What is phantom Inventory? Phantom Inventory refers to product that a store records as On Hand but is not actually present. Phantom inventory can happen to any supplier at any time and can cause expensive replenishment issues.
Phantom inventory occurs when the inventory levels shown at the store level are inaccurate. For most suppliers, Walmart relies on its Global Replenishment System (GRS) forecast to automatically reorder products based on a store’s need, weighed against its pipeline.
For example, Walmart’s forecast expects store 100 in Bentonville, AR, to sell three units next week. If the store’s pipeline indicates five units On Hand (that aren’t actually there, also known as phantom inventory), the system will fail to generate an order.
If Walmart’s GRS system believes a store has product even when it doesn’t, it will delay an order (or not place it altogether), leading to:
In fact, phantom inventory is one of the major root causes behind instock problems at Walmart.
Phantom inventory can be dangerous because it’s a “silent killer.” This issue often sneaks up on a lot of suppliers because everything looks “right” on paper (filling orders On Time and In Full, instocks look “healthy,” etc.), but the supplier just doesn’t seem to be selling what’s expected. As the supplier sells fewer products because of phantom inventory, Walmart’s system artificially suppresses its forecast (because it believes the product isn’t “moving”), leading to fewer orders and further lost sales.
What can cause phantom inventory?
Suppliers have a few options in handling phantom inventory.
Suppliers can run a phantom inventory analysis and compare recent point-of-sale (POS) activity at an item-store level against:
Next, they can flag a store if it has had historical sales but hasn’t sold at similar levels recently, though it has sufficient product in the pipeline, which indicates a potential for phantom inventory.
Once the supplier has a list of stores they suspect has phantom inventory, a few tactical options become available:
The pros of this option include:
However, there are some cons:
The second option to handling phantom inventory is to hire a third-party company to physically audit stores and make On Hand adjustments.
The pro to this approach is that suppliers get “eyes on the product.” Teams can be physically present at stores to count actual products to recommend accurate On Hand quantities.
However, the cons are that it only includes a snapshot in time and can be very cost-prohibitive. Most third-party companies charge per store, and suppliers can have hundreds, if not thousands, of stores.
The final option is to use a third-party analytics service to find stores with phantom inventory. Using the Shelf Availability Map in SupplyPike’s Retail Intelligence, you can quickly spot problematic stores (reports take less than 1 minute to set up and run) and download the needed data.
Retail Intelligence – Shelf Availability Map
Once you’ve identified the stores, you can even use SupplyPike’s SSO and DC Push Generators to send products to stores in need automatically.
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