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4 Inventory Management Best Practices—GEODIS Insights

A deep dive into the new reality of inventory management in a changing world, together with four techniques to help companies optimize stock levels, boost profit margins, and meet consumer demand.

The supply chain—including inventory management—has changed forever. A rare combination of circumstances allowed retailers to find temporary success with just-in-time (JIT) inventory systems. As retailers found out during the pandemic, however, this approach only works when supply and demand aren’t disrupted.


Case in point: When the pandemic struck, existing inventory management methods were upended. With global trade disturbances, shuttered manufacturing facilities, skeleton crews, unpredictable consumer demand, and shortages of everything from glass to semiconductors, JIT practices were no longer practical or possible.


To ride out economic instability and unstable demand, retailers had no choice but to shift to just-in-case inventory methods. Instead of receiving items right when they’re needed, they began to keep large inventories on hand to avoid hard-to-predict stockouts. Now, a few years later, as manufacturing finally catches up, the industry faces inflation, economic uncertainty, and labor shortages—and consumer demand is declining as a result.


This is leaving some retailers with an unexpected glut of inventory—a stark contrast to the shortages they experienced just a few years ago.

Key takeaways


  • The supply chain is in constant flux, and it's becoming more difficult to balance supply, demand, capacity, and inventory
  • Stockouts and low inventories are causing consumers to look elsewhere, reducing already tight profit margins
  • Accurate stock levels are central to maximizing availability and revenue
  • Best practices for inventory management include: optimizing labor with technology, getting the C-suite on-side, making good use of barcodes, and incorporating predictive analytics into inventory cycle counting  

Welcome to GEODIS Insights. These longer pieces provide you with deep dives, research, and industry authority for logistics and the supply chain. Use our findings and expertise to help decide what's right for your business. In this article we're sharing research originally published in Supply Chain Dive in 2023, lightly edited and republished here with their kind permission. Visit Supply Chain Dive to download a PDF of this content. 

With the supply chain in flux, what will the new normal look like for retail fulfillment and inventory management today, tomorrow, and beyond? “We’ll never go back to what we had with just-in-time inventory strategies,” said Dennis Unkovic, business advisor, author, and international attorney at Meyer, Unkovic & Scott LLP. “It’s going to be totally different. Consumer demand isn’t the only metric that matters. Inventory decisions should also be made based on the parts a product contains, and where those parts are sourced.”


For instance, consumables, seasonal inventory that can carry over to next year, and products made with technology should each be handled differently. Suppose tech products are made from components sourced from many different regions, for example. In that case, they may require extra attention and planning as opposed to managing inventory for ballpoint pens or laundry detergent.


Accurate stock levels matter now more than ever

According to a report from IHL Group, worldwide inventory distortion costs reached $1.9 trillion in 2022—a 12.7 percent increase from 2020. This is the dollar amount retailers lost as a result of inventory stockouts on goods consumers were ready to buy.


Maintaining full shelves and accurate stock levels are critical to ensuring customer satisfaction. In this same survey, nearly 60 percent of consumers blame empty shelves as the reason they leave a store without buying. Consumers also say their trust in local retailers rests on whether items are in stock.


The same holds true for e-commerce. A Lucidworks study revealed that less than one-third of eCommerce shoppers will stay on the same site or app to find a substitute if the product they want isn’t available.


Consumers have a major impact on your inventory management strategy

“To ensure satisfaction, retailers should work from the customer backwards,” said Melanie Nuce-Hilton, senior vice president, innovation and partnerships at GS1 US. “For example, if the customer wants to get all their shopping done in one spot, how can you meet those expectations? You need to ensure that you have products that perform well and are available. Minimize opportunities for consumers to make different choices. Loyalty is fleeting.”


But it’s also important not to go too far in the opposite direction. Excess inventory can build up when stock isn’t closely tracked. This limits cash flow; reduces profits; increases storage, labor, and insurance costs; and raises tax bills. Over time, as inventory sits, retailers may incur even more losses through expired or outdated stock.

