Why Inventory Inaccuracy Happens

 1. Misplaced Inventory

Sometimes inventory is actually physically present in a warehouse or storage facility, but it simply can’t be located. Inventory can be misplaced in a number of different ways, usually because of subpar storage procedures or inconsistency in adhering to sound ones. For example, poorly trained staff may inadvertently place items in the wrong location, or they could forget to update the system when moving inventory. Shortcomings in labeling or poorly organized storage areas could also contribute to these errors, as can changes to warehouse layouts that aren’t adequately communicated to employees.

2. Damage and Spoilage

Damage and spoilage are common causes of inventory shrinkage, especially in industries that handle fragile items and perishable goods. Often, these problems go undetected until physical inventory counts are conducted—and the longer companies wait between counts, the worse damage- and spoilage-related discrepancies tend to be. In manufacturing, these issues can impact raw materials, works-in-progress, and finished stock, should quality control and production troubles rear their heads. And in transportation, damage caused by rough handling or poor packaging can render inventory unsellable, and inadequate warehouse conditions may cause spoilage.

3. Theft

Whether items are stolen by internal employees, shoplifters, or even organized retail crime groups, theft is a very real and common cause of inventory discrepancies across the supply chain. Often in retail, theft is referred to as shrinkage, though this term typically also includes understock discrepancies resulting from damage and spoilage. Regardless, inventory thievery ranges from small-scale, unsophisticated pilfering all the way to sophisticated, long-term fraud perpetuated by internal or external bad actors. The inconsistencies in inventory tracking attributable to theft give rise to unexpected stockouts, lost sales, distorted demand forecasting, and ineffective replenishment planning.

4. Shipping Errors

Shipping errors frequently result in discrepancies that can affect expected inventory levels of both incoming and outgoing goods. For example, incorrect quantities shipped by suppliers and a failure by receiving staff to inspect incoming shipments for accuracy could impact inbound inventory. Similarly, workers picking the wrong items, shipping incorrect quantities, or sending orders to the wrong places could cause outbound issues that create discrepancies. Shipping errors can often be compounded by inadequate training of warehouse staff, rushed operations, seasonal staffing during peak periods, and outdated inventory management systems that don’t use barcode scanning, RFID, or automated picking technology.

5. Human Errors

More often than not, inventory discrepancies come down to human error. Whether it’s a data entry error, a counting gaffe, or just forgetting to update stock movement, mistakes happen when people process and move inventory. On the data entry side, mistyping an inventory quantity or SKU could potentially throw off recorded numbers. Meantime, in the warehouse or on retail shelves, improper adherence to storage or merchandising procedures could lead to misplacement of items. And missteps in security procedures could leave expensive inventory vulnerable to undetected theft.

 Why Inventory Inaccuracy Happens