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Retailers Chase 'Phantom Inventory' Losses With AI Stock Rebalancing
Stock that exists in a retailer's system but cannot be bought is quietly costing sales, and Kearney estimates that closing the availability gap could lift revenue by as much as 1%. AI-assisted inventory rebalancing is being deployed to shrink that gap, cutting transfer-planning time by as much as 90%.
Products logged as available can still be out of reach for shoppers — sitting in a backroom, misplaced on the floor, damaged, reserved against another order, or otherwise unavailable for fulfillment. In every case, the result is the same: the customer cannot buy the item.
A September report from Kearney describes the discrepancy as "phantom inventory," where stock appears in a retailer's records but is not actually sellable. Merchandise may be lost, damaged or set aside in ways the system does not capture, leaving a persistent divergence between recorded and real availability.
The revenue at stake is measurable. Kearney estimates that a 1- to 2-percentage-point improvement in product availability could translate into a 0.5% to 1% sales increase, with the outcome varying by product category and how readily shoppers can switch to a substitute.
The problem also feeds back into planning. When items cannot be found, sales soften, and forecasting systems may read the decline as weaker demand rather than a stock-handling failure — prompting retailers to order less of the very product that was misfiled or stranded.
Retailers are turning to artificial intelligence to narrow the gap between what systems report and what customers can actually purchase. AI-assisted inventory rebalancing can reduce transfer-planning time by as much as 90%, according to the report.