{"id":2293,"date":"2020-04-06T10:43:39","date_gmt":"2020-04-06T15:43:39","guid":{"rendered":"https:\/\/www.rmservicing.com\/?post_type=articles&p=2293"},"modified":"2020-04-06T10:43:39","modified_gmt":"2020-04-06T15:43:39","slug":"how-to-avoid-and-reduce-phantom-inventory","status":"publish","type":"articles","link":"https:\/\/www.rmservicing.com\/articles\/how-to-avoid-and-reduce-phantom-inventory\/","title":{"rendered":"How to Avoid and Reduce Phantom Inventory"},"content":{"rendered":"

Phantom inventory plagues retailers and brands alike. Brands need to know what phantom inventory is and how to avoid it.<\/p>\n

What is Phantom Inventory?<\/h2>\n

Phantom inventory happens when your products appear to be available at a retail store within a retailer\u2019s inventory system but are actually missing or out-of-stock. When you think that your products are available but are actually not, you risk lost sales and lower profit margins.<\/p>\n

In one case, a CPG manufacturer lost 5% of its total revenue<\/a> with one retailer during a large promotion due to Out Of Stocks.<\/strong><\/p>\n

In this age of convenience, consumers expect their desired product to be where they want it: on the shelf where it normally is. If it\u2019s not, they\u2019ll skip the purchase, substitute it with a different product, or delay the purchase. The lower the price point and more commoditized an item, like toothpaste, the more likely they\u2019ll buy from a competitor that has a similar offering. In the worst-case scenario, you\u2019ve now not only lost that single purchase but that customer has now switched brands and you lose out on their future sales.<\/p>\n

Phantom inventory can wreak havoc on your sales if there is an automatic reordering system in place with your retailers by making electronic stock appear higher than what\u2019s really available.<\/p>\n

For the health of your bottom line, investigate if phantom inventory is happening to your products at every store you work with. Keep reading to learn how to prevent phantom inventory and reduce it if you\u2019re struggling with it right now.<\/p>\n

1. Know how to spot phantom inventory.<\/h2>\n

Understanding how to spot when phantom inventory is occurring is the first step toward solving it. There are two ways to check if it\u2019s happening to you: physical and analytical observations.<\/p>\n

First<\/strong>, perform a physical observation. Check shelves, backrooms, and unpacked boxes for inventory not accounted for. For even more peace of mind, hire an external third-party who is objective to come in and help with inventory audits.<\/p>\n

Secondly<\/strong>, know the signs of phantom inventory and regularly check for it through analytical observation.<\/p>\n

There are three main red flags in your analytics to look for:<\/strong><\/p>\n

    \n
  1. Inventory turnover is decreasing.<\/li>\n
  2. Your reporting shows that inventory is available but no sales have occurred at that location over a period of time.<\/li>\n
  3. Inventory is manually allocated to locations and a rise in sales is observed but then falls back to a \u201cno sales\u201d status.<\/li>\n<\/ol>\n

    2. Identify the root cause of your phantom inventory.<\/h2>\n

    If it does appear phantom inventory is happening to you, the next step is to identify what\u2019s causing it. Use this checklist of common root causes of phantom inventory to see which of them is causing you to lose sales.<\/p>\n