When an item is out-of-stock, you are missing sales opportunities. Add up lost sales from all out-of-stock items, and you may be surprised at the lost revenue. But, how do you measure this lost opportunity? And how can you stop the revenue loss?
Paladin designed the PaladinNsight™ Lost Opportunity tool to help you claim those lost dollars.
The Lost Opportunity tool includes a meter and a viewer. The Lost Opportunity Meter is located in the Inventory module in the Inventory tab. If you are a manager or other high-level employee, it will automatically appear on your PaladinNsight™ dashboard.
The Lost Opportunity Meter estimates how much money you risk losing over a four week time period from out-of-stock items with no open purchase orders.
Figure 1: Lost Opportunity meter in the PaladinNsight™ dashboard
To read the Lost Opportunity Meter and find out the financial impact of your out-of-stock items, multiply the meter value by $1000. In Figure 1, the meter estimates a $10,360 revenue loss over four weeks if no action is taken to resupply out-of-stock items.
Your lost revenue could be 3-5 times greater. As you evaluate lost opportunity estimates in the Lost Opportunity Meter, keep in mind that this is a conservative estimate, and out-of-stock items can have a long-term ripple effect. For example, a customer who can’t find an item in your store may take their current shopping list and future business to another store. Customers can also tell other customers. The cost to you can be significant and hard to put a number on.
Want to turn around your revenue loss? — Meet the Lost Opportunity Viewer
If the Lost Opportunity Meter reports a number that seems significant to you, click the Lost Opportunity magnifying glass to open the Lost Opportunity Viewer. The viewer provides a detailed look at the estimated revenue loss from each out-of-stock item based on sales history and other information. You can use this knowledge to make decisions and then take action.
Figure 2: Lost Opportunity viewer
In the Lost Opportunity Viewer, a list of out-of-stock items will appear. The item with the largest revenue loss estimate (largest lost opportunity) will be at the top of the list. In this way, you can address the highest-return item first, and then continue down the list.
If you’d like to sort the list by values in another column, click the column title. Consecutive clicks will change the column sort order.
Figure 3 illustrates information provided in the viewer. In the next section, we will show you how to interpret these values and provide examples.
Figure 3: Lost Opportunity viewer information
As you view out-of-stock items, note the following conditions:
- Only active inventory items appear.
- If an item has an open purchase order, it will not appear.
- An out-of-stock value of zero (0) weeks means the item went out of stock the current calendar week.
- A zero (0) lost revenue and lost profit value means that the item had good sales history, but there is not enough evidence to know that it would sell if it were in stock. This may happen with items that are seasonal.
- If lost revenue and lost profit values are blank, the item didn’t have enough sales history and other information to forecast sales of this item.
- If you cannot see the entire item description, place your mouse pointer over the three dots (…) to view a message window that shows the full description.
- You can export your current view to Excel at any time by clicking the Excel Export button on the bottom ribbon.
Making use of the Lost Opportunity Viewer with examples
To help you learn about the Lost Opportunity Viewer, let’s assume the following two items — TANKLESS WATER HTR and AZALEA FERT 20 LB — appeared in the viewer’s list of out-of-stock items.
Figure 4: Out of stock items
Why an out-of-stock water heater is a lost opportunity
First, let’s look at the TANKLESS WATER HTR. This item is in the lost opportunity list because you are out of it and no open purchase orders exist. The lost opportunity values suggest that there is a good chance that you could sell one or more of this item in the next four weeks.
By not having this item in stock, you risk losing, conservatively, an estimated $439.98 in lost revenue and $96.36 in lost profit.
Tankless water heater lost opportunity values explained
|52+ WK QTY||4||You sold 4 in the past year (52 calendar weeks plus the days in this calendar week).|
|Weeks Out of Stock||1||Sometime last (calendar) week you stock-on-hand went to 0, and you have no open purchase orders.|
|Lost Revenue (estimated)||$439.98||In the next four weeks, there is a high likelihood that you could sell this item and make $439.98 in revenue–if you had it in stock.|
|Lost Profit (estimated)||$96.36||In the next four weeks, there is a high likelihood that you could sell this item and make $96.36 in profit–if you had it in stock.|
How out-of-stock fertilizer can have a long-term effect on your business
Now let’s look at the fertilizer item– AZALEA FERT 20 LB. This item has been out-of-stock for only a few days, and you don’t have any on order (or it would not appear in the Lost Opportunity Viewer). This appears to be a very popular item (136 were sold in the last year), and you are likely losing revenue quickly by not having it in stock.
If you get this item in stock now, you could, conservatively, earn an estimated $367.54 in revenue and $123.33 in profit over the next four weeks. Remember that this revenue doesn’t include additional sales from the rest of a customer’s shopping list or the customer loyalty you earn by having what they need.
Azalea fertilizer lost opportunity values explained
|52+ WK QTY||136||You sold 136 in the past year (52 calendar weeks plus the days in this calendar week).|
|Weeks Out of Stock||0||Sometime this (calendar) week you stock-on-hand went to 0, and you have no open purchase orders.|
|Lost Revenue (estimated)||$367.54||In the next four weeks, there is a high likelihood that you could sell this item and make $367.54 in revenue–if you had it in stock.|
|Lost Profit (estimated)||$123.33||In the next four weeks, there is a high likelihood that you could sell this item and make $123.33 in profit–if you had it in stock.|
Give the Lost Opportunity tool a try
We’ve designed the Lost Opportunity tool, with its meter and viewer, to help you keep your customers and earn you money. There are no reports to run, and the information is available and up-to-date each time you open the Inventory module.
Using this tool on a frequent basis will make your store operate more efficiently, and you will build customer loyalty and revenue. Give it a try!
If you have questions or suggestions about this information, contact email@example.com.