Why Storage and Inventory Are Where Profit Lives (or Dies)

Inventory isn’t stock.

It’s cash wearing a cardboard costume.

Every pallet in your warehouse is money you’ve already spent, promises you’ve already made, and expectations customers will absolutely hold you to - whether you’re ready or not.

When storage and inventory are tight, boring, and brutally well-run, profit shows up quietly.

When they’re loose, messy, and “we’ll fix it later”, margins leak, service collapses, and no one can quite explain why.

This isn’t a warehouse problem.

It’s a business one.

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Inventory Management Isn’t About Stock. It’s About Regret Prevention.

Good inventory management is boring on purpose.

No drama. No heroics. No “how did this happen?”

It’s simply having the right products, in the right quantities, in the right place, at the right time - without someone needing to pull a rabbit out of a hat every Friday.

When it works, it quietly:

• Kills dead stock before it kills cash flow

• Keeps best sellers in stock instead of turning them into apology emails

• Stops forecasting from being a vibes-based exercise

• Protects fill rates, conversion, and customer trust

McKinsey estimates that companies who actually manage inventory properly can free up 20–30% of working capital tied up in stock. That’s not “efficiency”. That’s growth fuel you didn’t realise you’d buried in racking.

The Inventory Chaos Trap (And Why Growing Businesses Fall Into It)

Here’s the pattern we see constantly:

• Sales grow faster than systems

• SKUs multiply

• Warehouses get fuller but accuracy drops

• Spreadsheets multiply like rabbits

• And suddenly no one trusts the numbers

At that point, inventory stops being a control mechanism and starts being a crime scene.

You don’t fix that with another meeting. You fix it by rebuilding the fundamentals.

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The Non-Negotiables of Grown-Up Inventory Management

If you do nothing else this quarter, stop trusting the spreadsheet, run a basic ABC, and walk your pick path with a stopwatch.

1. If You’re Still Running Inventory in Spreadsheets, You’re Flying Blind

Spreadsheets are great for analysis.They are catastrophic as a system of record.

A real inventory system must:

• Sync with sales channels and accounting

• Capture stock moves as they happen, not when someone remembers

• Trigger reorders automatically based on demand and lead time

And here’s the part everyone skips:

You must actually use it.

Cycle count. Train people. Fix root causes.

If your system says 100 and the shelf says 42, don’t blame the software - blame the process.

Gartner puts the cost of poor inventory accuracy at up to 10% of revenue.

That’s not a rounding error. That’s a slow bleed.

2. ABC Classification Is Useless Unless You Act Differently

ABC analysis isn’t a report.It’s permission to care unevenly.

• A-items get attention, proximity, frequent counts

• C-items get bulk locations and minimal love

Treating a $2 fitting and a $2,000 component the same is how warehouses stay busy and unprofitable at the same time.

If your ABC analysis doesn’t change layout, counting frequency, or replenishment rules, it’s just colourful wallpaper.

3. Just-In-Time Is Not a Religion

JIT is brilliant… right up until your supplier misses one shipment and your best-selling SKU disappears for three weeks.

The grown-up version:

• Lean stock where supply is reliable

• Buffers where failure is expensive or reputationally fatal

You’re not trying to eliminate stock.

You’re trying to eliminate pointless stock.

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Warehouse Layout: Where Labour Costs Go to Die (or Behave)

Warehouse layout is one of the most under-priced profit levers in logistics.

A bad layout:

• Burns labour through walking

• Increases pick errors

• Makes scaling painful

A good layout:

• Ships more orders with the same people

• Reduces fatigue and mistakes

• Makes peaks survivable

Deloitte shows layout and process optimisation alone can lift warehouse productivity by 15–25% without adding headcount. Same building. Same people. Just fewer stupid steps.

Fast movers near packing. Heavy items in the golden zone.

Pick paths that flow instead of zigzag.

This isn’t aesthetics. It’s economics.

Storage Optimisation: Stop Paying for Air

If your racking looks like a Tetris game played by someone who hates money, you’ve got a problem.

Good storage design:

• Uses vertical space intelligently

• Matches rack type to SKU behaviour

• Makes FIFO automatic instead of optional

Dead space doesn’t show up on invoices.It shows up later in overflow costs, congestion, and “temporary” pallets that never move.

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Tech Should Remove Thinking, Not Add Screens

You don’t need robots everywhere.You need fewer moments where humans have to remember things.

Barcode scanning kills fat-finger errors.A proper WMS creates one version of the truth.Mobile tools close the gap between “it moved” and “the system knows it moved”.

Manhattan Associates reports WMS-driven operations routinely hit 99.9%+ pick accuracy.

That’s not impressive tech. That’s fewer refunds and reships quietly staying off your P&L.

Automate only once the basics behave.

Otherwise you’re just accelerating chaos.

