Most warehouse costs don’t show up on any report. The visibility gap is why.
Every warehouse has a visibility gap. It is the difference between what the system says is on the floor and what is actually there and in most operations, it is wider than anyone realizes. It does not announce itself. It grows through ordinary daily activity: a put-away logged to the wrong location, a short shipment recorded as complete, a pallet moved without a system update. By the time the gap surfaces, the cost is already embedded in overtime, missed service level agreements and emergency expediting.
Operations managers feel it before they can name it. On-time, in-full (OTIF) numbers soften. Pickers keep raising exceptions. The cycle count list never gets shorter. But when asked to point to the root cause on a P&L statement, the answer is usually the same: they can’t. The symptoms have names — inventory shrinkage, phantom stock, location drift: but the underlying cause is consistent: a visibility gap that compounds silently, through activity that looks normal until the costs surface.
Why it’s so hard to catch
The challenge isn’t that warehouse teams aren’t paying attention. It’s that the pace of daily operations makes sustained investigation nearly impossible.
The average warehouse spends 6,500 hours per year on manual cycle counts, the equivalent of three full-time employees counting continuously, year-round. And by the time those counts reach decision-makers, the data is already out of date, because the warehouse never stopped moving while the count was happening.
“What used to take weeks now happens in less than 24 hours across our facility. Our team can focus on resolving issues instead of searching for them.”
Kayla Watson
Sr. Inventory Manager, ODW Logistics (Columbus, OH)
The result is a feedback loop that sustains itself. Supervisors focus on today’s throughput. Exception reports go unresolved. Workarounds become standard practice. And the root causes of inaccuracy are never addressed. Not because teams don’t care, but because every day is too urgent to stop and look.
What it costs, in real terms
The financial damage is larger than most operations quantify and it crosses functional lines in ways that make it hard to attribute to any single cause.
One major US grocery retailer put a number to it: $250,000 per site per year spent on “chaseback,” where pickers search for stock the system says exists but that isn’t where it’s supposed to be. Their assessment: six percent of total labor costs were consumed by inventory the team knew existed but couldn’t locate.
The direct hours are significant. But the hidden cost compounds in the knock-on effects: safety stock inflated to cover uncertainty, congested pick aisles that slow throughput across the whole operation, service level agreement (SLA) penalties and the slow erosion of client confidence that is especially damaging in a 3PL environment where contract retention depends on consistent performance.
A single put-away error (one pallet logged as 100 cases when it holds 50) creates a phantom location that triggers overpicking, marshaling rework and incorrect quantities reaching the end customer. Across a facility running three shifts and hundreds of pallets daily, those individual thirty-minute anomalies add up to more than fifty hours of wasted labor every week. It’s hidden, because none of it shows up on a single line of any report.
The shift that changes the picture
The operations that get ahead of drift share a single trait: they stop relying on periodic counts and start working from continuous, real-time visibility of the whole facility.
At its Joliet, Illinois facility, a 1.1 million square-foot multi-client site handling everything from beer and pet food to furniture and baby goods, Saddle Creek Logistics deployed daily autonomous scanning across all storage configurations. The result was a 10% improvement in inventory accuracy and the elimination of manual cycle counting labor that had previously consumed significant team capacity.
ODW Logistics saw the same pattern at its Columbus, Ohio distribution center. Full-facility audits that had previously taken weeks now complete in under 24 hours. Teams that had spent their shifts searching for discrepancies shifted to resolving them: a fundamentally different use of the same headcount.
GXO, which has deployed Dexory’s platform across seven sites in the US and Europe, recovered 47 hours per week previously lost to empty-location checks and reallocated that capacity to higher-value operational work.
The common thread isn’t the technology; it’s the change in operational stance. When inventory data is continuous and trustworthy, teams stop reacting to symptoms and start managing the conditions that create them. Decisions get faster, escalations get fewer and the gap between what the system says and what’s on the floor stops growing.
That is the cost drift has been hiding. And it tends to be the first thing that changes when teams can finally see it.
Find out what inventory drift is costing your operation.
Dexory’s Cost of an Error white paper breaks down the real cost of visibility gaps at every stage of warehouse operations, from goods receipt through outbound. The Forrester Total Economic Impact (TEI)-backed ROI calculator lets you model the impact on your own numbers in under two minutes.
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