The Hidden Cost of Stockouts
A stockout is not just a missed sale. It is a chain reaction that damages your business in ways that are difficult to measure. The customer who finds an empty shelf does not just leave without buying that item. Studies show that 21% of customers will buy from a competitor, and nearly a third will not return for at least a month. The lifetime value lost from a single stockout event can far exceed the cost of the item itself.
For Kenyan retailers and wholesalers, stockouts are especially damaging because customers often have multiple alternatives within walking distance. In busy commercial areas like Nairobi CBD, Gikomba, or Mombasa's Old Town, a customer can find a competitor's shop in minutes. Your stockout becomes their sale.
Why Manual Monitoring Fails
Many businesses rely on staff to visually check shelves and report low stock. This approach fails for several reasons. Staff are busy serving customers and restocking is not their primary focus. Visual checks only catch items that are already critically low, not items trending toward a stockout. Seasonal demand spikes can drain stock faster than anyone anticipates.
- Staff forget to check slow-moving items that suddenly become popular
- Back-of-store stock creates a false sense of security when shelf stock runs out
- Weekends and holidays create gaps in monitoring when sales volumes are often highest
- High-SKU businesses make it impossible to visually track hundreds or thousands of products
- Supplier lead times are not factored into visual checks, so reorders happen too late
Setting Effective Reorder Points
A reorder point is the stock level at which you need to place a new order to receive goods before you run out. Calculating it correctly requires two pieces of information: your average daily sales rate and your supplier's lead time. Multiply the two together and add a safety stock buffer to account for variability.
| Factor | Example Value | How to Calculate |
|---|---|---|
| Average daily sales | 10 units/day | Total units sold in 30 days divided by 30 |
| Supplier lead time | 5 days | Average time from order to delivery over last 5 orders |
| Base reorder point | 50 units | Daily sales (10) multiplied by lead time (5) |
| Safety stock | 15 units | Covers 1.5 days of extra demand or delivery delays |
| Final reorder point | 65 units | Base reorder point (50) plus safety stock (15) |
Your safety stock buffer should be higher for items with unpredictable demand or unreliable suppliers. In Kenya, where supply chain disruptions from weather, transport strikes, or port delays are not uncommon, a slightly larger safety stock can prevent costly stockouts during these periods.
How Automated Low Stock Alerts Work
Automated alerts monitor your stock levels continuously and notify you the moment an item drops below its reorder point. Unlike a staff member who checks once a day, the system watches every sale in real time. The alert can be sent via email, SMS, or in-app notification, ensuring the right person takes action immediately.
- 1Set reorder points for each product based on its sales velocity and supplier lead time
- 2Configure alert channels so purchasing staff receive notifications through their preferred method
- 3Define escalation rules so that critical items trigger urgent alerts if no action is taken within a set timeframe
- 4Review and adjust reorder points quarterly based on changing demand patterns and supplier performance
Beyond Alerts: Full Automation of the Reorder Process
The most advanced inventory systems go beyond alerts and automatically generate purchase orders when stock hits the reorder point. The system calculates the optimal order quantity based on your economic order quantity settings, creates a draft purchase order, and sends it to you for approval. This reduces the time between detecting low stock and placing the order from hours or days to minutes.
Automated reordering is particularly valuable for businesses with hundreds of SKUs where manually monitoring each item is impractical. It ensures that no item slips through the cracks while freeing your purchasing team to focus on supplier negotiations and strategic decisions rather than routine reorders.
Measuring the Impact of Low Stock Alerts
- Track your stockout rate before and after implementation to quantify the improvement
- Monitor fill rate (percentage of customer orders fulfilled from available stock) as it should climb above 95%
- Measure the reduction in emergency orders, which typically carry premium pricing and expedited shipping costs
- Calculate the revenue recovered from sales that would have been lost to stockouts
Businesses that implement automated low stock alerts reduce their stockout frequency by an average of 65% within the first quarter. The combination of accurate reorder points and instant notifications keeps your shelves stocked without tying up excess capital in safety stock.