The Human Layer: Where Everything Falls Apart or Finally Works

The best system in the world fails if:

• People don’t trust it

• Training is optional

• No one sees the numbers

What works:

• Clear KPIs (accuracy, turnover, variance)

• Regular cycle counts

• Feedback from the floor

• Fixing causes, not just adjusting stock

The goal isn’t perfection.

It’s fewer surprises and more predictability every quarter.

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A simple way to think about profit in storage and inventory

Strip away the warehouse jargon and complicated dashboards and profit in storage and inventory comes down to a handful of levers you can actually pull.

A useful way to frame it is this:

Profit in storage and inventory = space cost + labour + carrying cost + shrink + service risk

You are already paying for all five.The only real question is whether they’re quietly bleeding margin or quietly compounding profit.

Space cost

This is your rent, rates, racking, and cubic metres tied up by stock that isn’t moving. The lever here is layout and policy. Right-size the footprint. Match storage type to SKU behaviour. Clear dead stock instead of paying to babysit it month after month.

If product hasn’t earned its shelf space lately, it’s probably stealing it.

Labour

Every extra touch, re-pick, reshuffle, and emergency stocktake is payroll burned on non-value work. The lever is process design. Clean pick paths. Clear slotting logic. Less improvisation.

Your team shouldn’t need heroics to compensate for bad inventory decisions upstream.

Carrying cost

Inventory is not “free until it sells”. It is capital, interest, insurance, risk, and obsolescence sitting quietly on a shelf. The lever is better ordering rules and smarter safety stock. Stop over-covering low-value SKUs while starving the products that actually turn.

Most warehouses are over-insured in the wrong places and under-insured where it matters.

Shrink

Damage, loss, expiry, and write-offs hit your P&L twice. Once when you buy the stock. Again when you throw it out or mark it down. The lever is basic control. Packaging standards. Handling discipline. Cycle counts frequent enough that problems show up early, not at year-end when they hurt more.

Shrink rarely arrives as a surprise. It arrives as neglect, slowly.

Service risk

Too much stock in the wrong place still creates stockouts, late orders, and angry customers. The lever is demand alignment. The right quantity, in the right node, for how orders actually flow today, not how a spreadsheet predicted last year.

Availability is about placement, not volume.

Once you see storage and inventory through these five buckets, “warehouse costs” stop being a fixed bill and start looking like a profit system you can tune.

What this looks like in the real world

Take a mid-market retailer running one main warehouse and a small overflow site. On paper, they were “well stocked”.

In reality, they had slow movers stacked to the ceiling, seasonal product lingering well past its use-by date, and best sellers permanently parked at the back of the shed.

The result was predictable.More space. More handling. More write-offs.

And still missed sales because the right stock wasn’t where it needed to be when it mattered.

When we mapped their inventory into the five buckets above, things shifted quickly:

• Dead and obsolete stock was cleared instead of quietly burning space cost.

• Fast-moving SKUs were re-slotted to cut walking and double handling, reducing labour per order.

• Ordering rules were reset so slow movers weren’t being over-bought “just in case”.

Nothing about customer demand changed.What changed was how hard each pallet position and each labour hour worked.

Within months, storage costs were down, picks were faster, and last-minute expedites to rescue stockouts all but disappeared.

That’s profit moving out of the racks and back into the business.

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If your storage and inventory touch NZ, Australia or the US

If you’re staring at warehouse invoices or stock reports thinking, “This feels expensive, but I can’t quite see why”, that’s usually the signal.

If your network touches New Zealand, Australia, or the US, we can walk your storage and inventory through this five-lever model, pressure-test where margin is leaking, and map a 90-day plan to fix it.

Use this article as a checklist.If you recognise yourself in the example above - too much stock, the wrong stock, or a warehouse that always feels like a firefight - that’s your cue to book an inventory and storage review.

Not just renegotiate the next transport rate.

Because your supply chain won’t fix itself.

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FAQs: Storage & Inventory Profitability

What is inventory management in logistics?

Inventory management in logistics is the process of controlling how much stock you hold, where it’s stored, and how it moves through your warehouse and supply chain. Done properly, it ensures the right products are available when customers order, without tying up excessive cash or creating costly stockouts and write-offs.

How does inventory management impact profitability?

Inventory directly affects profitability by controlling carrying costs, write-offs, labour efficiency, and order fulfilment accuracy. Poor inventory management traps cash in dead stock, increases picking errors, and drives missed sales. Well-managed inventory can free up 20–30% of working capital while improving service levels and margins.

Why is warehouse layout important for inventory efficiency?

Warehouse layout determines how much time and labour it takes to fulfil orders. Poor layouts increase walking time, congestion, and picking errors. Optimised layouts that position fast-moving items near packing zones and design logical pick paths can improve warehouse productivity by 15–25% without adding staff or space.

What is the difference between storage optimisation and inventory management?

