How Ghost Inventory is Related to Supply Chain?

by Obella Marie D. Ronsairo, AUGUST 2022

Phantom inventories or simply ghost inventories are common expression for goods that an inventory system considers to be on-hand at a storage location but are not physically available. This could be due to the items being moved without properly recording the changes in the inventory record, breakage or data entry errors. Those are the products or item that are shown to be available in the system but aren’t available in the stockroom. 

When your inventory management system’s stock levels are not accurate, it’s hard to make the right decisions for your store. Having the right concepts, techniques, and tools necessary to effectively manage the inventories, will help you to assess and manage stock level. 

From the supply chain perspective, ghost inventory may arise from misunderstandings about specific inventory items, such as those involving non-standard components. Inventories or stocks are equivalent to money. If inventory mismanagement often goes unnoticed until long after they have occurred, you may experience the following scenarios: 

Bad Data: You might make dozens of changes to your product offering before you notice the phantom inventory problem. You might cancel future reorders for this product and tweak other product prices. You also might change the store layout and launch new marketing campaigns. 

Inaccurate Forecasting: Accurate data helps you budget accurately, maintain positive cash flow, and promote the right products at the right time. It also sets your supply chain and stock replenishment up for success. Inventory data is an essential piece of the demand forecasting method.  

What Causes Phantom Inventory: 

  1. Receiving Errors 
  1. Issues in Recording of items 
  1. Misplaced Inventory 
  1. Lack of Inventory Assessment 

Ghost inventory can be avoided by evaluating the inventory and sales data from system for a head start. It will highlight any discrepancies, point you to the source of your phantom inventory issue and help you quickly notice and prevent future ones. 

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About the writer:

Obella Marie D. Ronsairo. Loves to feature life and see the beauty of every side of the stories. Have been with the newsletter team for almost two years since becoming part of the MPTSouth family. Gained a lot of fun, experience and knowledge through this growing team and helped her to develop more of her skills in writing and creativity.

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