Learn how GEODIS will optimize your inventory management to maximize availability, reduce stockouts, and delight your customers. Talk to us to learn more.

Top inventory management best practices

“Before COVID-19, retail was slow rolling out digital transformation and any type of automation,” Nuce-Hilton said, “but then it all broke loose. Suddenly, consumers couldn’t or wouldn’t come into stores. Some retailers were forced to put their inventory online for the first time. It became critical to know: What do I have, where is it, and is it available to sell? You can’t make or fulfill a promise to a consumer if you don’t know these things.”


Good inventory management can do more than improve stock accuracy and improve customer satisfaction: It can make your workers more efficient, too. With the right technology, processes, and procedures in place, employees will spend less time on manual inventory tasks and more time on projects that build the business.


These four inventory best practices will help you get started:


  • Optimize labor with technology
  • Get the attention of the C-Suite
  • Pay attention to barcodes
  • Try a new cycle-counting process
barcode reader

Optimize inventory labor with technology

It’s no secret that labor challenges are making talent recruitment and retention difficult. Even if you have the products, your shelves may still sit empty because no workers are available to move inventory.


Using technology to reduce manual processes and extend the capabilities of existing workers allows retailers to do more with less labor—and improve overall inventory management. For example, supply chain management enabled by artificial intelligence (AI) has helped businesses improve inventory levels by 35 percent, according to McKinsey. “Retailers are going to end up spending more money on technology because, today, technology is more dependable and available than labor,” said Unkovic.


While technology could involve something as complex as robotics and AI, it could also be as straightforward as what Nuce-Hilton suggested: using simple computer-vision cameras to help employees find and address inventory holes.


Many times, technology that optimizes labor can have an impact in other areas as well. For example, a computer-vision camera system in a retail storefront will not only identify shelves that need to be stocked, but also provide other vital metrics that can improve inventory management, such as traffic patterns and dwell time. When you can expand possible use cases for technology, you can accelerate ROI and use those savings to fund your next digital transformation initiative.


Get the attention of the C-suite

Getting—and keeping—the attention of C-level executives and boards of directors is one of the only ways to make sure supply chain and inventory management strategies are built into operations to improve efficiency, reduce costs, create a competitive advantage, and minimize the potential for disruption and risk.


Executive leaders hold the power to prioritize supply chain and inventory management initiatives, release resources to manage disruptions and bottlenecks, and replace or update legacy systems.


“It’s vital for those in supply chain positions to tell their CEOs, ‘We need to make capital improvements,’” explained Unkovic. “Then explain how these improvements will pay off. Sometimes, the only way to get their attention is to tell them you want to either spend their money or make them money. Ultimately, ROI is going to determine how valuable they are as a CEO.”


Unkovic uses automated guided vehicles (AGVs) as an example. While they may seem like a hefty investment to leadership, he is quick to point out that these machines never take vacations, stop to eat, or leave for another job. On top of that, they have significant safety benefits. “In warehouses with this kind of technology, zero people have been injured. It’s not only about money, but also safety. This is the kind of information the C-suite needs to understand,” he added.


Now is also the time to consider elevating supply chain leaders to the boardroom. A recent EY study reveals that, for 60 percent of C-suite executives, the strategic importance of the supply chain has increased since the pandemic. Adding their expertise and knowledge to top-level discussions can keep initiatives like inventory management at the forefront and make sure leaders consider innovative ways to deliver what consumers want.

Learn how GEODIS will optimize your inventory management to maximize availability, reduce stockouts, and delight your customers. Talk to us to learn more.

Pay attention to barcodes

For decades, one-dimensional (1D) UPC/EAN barcodes have provided product and pricing information at points of sale. When it comes to product traceability and transparency, however, they don’t offer visibility to this type of data.


