10 Statistics That’ll Change the Way You Think About Inventory

Order fulfillment has always been complicated business. 

But as the global supply chain becomes ever more connected and retailers of all sizes double down on various omni-channel fulfillment strategies in order to predict and cater to changing consumer behaviors and expectations, order fulfillment is only growing even more complicated.

With so many moving pieces, inventory visibility—knowing how much inventory you have and where it lives along your supply chain—and inventory management have never been more important than they are today. 

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Chances are, you know that inventory management and inventory visibility are important to the financial well being of your operation. But just in case you still need some convincing, below are 10 statistics that drive home just how important they are. 

Statistics About Inventory Accuracy and Visibility

1. 43 percent of small businesses in the United States don’t track inventory, or do so using a manual system. (Source)

And that can have a major impact on their ability to effectively conduct business over the long term. Operations that don’t track their inventory are more likely than those that do to run into forecasting problems, which could lead to excess carrying costs of inventory, unexpected stockouts, or too much inventory which won’t move.

2. The average U.S. retail operation has an inventory accuracy of only 63 percent. (Source)

In an academic setting, a score of 63 percent would just barely be passing. In a business setting, especially in regard to inventory management, it’s simply unacceptable. 

When inventory levels are chronically inaccurate, it is next to impossible to manage replenishment schedules, leading to stockouts and, generally, a poor customer experience as customers must either wait longer to receive their orders, or face cancelled orders once the error is realized. 

3. 34 percent of businesses have shipped an order late because they inadvertently sold a product that was not in stock. (Source)

This statistic serves as a case in point to #2 above, and the lesson is clear: Poor inventory visibility leads to an inability to meet customer expectations, which ultimately leads to a decrease in customer satisfaction.

If your business is going to remain relevant in a digital landscape and competitive against ecommerce giants like Amazon, you cannot afford to disappoint your customers or turn them away due to a lack of inventory. 

4. Worldwide cost of inventory distortion (including shrinkage, stockouts, and overstock) is an estimated $1.1 Trillion. (Source)

That is a truly staggering amount of waste—roughly the gross domestic product (GDP) of the entire country of Australia, lost to inefficiencies in the system. Recouping even a percentage of that loss can be a game-changer for most retailers and operations.

5. Reducing stock-outs and overstocks can lower your overall inventory costs by 10 percent. (Source)

Which is a significant amount of capital for virtually any operation. Imagine what you could do if 10 percent of your inventory’s value was no longer tied up in product on the shelf, but accessible for your business to put to use elsewhere. That is money that could be used for research and development, expansion, automation initiatives, employee recruitment…the list goes on.

6. By some estimates, item-level tagging, when implemented properly, can increase inventory accuracy from 63 percent to 95 percent.  (Source)

Item-level tagging in this case refers to the use of RFID tags (and some other similar technologies) to track inventory—from the moment it enters a facility to the moment that it leaves a facility. 

These tags, paired with scanners, sensors, and robots/drones throughout a facility, remove much of the potential for human error, and can lead to fewer stock-outs, higher margins, and generally improved sales. 

7. Approximately 72 percent of all retailers plan to leverage real-time inventory visibility—enabled by automation, sensors, and analytics—to reinvent their supply chains. (Source)

This statistic shows us that retailers understand not only the importance of accurate inventory visibility for their businesses, but also the unique role that technology has to play in the war for more accurate data.  

Statistics About the Impact of Inventory on Operations and Facilities

8. As of June 2019, U.S. retailers are sitting on approximately $1.36 of inventory for every $1 in sales. (Source)

In order to prevent stockouts, most retailers settle for the opposite: Overstocking inventory to ensure that it’s available if a customer wants to make a purchase. 

Unfortunately, overstocking brings its own costs and challenges: Namely, that capital is tied up and unavailable for other uses, like making nimble business decisions or investing in efficiency/productivity-boosting technologies. There is also an increased risk of shrink as product ages and potentially expires, as well as added costs associated with housing and managing the added inventory.

9. Since 2013, the number of private warehouses in the U.S. has risen from 15,763 to 18,182—a growth of 2,419 facilities, or more than 15.3 percent. (Source)

While this growth has been caused by a lot of factors, including a healthy and expanding overall economy driven by consumer spending (and business investment), one of the most important is the desire to reduce shipping times to accommodate customer desires for 2-day, 1-day, and even same day shipping. 

Simply put, by adding additional warehouses and DCs to their network, operations are able to stock inventory closer to the end customer, leading to faster (and cheaper) shipping options. 

10. But there is a movement towards smaller warehouses—as small as 200,000 to 50,000 square feet in some cases, from an average of about 400,000 square feet. (Source)

At the same time that businesses are building more warehousing facilities, there has been a move towards smaller facilities. Less space, paired with more inventory (and more types of inventory) means that operations need to use their space more efficiently. 

This boost in efficiency can be achieved in a number of ways. Implementing an intelligent warehouse slotting process, for example, allows operations to put their inventory exactly where it needs to be. At the same time, investing in technologies like AS/RS or goods-to-person can allow an operation to reclaim vertical space, potentially doubling their storage capacities without expanding the facility’s footprint.

Putting This Knowledge to Good Use

With all of these numbers and figures in mind, it’s clear to see the importance of properly managing and tracking the inventory within your facility and overall supply chain. A trusted systems integrator can help you understand the options that you have at your disposal for increasing inventory visibility, from slotting to implementing new technologies and everything in between.