Warehouse Woes: When Inventory Becomes a Liability
August 28, 2025
Excess stock ties up working capital, inflates storage fees, and heightens obsolescence risks. To tackle these challenges, companies must view idle inventory as a strategic liability rather than a hidden asset.
Warehouse Woes Inflate Your Carrying Costs
Warehouse space was once undervalued. However, average warehousing costs climbed to $7.50 per square foot by 2024. Consequently, millions in working capital became tied up in idle inventory. Furthermore, occupancy inefficiencies often left up to 40 percent of space unused.
Obsolescence and Write-Offs
Approximately 20 percent of goods became obsolete before sale in 2023. Therefore, write-offs and disposal fees surged across industries. Moreover, tech product lifecycles shortened, accelerating inventory markdowns. As a result, balance sheets were burdened with unsellable stock.
Labor Shortages and Error-Driven Warehouse Woes
Warehouse labor shortages drove pick-and-pack error rates up by 15 percent. Consequently, order accuracy dropped and customer complaints rose. In addition, overtime premiums added another 12 percent to labor costs. Thus, manual processes became both error-prone and expensive.
Automation’s Double-Edged Sword
Many firms invested in automation, spending an average $125 per square foot. However, capital outlays delayed ROI for up to five years. Meanwhile, integration challenges caused project overruns in 38 percent of implementations. Therefore, technology spending required rigorous cost-benefit analysis.
Demand-Driven Replenishment Ends Warehouse Woes
Transitioning to demand-driven replenishment reduced excess stock by 25 percent in pilot programs. Likewise, dynamic slotting improved space utilization to over 85 percent. Consequently, carrying costs and obsolescence rates fell sharply. In the end, warehouse operations were transformed from liabilities into strategic assets.
