If you work in distribution or retail, chances are you have faced this at least once: the system says you have the goods, but the goods are nowhere to be found. It's not a uniquely Romanian problem, and it doesn't necessarily depend on the size of the business. We have read EU statistics showing that 63% of distribution and retail managers are unable, at least once a week, to locate goods the system shows as in stock. What's more, 24% of managers report this problem on a recurring basis, either in the warehouse or even on store shelves.
Phantom stock can't be eliminated completely, but it can be reduced drastically. The key lies in clear procedures, well-defined workflows and digitalizing warehouse operations.
What is phantom stock and why does it happen?
Phantom stock (or phantom inventory) means products that show up in your inventory management system as available but either don't physically exist or can't be found at the location indicated. The gap between book stock and physical stock creates operational chaos and real financial losses.
The causes are many and often overlap:
- Human error at receiving or shipping: data entered incorrectly, missed scans, duplicate records. These are the most common causes and also the easiest to control with the right procedures and tools.
- Theft and shrinkage: internal or external, it shows up as stock discrepancies that are rarely identified in real time.
- Unrecorded damage and expiry: products taken out of use but never removed from the system stay "in stock" indefinitely.
- Incorrectly processed returns: returned goods end up in the wrong areas or are not put back into the records correctly.
- Flawed stock counts: an inventory count with methodological gaps can confirm, on paper, stock that doesn't exist, keeping the problem alive.
- Master data errors, such as an incorrect number of units per case or per pallet.
How does it affect you in practice?
The effects of phantom stock are not abstract. They translate into measurable costs and losses:
- Missed sales and unhappy customers. The system lets you place an order against stock that doesn't physically exist. The result: late deliveries, cancellations and, over time, lost customer trust. Statistics show that 77% of managers admit they have lost customers because they couldn't physically locate the stock in time.
- Tied-up capital. Phantom stock distorts purchasing forecasts. The company orders products it theoretically already has, tying up cash for no real reason.
- Higher operating costs. Time employees spend searching for goods, redoing orders and handling complaints all adds up to an invisible but substantial cost.
- Tax compliance risks. With reporting obligations such as Romania's SAF-T (the standard audit file companies submit to ANAF, the Romanian tax authority), inaccurate stock records can draw the tax authorities' attention and lead to penalties.
What can you do?
The solution is not a single action but a systematic approach. On the one hand, you need clear procedures and workflows: from receiving to delivery, every operation must be standardized and traceable. On the other hand, you need a digital tool that supports these procedures and removes the reliance on people wherever possible.
A warehouse management system (WMS) such as NEXT WMS, with mobile scanning and real-time inventory features, answers both needs. It brings order to the entire warehouse, gives full transparency over the goods and lets even less experienced operators carry out their tasks correctly.
What does a warehouse that has solved the problem look like?
Companies using NEXT WMS have put in place an operating model in which phantom stock is almost non-existent. Some of our customers receive, store and ship more than 2,500 cases of products every day with 99.98% accuracy.
How does it work in practice?
- Receiving is done by case, with labeled pallets built on the spot and automatic putaway tasks. The system recommends the best storage location based on product ranking (zone A for the best sellers, close to dispatch; zone B in the middle; zone C at the back), proximity to the same item and the top-down principle. Non-conforming products are flagged automatically and recorded separately.
- Replenishment of the picking area is generated automatically based on product turnover and the demand from active orders, so picking locations are always stocked at the right level.
- Deliveries run on a split order picking flow: full pallets are handled by forklift operators, and partial quantities by another category of users. Every pallet is scanned when it is handed over to the dispatch area, and closing an incomplete pick requires a supervisor's approval. Packing and checking are done by a different user, who rescans every product, guaranteeing a second validation.
- Truck loading also requires mandatory scanning. The warehouse manager builds the route by drag-and-drop, and the system won't let the route be closed until every pallet has been scanned: a simple measure that eliminates the risk of leaving goods behind on the dock.
All these operations give full, real-time visibility over stock. Any user, whatever their experience, knows at any moment what stock is in a location, how much has been reserved in active picks and what the status of each order is. That's because they have all this information on their mobile device, right there in the warehouse.
The result? Full stock traceability by batch, product, customer and supplier. You know what was loaded onto each truck, when, and how long it took. Capital flows efficiently, deliveries are correct, and phantom stock is no longer a problem that costs you time and money.
To find out more about how NEXT WMS can be implemented in your warehouse, visit nextisolutions.ro/en/warehouse-management-system or contact the Next iSolutions team; you'll find our phone number and email right below.
