Overstocks and out-of-stocks cost retailers $1.1 trillion in lost revenue


According to a new study from IHL Group, commissioned by OrderDynamics, retailers suffer about $1.1 trillion in lost revenue as a result of overstocks and out-of-stocks.

The study shows that overstocks account for 3.2 per cent in lost revenue for the average retailer while out-of-stocks are to blame for 4.1 per cent.

Retailers in North America lose about $123.4 billion as a result of overstocks and about $129.5 billion due to out-of-stocks.

The study found that the losses are largely due to internal process failure, personnel issues, data disconnect, supplier issues, employee theft, and consumer theft.

Internal process failure has resulted in $284.9 billion in losses and usually results due to inadequate training, lack of cohesiveness between different departments, and technology overhauls that complicate systems. Issues regarding personnel have resulted in a loss of $259.1 billion and this includes lack of training and employee errors.

Data disconnect accounts for a loss of $222.7 billion and about 60 per cent of this issue is a direct result of retailers failing to take into account the importance of overstocks and out-of-stocks.
Supplier issues cover everything from late deliveries to too much product and account for a loss of $158.5 billion while theft, which totals to $161.6 billion in losses is largely as a result of employees rather than consumers.

In a statement, IHL President Greg Buzek said, “These problems are within retailers’ grasp to solve, but it requires more than data, more than business intelligence.It requires understanding the root causes of inventory and data disconnects and implementing the technology solutions and operational changes to address these revenue-limiting issues.” CJ