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Identifying and Preventing Inventory Discrepancy

Jake Rheude

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Accurate stock counts are critical to the efficient operation of your business. An inventory discrepancy introduced during eCommerce fulfillment can throw off your demand forecasts and lead to unexpected out-of-stock items. 

Here are the most common causes of inventory discrepancies in fulfillment warehouses and how excellent 3PL services can help you overcome them.

Inventory discrepancy prevention

What is an inventory discrepancy?

An inventory discrepancy occurs when the inventory recorded in the warehouse management system (WMS) or your inventory management system differs from what’s actually on the shelf. Inventory discrepancies can cut into your profit margins and harm your customer satisfaction. Accurate inventory levels are essential to a well-run eCommerce operation.

Common causes of inventory discrepancies

ECommerce warehouses are large, hectic spaces filled with constant activity. Tracking the number of every SKU as it moves into and out of the warehouse is a challenging task that requires a high level of operational coordination. A mistake at any of multiple points in the supply chain, warehousing, and pick and pack process can lead to an inventory discrepancy.

Supply chain glitches

A common supply chain glitch that can lead to inventory discrepancies is sending the wrong amount for a SKU. For example, suppose your advance shipping notice (ASN) lists 100 of a particular SKU, and only 80 arrive. If the receiving team relies on the ASN and logs 100 units into stock, you have an inventory discrepancy.

Undetected damage is another receiving issue when items get damaged during transport to the fulfillment warehouse and aren’t properly inspected on receiving. You might end up with products in the system as ready to pick and sitting on the shelves that you can’t ship to your customers.

Lost in the warehouse 

Whole pallets of inventory can go missing if a warehouse doesn’t have good inventory control. The misplaced inventory could be sitting on the receiving dock without being logged into stock. Or someone might have moved it to a dark corner of the facility to get it out of the way, and now the warehouse doesn’t know the location of the stock. In either case, you paid for inventory that you can’t access or use because it’s in an incorrect location. That inventory discrepancy could lead to severe consequences when your 3PL can’t fill orders for products that should be in stock. 


Inventory shrinkage is inventory loss after your products are received and shelved. One of the reasons for shrinkage is employee theft. And, while most 3PLs take measures to protect against theft, it can happen.


Damage due to mishandling can also lead to shrinkage. That damage could be caused by stacking boxes so high that the weight damages the products at the bottom of the pile. Or perhaps your 3PL isn’t experienced at handling products similar to yours and stores them incorrectly. For example, Red Stag Fulfillment is expert at heavy and bulky fulfillment, so we have procedures to safely move oversized products. We have heard from clients about items being damaged in other warehouses that didn’t have those procedures.

Poor inventory management

Failures in inventory management can take many forms. For example, physical inventory counts that are sloppy or cycle counts that are too infrequent can lead to inventory discrepancies. So, without accurate records of your inventory levels that can come only from a periodic physical count, you won’t have a clear picture of when to reorder.

Inefficient returns processing

Handling returns is a challenge for many eCommerce businesses. Your order fulfillment operation needs transparent processes for evaluating whether you want to place returned items back in stock. Otherwise, you may end up with items marked as ready to pick that aren’t on the shelves and vice versa.

Outdated inventory management software 

Inventory management software is critical to your business operations. Keeping your inventory management software up to date is essential. And it’s crucial to ensure that you update to an app that has the features you need to flag missing inventory as your business grows.

How your 3PL can prevent inventory discrepancies

The right 3PL is, by definition, one that understands how to manage your products and handle your inventory. A top-notch fulfillment company will identify discrepancies and take steps to minimize human error in the fulfillment process. 

Top 3PLs like Red Stag Fulfillment take specific steps to prevent stock discrepancies.

Detailed receiving processes

At Red Stag Fulfillment, we require an ASN for every inbound shipment. We compare the SKU count on the ASN to the actual quantity received and inspect the shipment for damage. That prevents inventory errors introduced from the supply chain.

Excellent inventory control procedures

Red Stag Fulfillment’s founders were keenly aware of the impact that inventory discrepancies could have on their business. As eCommerce entrepreneurs, they had worked with 3PLs that misplaced inventory and gave poor customer service. The holiday season where they had to find their inventory in the fulfillment warehouse was the experience that inspired them to create Red Stag. 

Red Stag Fulfillment guarantees that we will move inbound shipments from dock to stock within two business days, so you don’t have to worry about misplaced inventory.

Round-the-clock security

Red Stag Fulfillment has 24/7 video monitoring of every area of our warehouses, and we provide round-the-clock security at all our sites. Our video monitoring prevents employee theft and allows us to find the root cause if there is any type of human error. Then we can provide proper employee training, so it doesn’t happen again.

Zero shrinkage policy

Red Stag Fulfillment has a zero shrinkage policy. If any of your products are damaged or lost while in our warehouse, we pay you the replacement cost. Fortunately, that doesn’t happen very often. Our inventory accuracy in 2021 was 99.991%. In our busiest month, December 2021, we got that rate up to 99.997%. 

Proper product handling

Professional warehouse staff should know how to properly handle your merchandise. For example, Red Stag Fulfillment assigns two warehouse associates to move products that weigh more than 50 pounds. That takes more staff time, but it is vital to prevent damage to oversized items. We treat our clients’ goods with the same care we would if they were our own.

Accurate and timely cycle counting

At Red Stag Fulfillment, we can perform a complete physical inventory plus periodic cycle counts that don’t interrupt the flow of orders. We will work with you to develop a schedule that minimizes costs and maximizes inventory accuracy.

Fast, expert returns handling

We handle returns with the same care that we use when handling outbound shipments. At Red Stag Fulfillment, we can evaluate whether a returned item can be resold based on your criteria. We can even take a photo and send it to you to help determine the status of a returned item. We don’t log items back into the inventory management system unless they’re approved for resale and placed back onto the shelf, ready to pick.

Superior warehouse management

Red Stag Fulfillment’s WMS and our extensive receiving procedures ensure that the inventory levels you see in our dashboard are accurate. We have checks and double-checks to reduce human errors. We designed our warehouses around operational efficiency and meeting the highest standards for inventory management. And we constantly strive for new ways to improve operations, saving time and money for our clients.

End inventory discrepancies with Red Stag Fulfillment

Even one inventory discrepancy can make your brand look bad. Lost, damaged, and misplaced inventory is only one reason that the cheapest fulfillment solution on paper may cost you more in practice.

At Red Stag Fulfillment, we’ve seen how reducing inventory discrepancies can help businesses grow and scale. Our fulfillment guarantees have made us one of the top-ranked 3PLs, and our fast and accurate service will make you look good. Find out how Red Stag Fulfillment can help make your job easier.

Find out how excellent fulfillment can improve your inventory management

More about managing inventory to prevent discrepancies:

Red Stag Fulfillment is a 3PL founded by ecommerce operators, and built for scaling businesses.

A team of fulfillment fanatics who care about our clients’ businesses like their own. We see things from our customers’ perspective, and have the guarantees to prove it.

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