So you’re a retailer, and your inventory system shows you have 50 units of a popular item in stock on a busy Saturday. Great news, right? Well, not quite. Your store associates just walked the aisles and found exactly zero units on the shelves or in the stockroom. Sound familiar? You’re not alone – this “phantom inventory” problem is causing massive headaches for retailers worldwide.
Up to 60% of retailers’ inventory records are inaccurate. Let that sink in. More than half of what retailers think they have in stock might not actually be there. In the past, that 60% may have sounded manageable. But with today’s omnichannel retail environment, this inventory chaos is costing the retail industry a staggering $400 billion in lost revenue every year. For individual retailers, that can translate to 1-3% in lost sales – and that’s just the tip of the iceberg.
But it’s not just about the missing products or lost sales. It has a cascading effect: frustrated customers walk out empty-handed, overwhelmed store employees scramble to manually check stock levels, and planning teams try to forecast future needs with inaccurate data.
The good news? We’ve entered an era where artificial intelligence isn’t just a buzzword – it’s a practical solution to this age-old problem. Predictive inventory systems like RELEX True Inventory are revolutionizing how retailers manage their stock, turning those inventory ghosts into concrete, actionable data. It’s like having a store assistant who never sleeps, constantly watching for inventory discrepancies and alerting you before they become costly problems.
Current inventory management challenges
Many businesses, particularly in the grocery sector, are still tied to manual ordering processes because they lack advanced inventory systems. Store staff spend countless hours monitoring inventory levels, tracking stock movements, and making ordering decisions based largely on guesswork or historical patterns. This approach isn’t just labor-intensive – it’s prone to errors and missed opportunities for optimization.
Even retailers who have implemented perpetual inventory systems face ongoing data quality challenges. The causes are diverse and complex: receiving errors, theft, shrinkage, product misplacement, and scanning mistakes all contribute to data inaccuracy.
Fresh products present even more unique challenges, with factors like spoilage, vaporization, and trimming affecting inventory levels. Consumer behavior adds another layer of complexity, such as when customers inadvertently or deliberately mis-weigh products — intentionally weighing organic bananas as if they were regular bananas, for example.
Understanding True Inventory’s core capabilities
True Inventory takes a sophisticated yet practical approach to solving these inventory challenges through two main solution components: Optimized Counting and Enhanced Inventory. These components work together to transform inventory management from a reactive process into a proactive, data-driven operation.
Optimized Counting: Tackling phantom inventory
At its heart, Optimized Counting helps retailers identify and manage phantom inventory—those frustrating situations where the system shows stockstock, but the shelf is empty. The True Inventory system approaches this challenge in two innovative ways.
First, the system employs sophisticated anomaly detection to spot potential issues in real time. By analyzing transaction data, it can identify suspicious patterns—like a sudden drop in sales despite showing available inventory—that might indicate a hidden stockout. When the probability of incorrect inventory reaches a certain threshold, the system automatically alerts store operations, enabling quick intervention before lost sales occur.
Second, through targeted and prioritized inventory counts, the system calculates the optimal timing between inventory checks for each product. This isn’t a one-size-fits-all approach; the system considers each product’s historical inventory accuracy, demand patterns, and ordering parameters. For example, one product might need counting every 15 days, while another can go 40 days between counts without risking accuracy issues.
Enhanced Inventory: The power of AI-driven accuracy
Enhanced Inventory takes inventory management a step further by automatically modeling and correcting systematic inventory errors. Think of it as having a sophisticated AI assistant constantly watching for patterns in your inventory discrepancies.
The system learns from past inventory counts to identify systematic patterns that affect inventory accuracy. These might include things like consistent shrinkage rates, handling losses, or even seasonal factors that impact certain products. For fresh products especially, this capability is game-changing. The system can account for factors like trimming waste in produce, evaporation in certain items, or how promotional periods affect inventory accuracy.
Combining capabilities for a highly practical store operation
In practice, these capabilities come together in a highly practical way for store operations. Each day, store employees receive a prioritized list of actions based on business impact. This isn’t just another task list – it’s an intelligent guide that helps staff focus their efforts where they’ll have the biggest impact on the business.
