A June 2015 IHL research house report found global retailers lost $1.1 trillion to poor warehouse management. Inventory shortages accounted for about $640 billion of the losses while surpluses made up the rest.

The report concluded some businesses could improve their inventory management systems and increase their sales by 7.5 percent. In order to manage their warehouses more effectively, companies and manufacturers must be aware of the common causes of shortage and surplus.

Poor projections
Too much and too little inventory will cost a company money. Lean Manufacturing Tools stated each piece of inventory has a physical cost for storage. Surplus items will lead to extra expenses and it could degrade before it finds a sale.

Computer World explained how companies fearful of paying too much will err on the side of caution and keep their warehouses empty. Businesses need the supplies on hand to meet their customer demands. When creating projections, a warehouse must have the proper information in place.

A popular solution is real-time data. A company wants information demonstrating what is actually happening in the warehouse, not what should be happening. A frequent physical inventory count will provide managers with the latest supply numbers. Software will log this data and create accurate projections about seasonal patterns. The more information that goes into a creating inventory projection, the better it will reflect reality.

Employees theft or mistakes
Having stockpiles of valuable products will be tempting to thieves. A warehouse must be secure and defended from break-ins.

Unfortunately, this will not protect a company from employee theft.  A warehouse needs a system to enforce worker accountability and provide visibility to management. If an employee does remove goods, consistent inventory checks will detect the missing items. Technology used to track employee and product activities will provide management with the tools needed to find the culprits. 

Sometimes problems are caused by employee mistakes. If a company is using a complicated coding system or not using a consistent process at all, employees could accidentally misrepresent need for supplies or amount of current stock. Warehouse managers can adopt technological solutions. Data capture tools, like bar code scanners, make physical inventory counts easier and less prone to error.

Improper labeling
Businesses usually don't store a single type of product. Most companies are manufacturing or selling a large variety of goods that need to be stored. Manufacturers also need to have raw materials for their assembly lines on hand.

Demand Media indicated that improper classification of inventory supplies is another major factor leading to lost profits. The diversity of inventory creates confusion. Without a system to differentiate each product, supply and resource, employees are unable to easily locate items, track missing goods or report needs.

A NAV Barcode Scanning system creates a unique label for every product. A tag on each item in a warehouse provides the worker with all of the information that he or she needs. Companies with large warehouses or diverse inventory need  tools to streamline data collection and prevent confusion.

For more information on warehouse management strategies download the "Keeping the Physical World and the Virtual World in Sync" white paper today.