The retail industry is one of the most stochastic industries. With several moving parts in the supply chain, the industry is constantly under pressure to maintain optimum inventory levels and optimize pricing while maintaining real-time inventory records, sales data, and many other inputs. Amidst all this, there is the phantom inventory issue and the challenge of lost sales. What is phantom inventory? When the inventory system indicates that a product is available at its point of sale (POS) system, but is not actually available in the store, that product is considered “phantom inventory”.
Inaccurate inventory data can wreak havoc on retailers, leading to out-of-stock products, lost sales, and frustrated customers. These inaccuracies also create challenges in allocation strategies and hinder accurate forecasting, making it difficult to ensure the right products are available in the right locations. Ultimately, this can contribute to the rise of phantom inventory and further complicate inventory management.
Top 5 reasons for inventory discrepancies
Learn the top 5 reasons why phantom inventory exists:
- Incorrect placement of products: This can create discrepancies when there is a physical inventory count during inventory audits. It results in incorrect stock levels and subsequent product orders.
- Customers are unable to locate products on the shelf: If they don't find the product they need, customers will simply leave the store and purchase elsewhere. This creates customer dissatisfaction and reduces customer loyalty.
- Infrequent inventory audits: If audits are not conducted periodically managers may not catch phantom inventory. This can result in inadequate product orders and lead to lost sales.
- Incorrect display of products: When products meant to be sold individually are displayed as a case, it can confuse customers. Calculating the case as a single unit and not counting the total number of products in each case can also cause discrepancies.
- Excess inventory: Miscalculations due to incorrect data entry can lead to ordering too many products. This excess inventory may never reach the shelves and risk becoming outdated. To entice customers, these products might be subject to significant price reductions, which can ultimately impact a retailer's profit margins.
Growing hybrid customers, unpredictable socio-economic conditions, and changing market trends have pushed businesses to implement artificial intelligence-powered (AI) systems to reduce phantom inventory. The invent.ai Phantom Inventory Mobile App streamlines inventory management, automating time-consuming tasks and providing real-time insights. Eliminating manual processes mitigates human errors. Thus, store managers can enhance operational efficiency, improve profits, and allocate more time to other responsibilities.
Talk with a retail expert to learn how to fix issues with phantom inventory.