top of page

Inventory Overstocks and Understocks; How to fix them?

Departmental silos are a challenge that many growing business organizations face, and the retail industry is no different. In fact, one of the top five most common causes of overstocks is “data disconnect”.

The Importance of Connecting Inventory Processes

Let’s have a look at some facts and figures:

  • Retailers lose $1.75 trillion annually because of out-of-stocks, overstocks, and returns (Entrepreneur)

  • Shrinkage cost retailers $60 billion in 2015 (Forbes)

  • Retailers can increase profits 50 percent with careful inventory management (CNBC)

  • In 2017, shrink cost retailers nearly $100 billion globally (Tyco Retail Solutions)

Additionally, when inventory processes are broken, this can have a ripple effect on the rest of your business processes. You might be facing data inaccuracies and not know the stock availability, or how quickly it’s selling. Then you cannot map forecasted demand to product lead times effectively. The more you disappoint the customers, the more they’ll turn to your competitors, and the more you order extra stock, the more capital you’ll have tied up.

Why Your Inventory Management Is Out of Sync

  • Inventory complexity

- For growing retailers, in particular, inventory management becomes complex quickly. As you introduce more channels, locations, and team members, processes must grow and evolve as your business does. But knowing what you have in a multi-channel business is easier said than done.

  • Outdated processes and tools

- You might be using systems/software that hasn’t been updated in years or processes that were implemented when you first started your business. If you don’t reevaluate as your business grows, then you’ll risk using software that doesn’t have the automation, integrations, or features you need to run your growing business.

How to Clean Up Your Inventory Management Processes

First thing’s first: You must find inventory management software for your retail business. Remember to look for software that will manage inventory across multiple channels and integrate with other tools you use in your business. This will help maintain the integrity of your inventory data. Automation is another important feature for fixing broken inventory management processes.

Once you have your systems in place, you can identify and focus on areas with the most problems. Here are some tips that will help you get started:

· Get a handle on your multi-inventory management.

· Use two kinds of reporting, snapshot (activity at a particular time) and trend (activity over a period of time).

· Formulate processes where your operations proactively communicate with marketing about important stock updates.

· Adopt a data-driven approach to your inventory management, so you can identify issues and opportunities using the metrics.

· Leverage automation, if you don’t have automation where you pull all of the different pieces together, you’re never going to be able to track your inventory properly.

· Calculate sales velocity and work back from product lead times to avoid stockouts.

Ultimately, it comes down to how disciplined your team is in inventory and data management. If a company has measurable circumstances that they can look at on a recurring basis to know what their inventory snapshots are, then they will be able to manage inventory far more effectively.


bottom of page