Beyond Out of Stocks

Ben Saldinger is the Senior Director of Partnerships at Simbe

The Real Cost of Shelf Gaps

Maintaining shelf-availability is a war of attrition for grocery retailers. Operational issues are inevitable, and no one pretends their store is immune to the bumps and bruises of retail. Beyond the daily grind of replenishment, the many faces of phantom inventory rear their ugly heads and wreak havoc.

More and more retailers are turning to shelf intelligence to get ahead of these challenges. By combining AI, robotics, and automation with store inventory, product, and pricing data, they are uncovering issues they wouldn’t have otherwise caught and resolving them faster.

We often see a common set of insights surface during store walks with retailers using Simbe’s data. These real-world examples highlight how forward-thinking operators are addressing beyond just out-of-stocks, including phantom inventory, outdated tags, and inefficient workflows.

Not All Out-of-Stocks Are Created Equal

But let’s start there: replenishment.

If your store has 50,000 products and maintains 99% on-shelf availability, you’re still left with 500 holes. And in my experience working with hundreds of retailers across a variety of sectors, very few stores consistently achieve that mark. That leaves us with a problem:

How do you meaningfully digest hundreds (or more) out-of-stocks?

Who on your team is responsible for working the shelves?

Are all out-of-stocks equal?

For that last question, the answer is—of course—not all out-of-stocks are created equal. At scale, it’s critical to focus on the issues that have the greatest impact on margin, revenue, and shopper loyalty. Let’s start by looking at the different types of shelf gaps.

Prioritizing What’s Actionable

For retailers with perpetual inventory (PI) and computer-generated ordering (CGO), we already have a strong signal to help prioritize which out-of-stocks can be resolved quickly. When a product is out-of-stock but still shows inventory on hand, it’s often a clear opportunity for action. These items typically fall into a few categories:

• Backstock: additional units in backroom
• Topstock: additional units above the shelves
• Multi-location: product is displayed in more than one part of the store 
• Phantom inventory: records indicate a product is in the store, but it isn’t

Take the example below: Tally flagged a paper plate item as out-of-stock on the main shelf for seven consecutive days, despite showing 31 units on hand. Upon investigation, the store team discovered the product was packed out in a secondary promotional display. By identifying the issue and moving the inventory back to the primary location, the team restored availability where shoppers expect to find it, protecting sales and improving the shopping experience.

Catching What Falls Through the Cracks

When products are out on shelf for multiple days but show stock on hand, this is a tell-tale sign of phantom inventory. Especially in slower-moving categories like Health & Beauty, Non-Foods, and Frozen Foods, it’s not uncommon for Tally to detect items that have been missing from the shelf for 30+ days. That is, until Consecutive Out-on-Shelf reporting is turned on and baked into standard operating procedures.

I’ve seen stores go from having 100+ of these conditions daily to zero.

Below is one example: Tally flagged a vitamin SKU that had been out on shelf for 16 consecutive days, despite showing four units on hand. After confirming the last delivery was over three months ago, the team zeroed out the inventory to trigger replenishment. Without this visibility, the gap might have lingered indefinitely. By making Consecutive Out-on-Shelf reporting part of daily routines, many stores have eliminated hundreds of these blind spots—recovering sales and preventing long-term inventory imbalances.

Consecutive Out on Shelf reporting is the safety net that prevents products from falling through the cracks. Amidst the ups and downs of store operations, if an item hits 3+ days out-on-shelf, Tally gently nudges the store team that it’s time to take action.

A Smarter Way to Work Replenishment

What about higher-velocity items?

In the Center Store, you don’t have the luxury of waiting three days to address high-demand products. But you also can’t afford to waste time on false positives. Tally scans across 50,000 products might surface over 1,000 holes on the shelves. But not all holes are immediately actionable. Some have zero inventory. Others are on manufacturer hold. Some are non-orderable. And even when inventory is present, the strategies to address them vary.

Here’s where pack size becomes a powerful filter. Pack size (or case quantity) indicates how many units are grouped together. By only focusing on holes where inventory is greater than or equal to one case, you can prioritize easy wins. These are replenishment tasks that can be handled by newer associates with minimal intervention because Tally knows where every product goes.

When inventory is under a case, more investigation is often required. These items are less likely to be in backstock or topstock. More often, they’ve been packed out incorrectly, placed in a secondary display, or are hiding in plain sight on an adjacent shelf.