The system ranks tasks by their potential business impact, measured in actual currency values. For instance, it might identify that checking the inventory of Product A could prevent $1,290 in lost sales, while Product B needs attention due to a potential markdown situation worth $770. This clear prioritization helps store teams make better decisions about where to focus their limited time and resources.
Real world impact: Success across retail segments
Initial pilots and implementations of True Inventory have delivered impressive results across both grocery and general merchandise retailers. Here are some key findings:
- 27% reduction in inventory balance errors compared to traditional ERP systems
- Identification of 90% more hidden stockouts compared to control stores
- Sales improvements of up to 2%
- Enhanced store efficiency and labor allocation through exception-based management, reducing time spent on inventory counts
- Transition from manual ordering to centralized ordering
- Improved stock management through automated processes
These results show that AI-powered inventory management can deliver substantial, measurable benefits across different retail environments while improving both operational efficiency and bottom-line results.
Choosing the right partner and preparing for implementation
Selecting your implementation partner
When choosing a partner for your inventory management transformation, it’s crucial to look beyond just the technology. Your ideal partner should have a comprehensive understanding of retail operations and a proven track record of successful implementations.
One key consideration is data integration capabilities. Look for a partner who already handles your supply chain data, as this can significantly reduce implementation complexity. For example, if your partner already manages your forecasting and replenishment data, they’ll already have access to the granular, product-location-day level data needed for True Inventory calculations. This eliminates the need to build new data flows and integrations from scratch.
An ideal partner should also offer end-to-end support throughout your entire operation. This means having solutions that work not just at the corporate level but also provide practical tools for regional managers and store personnel. The ability to deliver actionable insights through user-friendly interfaces at all levels of your organization is crucial for successful adoption.
Setting up for success
If a retailer lacks the right data and process discipline to jump straight to AI, it’s not a problem. Retailers can mature and collect the right data along the way, ensuring they’re set up for success at every stage:
- Initial counting: Establishing baseline accuracy through broad inventory audits
- Exception-based counting: Moving to targeted counts based on data-driven recommendations
- Full AI utilization: Leveraging machine learning to predict and prevent inventory discrepancies
- Maximized automation: Achieving high levels of automated corrections with minimal manual intervention
Pilot studies show that after approximately five months of inventory count data, retailers can achieve roughly 75% of the potential accuracy improvements. What’s more, organizations can leverage their existing inventory count history data during implementation to accelerate this learning process.
Each stage builds upon the previous one, creating a foundation for continuous improvement in inventory accuracy. As the system collects more data and learns from each store’s unique patterns, it becomes increasingly effective at predicting and preventing inventory discrepancies.
Measuring implementation success
Success measurement should begin with your core business KPIs – sales improvements, availability metrics, and spoilage rates. Using control and pilot groups for A/B testing can help clearly demonstrate the system’s impact. Beyond these basic metrics, consider implementing a centralized dashboard to track system performance indicators such as store response rates to inventory alerts and the accuracy of predictive inventory compared to your ERP data. Additionally, measure store compliance with inventory protocols, including how quickly and effectively stores respond to alerts and updates.
Looking forward: The future of inventory management
The retail industry stands at a pivotal moment in its evolution. The future of retail inventory management lies in this combination of artificial intelligence and human expertise. While the AI handles the complex task of detecting patterns, predicting issues, and automating routine corrections, store teams can focus on using their experience and judgment where it matters most. As retail continues to evolve, with increasing pressure on margins and rising customer expectations, solutions like True Inventory will become not just advantageous but essential.
The impact goes far beyond the numbers. True Inventory is transforming daily store operations, freeing staff from the burden of constant manual counting and enabling them to focus on what really matters: serving customers and driving sales. Store managers are moving from reactive firefighting to proactive management, armed with data-driven insights that help them prevent problems before they occur.
The days of accepting significant inventory inaccuracies as a cost of doing business are over. With True Inventory, retailers can look forward to a future where they can confidently know what’s on their shelves.
Ready to transform your inventory management?
