According to an ECR Retail Loss report, 60% of retail SKUs are impacted by inventory record inaccuracies1. Correcting stock records is estimated to deliver a sales lift of up to 8%1, making the benefits of resolving these inventory issues undeniable.
However, 59% of retailers report falling at the first hurdle. That is, optimizing their inventory systems to deliver complete product visibility. Without technology that delivers an accurate view of estate-wide inventory, identifying and correcting inaccuracies, whether by theft, damage, or incorrect manual inputs, is virtually impossible.
Inventory inaccuracies fall into two categories: overstated stock and understated stock, both of which cause store-wide problems. Overstated stock accounts for approximately 47% of inventory inaccuracies, while understated stock accounts for the remaining 53%1.
Overstated stock, often referred to as phantom inventory, occurs when a company records more stock than is physically available. If inventory management records display overstated stock, shelves are replenished too late. This often leads to stockouts, resulting in frustrated store managers, dissatisfied shoppers, and missed sales opportunities.
On the other hand, understated stock, referred to as shadow inventory, occurs when there is less stock recorded than what actually exists. If the system reports a stock level lower than reality, shelf replenishments are made too soon. This can trigger unnecessary purchase orders, increased holding costs, and an imbalanced supply-demand dynamic. The result is confused store associates who are told to replenish a shelf that’s still stocked, leading to significant waste implications.
There are a plethora of causes that can contribute to these errors, including incorrect manual adjustments to inventory numbers, poor process compliance, theft, accidental product damage, and receiving wrong deliveries in error.
Both scenarios highlight the importance of accurate inventory data, as they have far-reaching implications on labor efficiency, customer satisfaction, and overall profitability. Implementing robust inventory control measures and leveraging advanced technology can help mitigate these challenges, ensuring a more streamlined and resilient supply chain.
So how can retailers address inventory accuracy challenges? Lean on these AI and machine learning inventory accuracy solutions to supplement and supercharge your Inventory Management, F&R, and ERP systems.
Modern AI and machine learning models now offer predictive, real-time, and data-driven approaches to inventory accuracy. Solutions built on these models use multiple data sources to analyze inventory levels continuously and can detect and correct inaccuracies with precision. They also offer customizable data models that detect and address inaccuracies across your entire estate, helping to meet exact store needs.
To aid the journey toward interconnected systems, they seamlessly integrate into existing tech stacks, revolutionizing how you handle data flowing through point-of-sale (POS), ERP, F&R, supplier management, and other inventory optimization systems- making the entire inventory management ecosystem more efficient.
The adverse effect of inventory inaccuracies on grocery profits and productivity is clear. However, with the right technology, you can bring control and accuracy back to your inventory records, uplifting sales by up to 8%1 - all while reducing waste and improving productivity.
At Retail Insight, we refer to this technology as “cognitive technology" because it blends a deep understanding of how retail operations and systems work with data-driven technology to make smarter decisions grounded in more accurate information.
At Retail Insight, we've designed the InventoryInsight solution to automatically detect and fix inaccuracies within your inventory system, giving you unparalleled accuracy in your stock levels. With InventoryInsight, you gain a comprehensive and precise view of your entire inventory landscape, empowering you to make informed decisions.
Learn more about how Retail Insight's InventoryInsight solution cuts error-prone manual processes and takes the guesswork out of your inventory management.
References
1 https://www.ecrloss.com/research/grow-sales-by-improving-inventory-records