Encodify talks challenges of retail operations: supplier collaboration and inventory accuracy

Over the past months we’ve been mapping the challenges of retail operations in a survey that spans retail operations professionals in both the UK as well continental Europe. You can still help us by filling out the survey.

After the survey concludes we’ll publish our findings, but as we’re seeing more and more answers come in, we figured, why wait? Why not share some of the things we’ve already learned?

Well, that’s what we’re doing here.

In this article we’ll dive into one of the recurring challenges we’ve heard about from the UK based survey respondents. And that is supply chain transparency, supplier collaboration, and inventory accuracy.

Now, to the uninitiated, inventory management may sound like a minor challenge, but the truth is that issues with inventory management can affect everything from revenue to customer relations and cost of operations.

As you can see, it’s not without reason we’re seeing this challenge mentioned in so many of the survey responses. It affects everything from operations to sales and even strategy and planning.

So we decided to help out all of the people who find inventory management a challenge.

Five causes of inventory inaccuracy and how to prevent them

If you dive into the specific cases, there are a wide number of things that cause retail inaccuracies, but if you look at it from a broader perspective, there are three primary things that cause inaccuracies in inventory management:

1)    Manual processes as a result of outdated and/or siloed systems

2)    Data issues as a result of complexities in SKU and product category management

3)    Insufficient forecasting ability as a result of lacking product reporting metrics

4)    Inefficient supplier management and lead time availability

5)    Lack of scalability as a result of static retail operations systems.

1. Manual processes as a result of outdated systems and lacking integrations

Surprisingly, even in 2025, the most common causes of inventory management challenges are tied to manual data entry. Couple that with a lack of synchronization between systems (often a result of outdated systems) and you’ve got a perfect storm for creating inventory inaccuracy.

Human errors are a source of mistakes in all data entry. From mislabeling items to incorrect counting. But when you operate with older systems that often lack integration capabilities, you also rely on manual processes to carry information between systems, which only increases the risk of human errors.

In addition to an increase in errors, a lack of system integration and relying on manual processes, also makes it difficult to track inventory in real-time, even when no manual errors are made.

If your inventory management systems, sales platforms, and ERP systems aren’t properly integrated, it can result in delayed synchronization and data silos which compromises the real-time stock accuracy, increases the risk of overselling, and leads to poor decision making when it comes to demand fulfillment.

To combat this problem you can use automated workflows to ensure that data flows freely, and constantly, between all critical systems, including e-commerce, POS, warehouse management, and ERP.

2. Data issues as a result of complexities in SKU and product category management

A lack of data integration between systems, as we’ve talked about in the previous section, provides a nice segway to the broader category of problems that causes inventory inaccuracy, and that is of course data issues, often related to complexities in SKU and product category management.

For small retailers with limited product catalogues this may not be a big issue, but managing a large and diverse SKU portfolio is one of the most common challenges in inventory management, especially in retail and manufacturing sectors.

Bad SKU organisation and an inconsistent product categorization will complicate everything from inventory tracking to demand forecasting and replenishment planning. Furthermore, inconsistent SKU data also decreases the accuracy of analytics and makes it difficult to identify slow-moving or obsolete items.

The solution here may seem obvious. You need an inventory management software that is capable of handling complex SKU hierarchies and automate grouping to enhance visibility, simplify reporting, and optimize your replenishment strategies.

3. Insufficient forecasting ability as a result of lacking product reporting metrics

Lacking the ability to properly forecast is another challenge that will spill over into every area of business. It will lead to an inefficient restocking process and poor demand forecasting potentially resulting in either overstocking or stockouts.

And if you don’t have a granular insight into things like carrying costs (cost of warehousing, insurance, depreciation, and obsolescence), you lose the ability to optimise inventory levels effectively, and you won’t really have a way to justify investments in inventory optimisation technology.

A way to remedy this issue would be to make sure that your inventory management system incorporates collaborative forecasting to align sales, marketing, and supply chain teams to ensure all variables are considered in demand planning.

At the same time advanced cost-tracking modules that let you allocate carrying costs at SKU and category levels will improve your ability to perform cost-benefit analyses and prioritise inventory reduction efforts and make better stocking decisions on high cost items.

4. Inefficient supplier management and lead time availability

Managing products on their own is a challenge by itself, but in many cases supplier management is just as important, when it comes to accuracy in your inventory management.

While accuracy will let you know what needs to be improved, unreliable communications with suppliers and unpredictable lead times will disrupt your inventory replenishment cycles, which will cause delays and stockouts, leading to lost revenue.

An initial solution to this is to carry excess buffer stock from the suppliers in question, and while it does help to combat the lost revenue, it instead increases holding costs creating a similar loss.

The only real solution is to create a stronger supplier relationship with clear communication and performance metrics. You can do this by establishing a better flow of communications either through the use of good supplier collaboration software or by dedicating more personnel to maintaining the communications.

Both solutions will enhance supply chain analytics to monitor lead times, adjust reorder points based on supplier reliability data, and collaborate on campaigns and pressure seasons.

5. Lack of scalability as a result of static retail operations systems

One of the most overlooked challenges when it comes to retail operations in general is the need for scalability in your systems, and this is no different when we talk about inventory accuracy and supply chain transparency.

Any system you use to manage inventory, product information or supplier collaboration needs to be able to support everything from rapid business growth to fluctuating sales volumes.

Your business today isn’t the same as your business in a year, and the market and customer needs today isn’t the same a year from now as they are today. Making sure that your systems can handle scaling (in both directions) will avoid system slowdowns, data bottlenecks, and operational inefficiencies as transaction volumes increase (or decrease).

Is your experience different?

The subject we’ve discussed in this article comes from answers submitted to our global survey on the state of retail operations by retailers in the UK. If your experience is different, or if you think there’s more nuance to be added to this specific challenge, we’re still accepting submissions for the survey here and we’d love to hear from you.

When you submit the survey, you can also sign up for an in-depth interview which dives even further into the questions of retail operations and collaboration. After the survey ends all results will be anonymised and published in a report on the state of retail operations.