Stock-Outs and Their Impact on the Company’s Progress

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Starting a new business venture is never easy; there are a plenty of new issues to address, obstacles to overcome, challenges to face and rivals to compete with. Among the problems that occur most frequently, the case of stock-out must be mentioned. Running out of a specific commodity, especially a crucial one, often becomes a point at which the leader of a company starts panicking, which makes the matters even worse.

However, with a well thought-out plan in mind, even the case of a stock-out can be solved efficiently, as long as the company leader develops an efficient backup plan and adopts an appropriate leadership strategy. Although the Stone Horse Supply Company is clearly facing a small crisis now, after several steps have been undertaken, the current issues are likely to be resolved.

Inventory control must be one of the hardest aspects of running a company. Being the key means to run a business, inventory is used for a number of purposes, ranging from preventing stock-outs to providing proper accounting process. It is worth mentioning that, as a rule, an average company spends 45% to 90% of its total expenses on conducting a tight inventory control (Mandel & Semenov, 2008).

However, the situation can be reversed; stock-outs can be used as a means to control inventory. Once a stock-out takes place, the amount of money typically spent on inventory shrinks to a much lower amount of money; therefore, stock-outs affect the choice and application of inventory to a considerable extent.

However, to create a situation in which a stock-out can possibly occur, it is necessary to analyze the target market and its customers, understanding their needs and basic demands to be able to create a stock-out and use it for the benefit of the company. To leverage stock-outs fast and efficiently, a company must learn how to capture extra demand and use the acquired knowledge for the benefit of the firm (Onwukwe & Isaac, 2011).

Hence, it can be concluded that the increasing demand for stock-outs is actually the situation when one of the retailers has a surge of customers due to the stock-out situation occurring in the company of another retailer. Therefore, it would be logical to suggest that the demand for stock-outs increases when the specified market is flooded with the companies offering the same services and when the product availability reaches its peak.

In the light of the above-mentioned, it would be reasonable to suggest that by measuring the specified product’s availability, one can control the latter, therefore, avoiding the instances when companies have to close down due to the lack of customers. Three basic ways of measuring product availability are commonly distinguished.

Classified according to the type of an indicator, which is used for the process of measurement, the given methods seem quite trustworthy and, thus, have to be used by entrepreneurships to avoid possible crises. PEPFAR, or direct, indicators, allow to run a series of tests to check whether the provided goods meet the established standards.

After calculating the number of tests, one can figure out whether the result if worth trusting. The GRAF, or global fund indicators, in their turn, help figure out whether the attempts to broaden the goods distribution have been successful enough. Finally, product fill rate, which provides the means to assess the chances of product being supplied from an available inventory, should be mentioned.

Moreover, it is important to take account of the factors that affect product availability, such as the number of companies providing the given product, the demand rates and the availability of resources (Chandani et al., 2012).

In fact, the Stone Horse Supply is not the only company with problems concerning stock-outs; P&G has also faced a similar issue recently (P&G has better news on stock-outs, 2004). However, with the help of a CDSN initiative, Procter & Gamble still manages to stay afloat.

For the Stone Horse Supply, it can be advised that the company leaders should consider its key assets. Comparing the latter to the ones of the rivals, the company should offer the target market the services of higher quality compared to the ones of the rivals. Thus, it is worth focusing on the research of the target market, the rivals and the ways to improve the quality of the goods.

It must be admitted that the Stone Horse Supply is facing a crisis at the moment; in addition, the crisis is rather severe for an organization that has only started its growth and has not expanded to the size of a medium company yet. Nevertheless, it is worth mentioning that such rises can be viewed as a kind of tests.

Once a company manages to overcome the crisis by pulling itself together and applying the methods required to solve the problem, it can be considered that the given company has proven its right to exist in the specified market and even expand.

Unless the company takes the test successfully, however, it is clear that it lacks a certain element badly, whether the given element is related to the financial, managerial or organizational field. Though the need to have strong support is obvious, the specified situation can be viewed as a test for the Stone Horse Supply to pass to become successful in the chosen field.

Reference List

Chandani, Y. et al. (2012). Factors affecting availability of essential medicines among community health workers in Ethiopia, Malawi, and Rwanda: Solving the last mile puzzle. American Journal of Tropical Medicine and Hygiene, 87, 120–126. Web.

Mandel, A. & Semenov, D. (2008). Adaptive algorithms to estimate parameters of the optimal policies of inventory control under limited stock-out. Automation and Remote Control, 69(6), 1012–1022. Retrieved from EBSCOhost.

Onwukwe, C. E. & Isaac, I. O. (2011). On modeling the volatility of Nigerian stock returns using GARCH models. Journal of Mathematical research 3(4), 31–43.

P&G has better news on stock-outs (2004). Web.

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Stock-Outs and Their Impact on the Company’s Progress

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