Investigating stock-outs in Johannesburg’s warehouse retail liquor sector

Abstract

Purpose: The aim of this exploratory study was to investigate how management practices and processes contribute to stock-outs in the warehouse retail liquor sector in Johannesburg.

Research design: A pragmatic research philosophy was used in a multi-case approach to determine the association between business management practices and stock-outs. The unit of analysis of the study is the highest turnover outlets.

Findings: The results revealed that retailers base demand forecasting on judgement and naïve or simple moving average forecast methods. There is little consideration of variability, lead time or targeted customer service levels when determining optimal inventory levels. Product breakages are common, implying that data inaccuracies and stock-outs are highly probable. Information sharing between the retailers and suppliers is limited and formal collaboration programmes do not exist. The respondents revealed that frequent stock-outs resulted in poor business performance characterised by declining sales, customer retention and competitive advantage.

Limitations: Although the sample selected represented a significant portion of the top 50% contributors to the sector’s sales, the sample is small and the focus of the study is limited, which decreases the generalisability of the results.

Practical implications: Retailers can reduce stock-outs by investing in improvements in demand forecasting, synchronisation through collaboration and training of employees.

Originality or value: This study provides empirical evidence of the linkages between poor management practices and processes, stock-outs, customer service and business performance.