The hidden cost of shadow inventory
Shadow inventory isn't excess or forgotten product sitting in a warehouse. It is inventory that seemed profitable at the time of ordering but turns out to be a liability when the real costs are revealed, such as tariff exposures, surprise accessorial fees, and logistics penalties.
Although most supply chain companies can accurately track shipments, there is a disconnect between purchase orders, landed costs, and actual inventory profitability in real time. It’s a blind spot, where stock that looks strategic on paper becomes a cash trap when conditions shift.
Examples of shifting conditions could be:
- Tariff volatility: Tariffs, particularly in the US, have changed rapidly over the past few months. Let’s say a retailer accounts for a 25% tariff for aluminum and steel goods and places an order in May. On May 30, President Trump announced an increase from 25% to 50% for these tariffs, which come into effect on June 4. This shipment has already left port, but it now has double the tariff cost associated with it.
- Disruption fees: Supply chain disruptions can happen at any time. An unexpected storm hits, causing congestion in the port. Shipments are held for two weeks longer than anticipated, resulting in unexpected detention and demurrage charges.
- Accessorial fees & surcharges: The global price of fuel spikes, leading to increased transportational costs or line-item changes that are added to the final freight bill, which are not included in the original shipping quotation.
Integrated supply chains bring shadow inventory into the light
The key to solving the shadow inventory problem—and achieving sustainable cost optimization—is having a truly integrated supply chain. Disconnected teams that rely on fragmented data and delayed signals from legacy systems lack a real-time grasp of the financial picture, allowing hidden costs to accumulate after inventory is ordered.
Instead, a unified supply chain platform such as Blue Yonder, creates a single source of truth for spend management, inventory disposition, and risk assessment. By leveraging existing operational data—from purchase orders to invoices—and applying AI-powered analytics, the platform consolidates information to optimize every cost driver in real-time.
Building a cost-optimized supply chain with Blue Yonder
Blue Yonder provides immediate financial clarity by ensuring that planning and execution adjust instantly in the event of a disruption.
- Tariff volatility: The Blue Yonder Tariff Agent instantly tracks tariff changes and automatically updates cost calculations, allowing procurement and finance teams to adapt to sudden import duty hikes before the goods clear customs.
- Logistics fees: Transportation Management solutions instantly reconcile planned and actual spending—including port congestion, demurrage, and unexpected accessorial fees—preventing surprises that could derail quarterly results.
- Omni-channel optimization: Inventory is continuously and automatically routed to the location where it can deliver the maximum margin, effectively freeing up trapped working capital and preventing losses from overstock or missed sales opportunities.
- Predictive analytics: Advanced analytics pinpoint specific cost leakages, recommend corrective actions, and deliver granular ROI metrics on every process—from freight contracting to final fulfillment.
- Inventory cost visibility: Merchandise Operations maintains perpetual inventory with actual landed costs, not planned costs, so you can see exactly which products have become less profitable than expected and make decisions about repricing, reallocating, or clearing them before they drain cash.
Take control of shadow inventory and drive sustainable, cost-focused supply chain excellence with Blue Yonder. Connect with us today to learn more about our solutions and discover how to achieve true cost optimization.