At this point it’s necessary to make judgment calls on whether to “zero out” inventory to re-trigger CGO replenishment, or hunt down the misplaced inventory elsewhere in the building. If stock levels aren’t corrected manually, these items can remain stuck indefinitely, never replenished, and never noticed.

Worse, if a well-meaning associate zeroes out an item that’s simply shelved in the wrong place, it can disrupt ordering logic, shrink margins, and create lasting inventory imbalances.

By establishing a “shelf availability compass”, Tally helps ensure holes don’t remain open longer than they should. It also allows teams to get prescriptive. Leaders can use Tally’s out-on-shelf rate, by store or by category, as a diagnostic tool. For example:

or

Looking Beyond Out-of-Stocks

Out-on-shelf is the most important place to start with shelf intelligence, but it’s far from the only use case. Most retailers already have rich data sources that can drive actionable outcomes for store-teams. For example, product status reveals where an item sits in its lifecycle: active, seasonal, non-orderable, discontinued, or deleted.

Your first question might be “Why do we need computer vision to know which products are discontinued?” You don’t. But with hundreds of thousands of eligible SKUs in your catalogue, how do you know which tags are up in your stores today?

Unresolved, these tags take up valuable shelf real estate and create operational confusion. If Tally detects a discontinued item with zero inventory, there’s no reason for the tag to remain. Especially in stores without PI, this is a signal to pull the tag and remerchandise.

There’s also the issue of linked items, when one parent SKU has multiple child UPCs. This structure allows brands to update packaging, sizes, or ingredients without requiring entirely new SKUs.

But in-store, most barcodes reflect UPCs, not parent items. This often means a tag for an old UPC remains up, even though the store is now stocking the updated version. These scenarios aren’t just annoying, they’re operational liabilities.

Below is a common example: Tally flagged a discontinued tag for an energy bar that had downsized from 14.4 oz to 12 oz. While the store had received the updated product, the old tag remained and the active UPC had a lower price. By updating the ESL to reflect the correct size and price, the store avoided potential shopper confusion and ensured pricing compliance. These small mismatches, if left unresolved, can erode trust, trigger pricing discrepancies, and create friction at checkout.

This is a huge unlock for retailers using electronic shelf labels (ESLs). ESLs are only as accurate as the data that drives them. And with complex data relationships between parent SKUs and child UPCs, they’re not bullet-proof.

What Happens When the Shelf Looks Full?

Let’s flip out-of-stocks on their head. What happens when Tally flags a tag with zero inventory, but the shelf doesn’t have a hole? That’s a classic sign of pack-out issues like plugs or spreads, where stores fill holes with similar products to maintain a full-looking shelf.

Many stores are discouraged from showing visible gaps and rely on these visual fixes. But in doing so, they risk perpetuating phantom inventory and worsening future replenishment issues. Tally, combined with inventory data, uncovers chronic problems that often fly under the radar, even in stores that look like they’re in great shape.

In the examples below, Tally identified two separate cases where product was stocked in place of an item that no longer had inventory. In one case, a discontinued coconut flavor had been plugged into a spot for an older UPC that hadn't been received in months. In another, cookies were placed under the wrong tag, showing a different price and creating an "unlocated" item. In both cases, Tally helped correct the signage to reflect the actual product. These types of pack-out issues mislead both systems and shoppers, leading to pricing errors, inaccurate data, and inventory blind spots.

The New Normal for Store Teams

Today, it’s more important than ever to be efficient with labor when it comes to working the shelves. Store intelligence technology has created a paradigm shift and the best operators are embracing it.

Where store teams once began their shifts by manually walking the aisles to spot holes, they now show up with actionable task lists accessible via handheld devices. Daily metrics like Out-on-Shelf Rate % keep the team focused, goal-oriented, and empowered to make a difference.

Replenishment has gone from being a reactive, frustrating process to a proactive, rewarding one. And the ripple effects can be felt throughout the organization from store associates to regional managers to the C-suite.

By harnessing the power of AI, robotics, and automation to provide actionable data-driven insights, retailers can shift from reactive problem-solving to proactive execution. Those who embrace this evolution won’t just win the battle against out-of-stocks, they’ll redefine the role of the shelf as a strategic asset, not a daily headache.

In 2025 and beyond, the retailers who adapt will thrive, turning shelf digitization into a true competitive advantage.