). I’m sure there’s a solution, however I think we’re pretty far off from seriously pursuing it.

      How about you? I’d imagine a lot of your carbon fiber products are similar in that they arrive in bulk without packaging.

      • Dave says:

        You’re right, we run into a similar problem, though I think we could probably do it for a majority of our items…but we’d have to barcode them ourselves, which at this stage probably doesn’t make sense. Always looking for a better solution though!

  2. Tim says:

    Just out of curiosity Adam, when you say Inventory system, do you have a custom made application for this? Is it tied in to your cart platform? Just mainly curious, if you’re not comfortable answering on your blog don’t feel obligated to!

    • Adam McFarland says:

      Good questions Tim. Yes, it’s a custom made application tied to our cart. We’ve had to revamp it a few times over the years but now it’s to the point where I feel like it’s a competitive advantage having is all synced exactly the way we need it.

      Eventually we plan on using all of the historical data to automatically create promotions. If we have a forecast of sales, if we know how much inventory we have in stock, how much is on the way, and how long it takes to get here, we can look at our margins and historical sales for brand X or product category Y during month Z, and determine which is the best to put on sale. By “best” I mean most likely to sell a lot and profit a lot without running out of stock. The system could even generate the newsletter and banners for the site based upon a pre-determined set of graphics. It might be a few years away but I think that’s where we’re headed.

      • Tim says:

        Interesting, seeing the evolution of Pure Adapt – you essentially have built, from the ground up, not only your own cart, but your own ERP platform and all of it is integrated – you are MILES ahead of most companies regardless of size/resources!

        • Adam McFarland says:

          Thanks for the kind words Tim! It’s funny, we never set out to build an ERP platform (I actually had to look up ERP :)) or any other type of platform. All along we’re just trying to create things that solve our problems. That’s just our personality.

  3. Rob says:

    Great work! The amount you’re able to automate is insane. I honestly wouldn’t be surprised if one day you said you’d put electronic scales integrated into every shelf so you never have to check inventory manually ever again…

    As for

    When a customer orders more than we have in stock (say they order 20 and we have 15), the order is automatically held until we contact the customer. Sometimes they want to wait, sometimes they want the 15 and want a refund for the 5, sometimes they want the 5 sent at a later date. There are too many scenarios to automate. We reach out to the customer right away and then handle it however they prefer.

    How many scenarios are there? Do you manually email the customer or are they sent an auto email? Could it be done with links in an email – click this one to make this happen, this one to make that happen or get back to us if you want something else. Is it that this happens so infrequently it’s not worth it?

    • Adam McFarland says:

      Thanks Rob – I never thought about electronic scales in the shelves but that’s a good idea!

      To answer your question: that scenario happens a few times per week. It’s generally with our larger wholesale customers. It could be automated via links in an email eventually. Maybe I shouldn’t have written “There are too many scenarios to automate” because that’s not entirely true. But there are a lot of them. It could be hard to convey to the customer clearly and would also take some programming effort. For now we like reaching out to the customer, because they’re typically some of our best customers and we like taking care of them with a personal touch, and because we can generally reduce the options for them based upon what they’ve done in the past.

      If it becomes a more regular thing, we probably will consider automating it. Then again, if we continue to improve our inventory management we shouldn’t run out of things all that much more frequently than we do now. We’d have to have a much larger variety of items, which is certainly possible. Who knows, maybe you’ll read a post in 2018 about how we finally automated it 🙂

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