How to Stop Losing Money Through Poor Inventory Management

The hidden cost of "roughly right" stock

Most businesses know their sales to the naira but their stock only to the carton. That gap is where money disappears: products that expire on the shelf, cash tied up in slow movers, and customers who leave because the one item they wanted ran out yesterday.

In our experience working with pharmacies and supermarkets, 3–8% of annual revenue is lost to inventory problems that were visible in the data long before they became losses.

Find the four common leaks

Start by measuring, not guessing. Pull the last 90 days and look for these patterns:

• Dead stock — items with zero sales in 60+ days still occupying shelf and cash.
• Shrinkage — the difference between what the system says and what a physical count finds.
• Expiry write-offs — batches that expired before they sold.
• Stock-outs — days a fast mover had zero stock (every one is lost revenue).

Set reorder levels from real demand

A reorder level should be average daily sales × supplier lead time, plus a safety buffer. Recalculate it monthly for your top 50 products — they usually drive 80% of revenue.

The goal is not more stock. The goal is the right stock, in the right branch, before the customer asks.

Count a little, often

Annual stock-takes find problems months too late. Cycle counting — counting one category or shelf every day — keeps records accurate with a fraction of the disruption. Investigate every variance above a threshold you set, and record the reason.

A simple 30-day plan

Week 1: clean up product data and set reorder levels. Week 2: start daily cycle counts. Week 3: review expiring batches and move them with promotions or transfers. Week 4: compare losses to your baseline. Most businesses see an improvement in the first month.