Why Inventory Tracking Belongs In The Growth Budget

Ben Hussey is the co-CEO of Katana Cloud Inventory.

gettyMost growing product businesses fix one inventory problem but don’t realize they’ve created another. As businesses grow, most discipline goes into knowing what’s in stock. They get better at tracking what they have. Far fewer build the same discipline around knowing where each item physically sits once inventory is no longer confined to a single location.

With one warehouse and a short SKU list, location is almost self-evident. As a business adds storage locations, warehouses and sales channels, location becomes a separate layer of complexity from quantity, and most small to medium-sized businesses (SMBs) never consciously plan for it. A count can be correct at the total level and still be useless to the person standing in the aisle trying to fill an order because tracking how much you have and tracking where it is are two separate problems.

This same issue shows up in how long it takes to act on that count. Research from Bartholdi and Hackman found that most order-picking time goes to movement and searching—traveling alone accounts for about 55%—while only around 10% is spent actually retrieving the item.

These costs build up a few minutes at a time, usually without a single incident large enough to prompt a fix. Then one day, there is. I’ve seen a growing consumer brand almost lose its fulfillment partner right before its busiest selling season. The inventory was there, but there was no reliable way to tell a picker which pallet or bin held it. The business had scaled its supply and sales channels well ahead of scaling the part of its operation that tracks physical location.

The fix for wasted picking labor or the risk of losing a fulfillment partner, as well as other issues such as tied-up capital and unused stock, is a shared, real-time record of exactly where every item sits. Building that record takes two things: a consistent process and current data.

A consistent process means receiving, picking and putaway happen the same way regardless of who does them, recorded somewhere everyone can check. Without that consistency, current data isn’t worth much; a record updated in real time is only as reliable as the process feeding it. If both are in place, you get accuracy and speed.

Accuracy shows in many ways: better reorder and purchasing decisions, easier traceability when something has to be found fast and clearer capital visibility since inventory that can’t be reliably located behaves, financially, like it doesn’t exist.

Speed is just as easy to notice. For example, when items arrive, they’re put away in a set location and made available the same day, so there’s much less time between receiving a shipment and having it ready as inventory. It also shows in counting, where a full count no longer has to be a once-a-year, operation-halting event because the business always knows exactly which section to check next.

None of this is free to build, but it’s worth asking what it’s actually being compared against because the alternative isn’t “no cost.” The alternative is the cost already showing up in searching time, shutdown counts and decisions made on the wrong numbers.

If the payoff is this clear, the obvious question is why accurate tracking isn’t already standard. The honest answer is that for a long time, not fixing it has felt like the rational choice.

Informal stock tracking is free and easy to pick up. The costs are there, but they blend into daily work, so most businesses compare the concrete, immediate cost and disruption of changing systems to a background pain they’ve already learned to live with. Inertia usually wins, and the daily friction of manual tracking becomes part of the routine rather than a problem with a fix.

Two other reasons hold businesses back. Many think formalizing inventory tracking means a big, expensive software rollout, so it’s easier to put it off. “Later” feels safer than “now.” Plus, inventory accuracy isn’t one person’s job; it cuts across operations, purchasing, sales and finance. This makes it a problem that everyone experiences but no one owns.

None of this is irrational. For a business small enough, with one location and a short product list, the effort of formalizing how it tracks stock genuinely may not pay off yet. However, the tipping point sneaks up, and most businesses cross it well before they notice.

Most companies treat warehouse operations as overhead, seeing it as a cost to cut rather than a tool for growth. However, limiting investment in inventory tracking is a backward budgeting decision. Adding locations, SKUs and sales channels puts more strain on how a business tracks stock, and a tracking system that was starved of investment can’t keep up. The cost of not keeping up also grows with the business.

If you can’t trust your stock levels, purchasing becomes reactive, which eats into your margins. The more a business grows, the more orders there are for that to happen to.

When inventory tracking is seen as overhead, it competes with every other expense the business wants to reduce and usually loses. If you treat it as a growth investment, it gets judged like hiring new staff or opening a new sales channel: by the opportunities it creates.

A business with reliable, standardized location tracking can add a new sales channel or warehouse as an extension of a system that already works. Without this, every new channel or location multiplies the existing problem.

Before spending on the things that are supposed to drive growth such as headcount, a new sales channel or a bigger marketing budget, consider whether it’s worth spending first on knowing, at any moment, exactly where your inventory is. This is the thing that determines whether that growth is profitable.

A business that can’t answer that question at its current size won’t answer it any better with twice the order volume.

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