Fixing Inventory Distortion – Are We There Yet?

IHL has been tracking retail inventory distortion and the true cost of out-of-stocks and overstocks for 18 years. Inventory distortion worldwide is a critical issue that continues to plague retailers worldwide, causing significant financial losses and operational challenges. When IHL measures inventory distortion, we look at out-of-stocks from the customer perspective (what did they come ready to buy but did not because they couldn’t find it in stock) and the retailer perspective on overstocks (excess discounts or spoilage). We titled the report Fixing Inventory Distortion – Are We There Yet as we look at progress and setbacks.

In 2024, the total cost of inventory distortion is projected at $1.7 trillion, a 3.7% improvement with out-of-stocks accounting for $1.2 trillion and overstocks totaling $554 billion. Without question a huge problem remains, one greater than the combined GDP of Australia.

This research paper reviews the total costs of out-of-stocks and overstocks worldwide and by region. This paper looks at root causes, what is working and not working, as well as the key solutions that are moving the needle. Finally, we discuss how AI/ML and Generative AI are already adding value and then what the future holds for impact on inventory distortion.

This study just hits the top level of data. If you are looking for detailed information, we recommend our Out-of-Stocks and Overstocks Matrix that looks at the root causes, by segment, and region for Out-of-Stocks and Overstocks around the world with historical changes, improvements, and where retailers are falling behind.