A recent study puts an actual number on the widely assumed damage caused by poor inventory management: $1.1 trillion globally. Whereas overstocking accounts for about 3.2 percent of lost retail revenue, out-of-stock events are even more costly, making up 4.1 percent of annual revenue losses. Five main factors lead to these staggering costs: (1) insufficient processes, which create gaps in the supply chain; (2) personnel issues, including poor training, laziness, and fraud; (3) data concerns, such as when retailers fail to measure stock levels properly or do not share information widely enough; (4) supplier issues, whether they fail to deliver on time or send too much of a particular product; and (5) theft. The solutions to these issues, from better training to improved system management, may seem easy to identify, yet they also demand a clear understanding of what causes inventory imbalances, which means that retailers constantly need to gather more data and improve their business intelligence.

 

Source: Tom Ryan, Retail Wire, May 15, 2015