Stock outs, why did it have to be stock outs?

     Are your brands performing better than expected?  Did you under-estimate your demand?  Did you forget to run your factory simulation?  These are some of the reasons that you may be experiencing stock-outs.  

     If you are reading through your performance report and you see that in 'Demand and Ill Will' you have lost customers due to unmet demand, then you are a victim of stock-outs.  This means that you had customers in your store (or on your website) ready to buy your products.  However, when the time came to purchase, you did not have any more computers in stock.  This upsets the customers and can generate ill-will towards your company in subsequent quarters.  

     First, I will discuss how to reduce stock outs.  Stock outs almost always are the result of under-production in your factory.  This can be caused by many different factors:

  • You projected fewer sales than you actually had.
  • Your factory did not have enough workers scheduled.
  • Your factory is too small and cannot possibly produce enough to keep up with demand.
  • You did not make the brand available for sale or you set your production rules and product priority improperly, resulting in it never being produced.

     The main cause of stock outs is firm's under-projecting demand.  This is a difficult issue to tackle, since there is no clear-cut way to determine how much demand your firm will have in any given quarter.  You must infer from the provided information whether you will sell more or less this quarter, or if you will sell less.  Keep in mind that there are several contributing factors that can indicate how much demand you will generate including: brand rating, advertisement rating, number of sales staff, and pricing.*  We always encourage firms to create three different projections when forecasting demand - one good projection where everything is better than expected, one poor projection where the firm has a 'worst case scenario', and one median projection where the results are what you realistically think may happen.  We then encourage for firms to aim somewhere in-between the 'median' and 'good projections'.  Be sure to re-run your factory simulation any time you change something that relates to production (like demand projection) in order to have the most accurate estimations possible. 

     Even if you forecast properly, you will still receive stock-outs if you do not have enough workers in your factory.  Be sure that you have enough operating capacity to produce enough units to cover the amount of demand you are projecting. Be sure to re-run your factory simulation any time you change a decision related to production (such as changing operating capacity).  

     If you are using all of your operating capacity and you still cannot produce enough to keep up with demand, then it may be time to scale-up your factory.  The only way to do this is to invest in Fixed capacity, but keep in mind that it takes 1 full quarter before your upgrades are completed and you can use your additional fixed capacity.  Try to plan ahead and keep your factory in-line with your growth.  

     It is possible that you projected correctly and had enough factory workers to produce your brand, but that it was never marked as 'available for sale'.  This is the worst case scenario.  You should receive an error message in your 'final check' that will alert you to this.  You did read over the 'final check', didn't you?


How will stock outs affect me?


     The ill will penalty may be calculated differently depending on which level of Marketplace© you are using.  You should always read the 'Lecture' tab of the 'Demand and Ill Will' section (located under 'Performance Report') to see how it will be calculated in your simulation.  

Typically, you will take the percentage of stock-outs from last quarter and divide it in half.  The resulting percentage will be the penalty applied against your total demand in this quarter.  This penalty is applied across all brands evenly.  For example, if your lost sales were 25% in the previous quarter, then, for this quarter your demand will be reduced by 12.5% across all brands. 

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