6 ways to prevent stock-outs in your company

Stock-outs have been a recurring problem for many companies since the onset of the Covid-19 pandemic. The impact of this on the supply chain. Because of this, product lead times and material shortages have caused stock-outs in many organizations.

Companies have faced 4 main problems: rising costs, supplier non-compliance, broken logistics and the need to validate new suppliers. In order to face the supply crisis that continues to have repercussions on companies, we have identified 6 best practices. These can be incorporated as a strategy in the purchasing areas.

Purchasing control in the event of shortages

Increase competitionBy having more suppliers competing for demand, buying companies can find new and better offers, improving commercial conditions, both in terms of price, as well as discovering suppliers with higher levels of quality and differentiation. This translates into important savings and improvement opportunities for the supply areas of the organizations. According to a study by the Data Sciense area of wherEX for those purchases that have between 4 and 6 offers (which is the average in wherEX), savings of 8% have been detected. In cases where more than 9 bids are submitted, this savings is 12%. For each additional supplier, a savings of 1.9% is generated.

Economies of scaleEconomies of scale have a relevant effect on the supply areas of companies. The Data Science area of wherEX carried out the study "Economies of Scale in Procurement: how much savings can I generate?The study analyzed the effect that economies of scale have on the awarding of goods through the platform, by doubling the quantity requested and improving the purchasing strategy. For the analysis, purchasing behavior was observed for more than 400 product categories traded through the platform. It also studied 141 companies that are part of the wherEX ecosystem. Among the results, the study revealed that on average, companies that buy in economies of scale can save 9.1%.

Spending under covenantsWhat percentage of the company's purchases are tied to long-term prices? According to a study conducted by Hackett Group, companies with a medium performance index manage between 55 and 60% of their purchases on a long-term basis, while those with high performance indexes manage 85%. World-class companies do so with more than 97% of their purchases. Locking in long-term prices reduces the risk of price volatility. It is important for companies to monitor what percentage of their purchases are long-term.

Preventing stockouts with technology

Digitization: Deloitte's Global Chief Procurement Officer (CPO) survey, which provides exclusive insights into the key challenges and opportunities shaping the course of procurement. which provides exclusive information on the main challenges and opportunities shaping the course of procurement, revealed that the companies that are leading the list in terms of sourcing performance, 90% are adopting technology in their processes.

Risk ManagementKraljic Matrix: The "Kraljic Matrix" is a tool used by companies when managing purchases and indicates that there are four types of products or services: "leveraged", "strategic", "non-critical" and "bottleneck or critical". Inputs and services in the "strategic" and "critical" categories require attention. It is therefore recommended to have a plan where relevant suppliers are identified. For this type of expenditure, it makes sense to work with a few well-established suppliers with low turnover to reduce risk. But if we talk about "leveraged" and "non-critical" products, e-procurement tools such as wherEX can generate important benefits for companies. Here we are talking about commodities such as raw materials or non-critical products such as cleaning materials.

Data analyticsData analytics: Having access to data and reviewing compliance metrics in real time allows you to detect opportunities to improve your purchasing strategy and generate savings. According to the results of Deloitte's Global Chief Procurement Officer (CPO) analysis, 75% of respondents say that data analytics allows them to improve their performance. This is achieved by being able to find new and more competitive suppliers, negotiate better commercial conditions and generate savings.