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Posting Lost Sales: Is Your Store Losing Business?


10/25/2006
By Gary Naples

It’s a fact of doing business: If you want to capture total customer demand, lost sale posting is necessary. Unfortunately, it’s something that many parts store owners and managers don’t routinely perform. And that’s hurting business.
 

Counter professionals actually complain that posting lost sales, even electronically, is troublesome.
While traveling on business recently, I had the opportunity to chat with a store owner who happened to be sitting next to me on a flight. We got onto the subject of lost sales and its importance. During our conversation, I asked him about tracking lost sales. His reply was typical of many stores: He can’t get his staff to consistently and regularly post lost sales. Although the inventory control system they use is automated, he said the counter people complain about the extra keystrokes necessary to post the lost sales. This, incidentally, is the same complaint parts managers hear on the OE side.

Why don’t stores track lost sales? After all, most store management systems allow counter professionals to track them. There are lots of reasons that employees don’t track lost sales:

• Employees are confused about what actually constitutes a lost sale.

• Employees are confused about when to post a lost sale

• There is apprehension about posting lost sales

• There is a fundamental misunderstanding about the importance of posting lost sales among employees.

• And finally, laziness can play a role, even though the process can involve only one or two keystrokes to record the lost sale.

Posting actual sales and lost sales allows you to capture total demand — what was sold and what would have sold had it been in inventory or ordered for the customer. Capturing total demand is the only way to predict, with reasonable certainty, what and how much of something a store should have in the inventory. For this very reason, lost sales becomes an essential building block of a profitable inventory. Of course, this also assumes that a method of inventory control or similar system is used, and the inventory control system is set up correctly and functioning properly in the first place.

What constitutes a lost sale and when should a lost sale be posted? This is something you need to recognize and communicate to your staff. The definitions and when to take appropriate action are as plentiful as lost sales themselves. Remember to keep it simple. Look at lost sales this way: If a customer requests a part, and you don’t have it in stock, and the customer doesn’t ask you to obtain it, then you can reasonably consider that a lost sale.

Here are some scenarios:

• A customer calls your store and inquires about the price of a part. He then asks if you have it in stock. You don’t. The customer does not ask you to order the part, and hangs up.

• A customer calls your store and inquires about the price of a part, thanks you and hangs up.

• A customer calls your store and inquires about the price of a part, then asks if you have it in stock. You don’t and the customer asks you to order it.

Which scenario would clearly warrant posting a lost sale? If you said scenario “one,” you would be correct. It may seem straightforward, but for some store managers, and staff, it conjures up serious reservations about posting it as a lost sale. What if the customer calls another local source? What if the customer calls back and orders it? What if the customer was really only interested in inquiring about price?

When it comes to posting, don’t second-guess yourself. If it fits the aforementioned simple definition, then post it! Second guessing the process can be more disadvantageous than the occasional duplicate or erroneous posting.

There might be some apprehension about posting lost sales because a manager might feel that lost sales posting can be construed as a sign of poor inventory management performance or inventory ineffectiveness. Hesitation based on these thoughts toward posting lost sales stifles the process of capturing total demand. This attitude is most prevalent when upper management does not fully understand the meaning of lost sales or their significance to demand tracking. This is where you must be proactive in educating everyone about what a lost sale really means and why consistent posting is important.

Still, another obstacle to lost sale posting occurs when the store manager and staff don’t fully understand the importance of lost sale posting to inventory management, and dismiss it as something that’s not important. You might hear comments like, “I know we don’t do a good job of posting lost sales, but we just don’t think about it,” or “I can’t get my counter people to post them,” or “Sometimes we’re just too busy and forget, or we don’t take the time.” These attitudes must be changed. Lost sales tracking is as essential to building an efficient and responsive parts operation as are actual sales.

Diligently reporting lost sales helps your business on two levels. First, it identifies customer demands that you are unable to fill from inventory or by other methods. Second, it helps you to profitably build your inventory by augmenting physical levels based on realistic comparative demand. For these reasons, if the manager or parts store owner wishes to be successful, he or she cannot afford to ignore the practice. In this case, the key to making the lost sale posting routine for all staff is a real willingness and ability on everyone’s part to make the lost sales tracking
a habit.

Here are some additional points that may help you in developing a process to ensure the consistent posting of lost sales.

Get everyone on the same page about what a lost sale is. Don’t complicate the definition. Remember, in its simplest terms, a lost sale means you didn’t have the part that the customer wanted when the customer wanted it, and the customer did not order it from you.

Ensure all are aware of the significance of lost sales. Have open discussion with appropriate parties to educate them about the purpose and need for posting lost sales.

Ensure that all store personnel understand the reasons for lost sale reporting. Again the keys are education and communication. As with any other task, if employees know why it is important to post lost sales, they will be more likely to do so than if they are told they must report them.

Ensure that all personnel know how to report lost sales. Is every responsible employee familiar with the process?

Review lost sales or lost sales reports with all relevant store personnel. Your staff is responsible for the reporting, and they will benefit most from it. Sharing information and involving them in inventory decisions will increase their responsibility and buy-in to the process. You should hold, at the very least, a brief weekly meeting to discuss lost sales with staff and review posting.















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