Inventory Leak

Where your stock quietly locks up cash without returning value. Often invisible in dashboards unless you zoom in SKU by SKU.

Definition

An inventory leak is any point where stock ties up cash without adding value to the business. It shows up as slow movers, dead stock, overbuying, poor clearance decisions, inaccurate data, or inventory held in the wrong place or channel.

E.g. You carry 9 months of a seasonal jacket at full cost, but only sell half at half price and clear the rest at a heavy markdown

Why it Matters

Inventory leaks matter because they quietly convert working capital into static stock. You feel it as cash pressure, weaker margins, and constant storage headaches, even when top-line sales look healthy.

Most businesses do not have a single “inventory problem”. They have a pattern of small leaks across categories, channels, and seasons that add up to a large cash drag.

Use this checklist to determine if you have an inventory leak issue

• Do slow movers and dead stock make up a large share of total inventory value?
• Do you increase marketing and discounting to clear space, not to drive strategic growth?
• Does your finance team flag rising carrying costs, but the planning team still pushes for more safety stock?
• Does your merchandising team launch new ranges/seasons while old ranges/seasons still sit in the warehouse?
• Do your teams argue about “gut feel” instead of using clear-cut views by inventory age, SKU, and margin?

If you find yourself saying yes to the questions above, your business do have an inventory leak issue

How to reduce this leak?

You reduce inventory leaks by making them visible and then attacking the biggest pockets first. Typical starting moves:

• Build a simple view by SKU of age, value, and last sale date.
• Sort leaks by cash value, not just units, and tackle the top 20 leaks
• Agree on guardrails for new buys when existing stock is still ageing.