Inventory management controls what stock you hold and when you replenish it. Storage optimisation focuses on how that stock is physically stored. Together, they reduce wasted space, improve picking speed, lower damage rates, and ensure every cubic metre of the warehouse earns its keep instead of storing air.

What technology improves inventory accuracy the most?

The biggest gains in inventory accuracy come from barcode scanning, real-time inventory systems, and a properly implemented Warehouse Management System (WMS). These tools remove manual data entry, track stock movements by location and status, and typically help operations achieve pick accuracy rates above 99.9%.

How often should inventory be reviewed or counted?

High-value or fast-moving inventory should be cycle counted weekly, mid-range items monthly, and slow-moving items quarterly. Regular cycle counting prevents small errors from becoming expensive problems and keeps inventory data reliable without shutting down operations for annual stocktakes.

Why do growing businesses struggle with inventory control?

Growing businesses often outgrow spreadsheets and informal processes before they realise it. As SKUs, sales channels, and warehouse activity increase, small inaccuracies compound into stockouts, overbuying, and lost trust in the data. Inventory issues usually aren’t caused by growth itself, but by systems and processes not scaling with it.

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From Storage Headache to Silent Profit Engine

Inventory and storage don’t need to be exciting.

They need to be boringly reliable.

Do that and you get:

• Less cash trapped in “maybe one day” stock

• Faster fulfilment without panic

• Customers who trust you’ll deliver what you sold

Ignore it and you’ll keep wondering why revenue grows but profit never quite keeps up.

Storage and inventory aren’t a cost of doing business.

They’re where profit either compounds quietly…or bleeds slowly while no one’s watching.

And that’s exactly the kind of chaos Transport Works exists to tame.

Always delivering. Even from the back of the warehouse.

Let's Chat About Your Logistics & Supply Chain

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Insights from Danyul Gleeson, Founder & Logistics Chaos Tamer-in-Chief at Transport Works

Danyul has been in the trenches - warehouses where pick paths were sketched on pizza boxes and boardrooms where the “supply chain strategy” was a shrug. He built Transport Works to flip that script: a 4PL that turns broken systems into competitive advantage. His mission? Always Delivering - without the chaos.

Sources & References

Inventory Management & Working Capital

• McKinsey & Company – Working Capital Management: Inventory Optimisation and Cash Flow(Findings on freeing 20–30% of working capital through improved inventory practices)

• Harvard Business Review – Why Inventory Is the Hidden Lever of Profitability(On inventory discipline, demand forecasting, and margin protection)

Inventory Accuracy & Revenue Impact

• Gartner – The Business Cost of Poor Inventory Data(Estimates inventory inaccuracy can cost businesses up to 10% of annual revenue)

• Retail Systems Research (RSR) – Inventory Distortion and Retail Performance(Analysis of stockouts, overstocks, and their impact on conversion and loyalty)

Warehouse Productivity & Layout Optimisation

• Deloitte Insights – Warehouse Optimisation and Fulfilment Efficiency(Evidence showing 15–25% productivity gains through layout and process optimisation)

• MHI & Deloitte – Annual Industry Report: Supply Chain and Logistics(Labour efficiency, warehouse design, and operational best practices)

Warehouse Management Systems & Accuracy

• Manhattan Associates – WMS Performance Benchmarks(Reports showing 99.9%+ pick accuracy in mature WMS environments)

• IBM Institute for Business Value – The Digital Warehouse(Impact of WMS, scanning, and real-time visibility on fulfilment performance)

Barcode, RFID & Automation

• GS1 – Barcode and RFID Standards in Supply Chain Accuracy(Global standards and error reduction through scanning technologies)

• Deloitte – Automation in Warehousing and Distribution(When automation delivers ROI and when it accelerates chaos)

Customer Experience & Fulfilment Performance

• PwC – Experience Is Everything: Here’s How to Get It Right(Delivery accuracy and fulfilment as key drivers of customer loyalty)

• Narvar – Post-Purchase Experience Report(Impact of fulfilment accuracy and returns on repeat purchasing behaviour)

Inventory Turnover & Best Practice

• APICS / ASCM – Inventory Management Best Practices(ABC analysis, cycle counting, replenishment logic, and inventory KPIs)

• Council of Supply Chain Management Professionals (CSCMP) – State of Logistics Report(Industry benchmarks for inventory, warehousing, and logistics performance)

Sustainability & Operational Efficiency

• World Economic Forum – Reducing Emissions Through Supply Chain Efficiency(Links between logistics optimisation, emissions reduction, and cost savings)

• McKinsey & Company – Sustainability in Supply Chains(Efficiency gains as a by-product of better logistics design)

Industry Benchmarks

• Statista – Inventory Carrying Cost Benchmarks

• Supply Chain Quarterly – Warehouse Operations & Inventory Control