Inventory Management Remains a Thorn in Grocery’s Side

Ashish Parshionikar
January 31, 2023
Inventory Management Remains a Thorn in Grocery’s Side

At A Glance

  • $18 billion in food that comes to stores is either spoiled or unusable.
  • 8% of grocer revenue is lost to poor inventory availability.
  •  5.9% of sales are lost due to out-of-stocks.
  • Retailers report that accurate inventory records can increase sales by 4%-8%.
  • Grocers must modernize their forecasting and inventory management capabilities.

Inventory management is one of the foundational elements of a successful retail operation. The importance of a well-managed inventory process increases 2X-3X for food and grocery retailers as they must manage products with a limited shelf life.

For grocers, any inefficiency in inventory management can result in poor customer experience that will impact their sales revenue and profit margin.

  • According to Retail Insights, food and grocery retailers lose up to 8% of revenue through poor inventory availability.

Thus, they need to understand and analyze the risks involved in inventory management.

Each process has its limitations and challenges. Below are some critical challenges related to inventory management that food and grocers need to overcome.

Lack of Real-Time Tracking and Limited Visibility

The ability to track products through all stages of the supply chain is now more of a demand than a request among shoppers. However, with limited real-time visibility and tracking of orders and shipments, it is challenging for grocers to manage and act on exceptional incidents such as port delays.

This leads to food spoilage, longer trace and response time to events such as food-borne illnesses and recalls, weakens shoppers’ trust, and missed on-time in full (OTIF) performance.

  • According to Tive, US grocery retailers estimate that $18 billion in food that comes to their stores is either spoiled or unusable.

Inaccuracy in Demand Forecasting

Compared with other retail verticals, grocery retailers need a more refined approach to forecasting. These are important, given the wide range of inventory varying from fresh to temperature-controlled products.

But with legacy infrastructure, changing trends, and paradigm shifts in customer behavior, grocers need help making accurate demand forecasts. Grocers either have too much stock or no stock in hand, resulting in additional storage costs and poor customer experience.

Excess stock on hand increases the possibility of inventory loss due to numerous factors such as spoilage, damage, or even theft.

  • According to the Food Institute, North American food retailers are losing 5.9% of their total retail sales due to the out-of-stocks scenario.

Inefficiencies of Manual Processes

Managing inventory with paperwork and manual processes can also be challenging for food and grocery retailers as it is time-consuming and unsecured. While this technique can work on small scales, as businesses grow, its feasibility diminishes. Thus, the involvement of manual touchpoints in managing inventory information can lead to costly errors and reduced operational efficiency.

Inaccurate inventory data makes it challenging for grocers to meet customers' expectations, especially with the development of omnichannel services such as online ordering and curbside pickup.

  • Retailers indicate that accurate inventory records can increase sales by 4%-8%.

Lack of Technological Foundation

To be efficient at performing their jobs, the retail workforce needs the capability to communicate effectively amongst peers and access accurate information anytime, anywhere. But the lack of support tools and technology makes it difficult for them to communicate clearly, which results in inefficient task management.

Also, their unfamiliarity or technical knowledge deficiency in leveraging software solutions results in process delays, poor planning, and store operations.

  • 85% of grocery retailers globally need more capabilities, people, technology, and processes to use insights to monetize their data and drive customer experience.


To overcome these challenges, food and grocery retailers need to modernize their inventory management systems. Specialized software can help manage inventory levels better by providing real-time inventory visibility throughout the supply chain and supporting real-time and automated tracking technologies ensuring inventory data is accurate.

Additionally, the software can sense demand changes at the store and adjust to keep inventory levels optimal. This can help grocers keep shopper satisfaction and service levels high and inventory and wastage low.

Note: Part 2 in this series will feature strategies grocers can deploy to overcome inventory management challenges.

So, stay tuned!!