Everything You Need to Know About Phantom Inventory

Phantom Inventory

"Knowledge is Power." No, we are not mentioning the famous dialogue from Game of Thrones. This is the mantra of Infizo Stock Management. When you have details of each and every asset as well as inventory, then you can definitely manage them efficiently.

But what happens when you have a big organization & you don't know the exact whereabouts of inventory & asset? What if your organization is showing inventories available on paper but when you explore your warehouse, it's not? A big problem, right?

This is the classic case, known as Phantom Inventory!

What is Phantom Inventory?

It refers to a missing product from the warehouse but according to the Inventory Management System, it is available. Long story short, inventory that does not exist is known as Phantom Inventory! As they say, "You can't fix something you don't know about.”

There are several reasons behind it, such as:

Burglary - Shrinkage happens when an item is lost because of employee theft, shoplifting, or another obscure reason. How can you spot it? If you see a sales drop in peak season or high sale season, then this might be the case of burglary.

Data entry mistake - Errors can occur as the product is received and sent to the warehouse but forgets to mention in the system or putting the wrong information in the system.

Worker errors- Store partners may make a mistake when entering information in the system, preparing returns, or picking stock to satisfy an online order.

Customer inventory theft and imperfect inventory count are also a few factors that cause phantom inventory.

Other Infizo Stock Management Features We Provide To Our Clients

Asset Management Software

Asset Tracking Software

CMMS Software

Inventory Management Software

Preventive Maintenance Software

Utility Management Software

Purchase Requisition Software

Helpdesk Ticketing System Purchase Order System

What is the impact of Phantom Inventory? How does it affect your business?

If you don't find the solution for the Phantom inventory, it can hurt your business in a huge way! Now you may ask, how does it affect your business? When you order inventory through the inventory system, then you get the inventory for the same. Then you put them for sale, and some are put in the warehouse stock.

However, from the warehouse, your inventory stock is not there. But your inventory management system shows that it is available, but in reality, it is not. So, as a result, you lose a potential client, business, and it also impacts your business reputation.

It can also impact your account books if you are declaring more assets than you actually have, also misleading.

After that, your inventory management software also does not perform re-ordering because it thinks that it is available in stock. So, again your business is affected by losing business.

Phantom Inventory also causes low sales performance and the wrong assessment of the organization, department store, or retail shop.

How to detect Phantom Inventory?

How can you detect stock conflicts when you're manually running reports on a huge number of information data every day? You have poor item visibility on the grounds!

Because the inventory is huge and data analysis would require a lot of time a Consumer-Packaged Goods (CPG) expert has. Perhaps, it would require a whole dedicated team.

Ghost stock examination, at any scale, requires a more powerful retail skilled & intelligent tool that can quickly work through your data, indicating for you to call attention to trends and anomalies so they can be treated in a timely manner.

Especially, if the analysis solution is combined with Artificial Intelligence. It can detect irregularities & patterns. After analyzing, it can inform you of every particular SKU (Stock Keeping Unit). This will give a clearer picture of future stock requirements.

Moreover, you will be able to tackle phantom inventory-related issues more efficiently. Furthermore, you can save related expenses.

What is the solution?

It is one of the serious & major problems in the retail sector. But it is not given as much attention as this issue requires. Retail companies think the only solution (as of now) to this issue is putting manpower for counting the inventory on a manual basis.

We know putting your manpower on manual counting of items is time-consuming, but it's the base for finding phantom inventory. Then only you will be able to track it.

Other than this, your company can hire mystery shoppers; they might be helpful in shelf-level conditions. You can also compare the on-shelf availability to continuous inventory. The information on Inventory quantity is kept updated on a regular basis.


Phantom Inventory is a big issue, especially if you are in the retail industry. However, we can only try to reduce and avoid phantom inventory. Moreover, it is believed that if you are a huge retail company & have several warehouses, then there are chances that phantom inventory exists in your company.

At last, as far as we are concerned, we believe that phantom inventory tracking can be done with the help of statistical data. When you keep track of historical data, it's a possibility that you can find phantom inventory exists in your company or not. You can follow the above-suggested solution.

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