Two-dimensional (2D) barcodes, such as QR codes, can hold much more information to help improve inventory management and consumer engagement. For example, they can carry data about batches and lots, shipment and expiration dates, and serial numbers to support recall readiness, stock rotation, and even forecasting. They can also connect consumers to online resources, content, and experiences. This can take inventory management to new levels for warehouses, distribution centers, and retailers.


Because 1D barcodes are scanned with traditional laser scanners and 2D barcodes must be read with optical scanners (like a camera), many retailers believe they’ll need to overhaul POS systems to take advantage of this technology. But that isn’t always true.


“If your registers can read QR codes, then they already have 2D-read capabilities,” Nuce-Hilton said. “Using 2D barcodes could be one of the most cost-effective things you can do technology-wise. They’re powerful because they unlock machine readability, and that’s how you scale automation.”


For ordering and distribution in logistics and transportation, serialized shipping container codes—more formally known as GS1-128 barcodes—are also something to consider. Placed on pallets and cartons by shippers or logistics providers, they act as license plates. “We’ve seen people ignore those barcodes and place their own barcodes right over them,” said Nuce-Hilton. “But these barcodes tie the products to electronic notification of what’s being shipped—so warehouses, distribution centers, and retailers can prepare to receive the items and prioritize their receiving process accordingly.”


Try a new cycle-counting process

Aligning the number of products in the warehouse with the expected inventory level recorded in the warehouse  management system (WMS) is key to maintaining accurate inventory levels, identifying and correcting discrepancies, managing product shrinkage, and preventing overstocking or out-of-stock items.


To do this, some retail and 3PL warehouses rely on standard cycle counting methods: counting products on a regular basis (at least once a year) and reconciling that count against the WMS. While this can be a dependable way to maintain inventory accuracy, it also has drawbacks. It requires time-consuming manual effort, creates the potential for human error, and doesn’t allow for the best use of resources. Following this approach, slow-moving products with unchanging inventory levels still need to be counted; even locations that remain empty for extended periods of time need to be cycle counted.


A new model—predictive analytics cycle counting (PACC)—can rectify many of these issues. PACC analyzes historic inventory data and uses algorithms to indicate which products and warehouse locations should be counted next based on their likelihood of being incorrect. Using actual data from warehousing operations, PACC classifies cycle count locations that have a high probability of mismatch based on metrics like real client inventory data, previous cycle counts, location, pick front activity, SKU order volumes, and item retail value.


This allows inventory control teams to focus on potentially problematic inventory locations and SKUs while reducing manual effort and labor hours. It also supports early identification of problems and maintains more accurate inventory. With PACC, warehouses can replenish stock on a reasonable schedule based on available data instead of ordering excess inventory to mitigate the risk of unexpected stockouts.

man scaning picking in warehousing

It's time for retailers to thrive

By prioritizing technology as a way to optimize labor resources, communicating effectively with the C-suite, paying attention to barcode technology, and exploring new strategies for cycle counting, retailers can proactively prepare and respond to inventory’s changing environment without over- or under-planning.


“What we’ve been through over the last few years has shown us that the industry can’t postpone digital transformation anymore,” said Nuce-Hilton. “We can’t even do it begrudgingly. We have to embrace it and find ways to turn inventory management into a competitive advantage instead of just trying to keep up. It’s time for retailers to thrive, not just survive.”

How GEODIS can help

GEODIS is one of the biggest warehousing and logistics providers in the U.S. and around the world. Here's what you can expect when you work with us:


  • Strategically located warehouses and distribution centers throughout the U.S.
  • More than 50 million square feet of storage space
  • Reach 99.5% of the continental U.S. in two days or fewer
  • A choice of multi-customer sites, logistics campuses, manual or automated warehouse solutions, and storage that's close to logistics hubs and your customers
  • Comprehensive value-added services
  • A wide and deep national, regional, and local carrier network
  • Integration with the full range of transportation, warehousing, and freight forwarding GEODIS services
  • Real-time visibility throughout the supply chain


Get in touch today and learn how GEODIS will optimize your warehouse and distribution services.