Overstocking & Understocking

Definition of Overstocking & Understocking

Inventory is the backbone of any field service or maintenance operation. But when inventory levels are mismanaged – either by overstocking or understocking – the consequences ripple across your entire operation. Understanding the fine line between these two extremes is key to running lean, efficient and profitable service workflows.

What Is Overstocking?

Overstocking occurs when businesses purchase and store more inventory than is needed. While it might seem like a good way to “play it safe”, overstocking ties up capital, takes up valuable space and increases the risk of asset obsolescence.

Common causes of overstocking:

• Inaccurate demand forecasting
• Lack of real-time inventory visibility
• Over-ordering due to fear of stockouts (*a stockout occurs when inventory runs out, leaving no items available to fulfill customer or operational demands.)
• Poor communication between procurement and operations
  
  

Consequences:

• Increased carrying costs (storage, insurance, depreciation)
• Cash flow constraints
• Parts becoming obsolete before use
• Wasted warehouse space

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What Is Understocking?

Understocking is the opposite problem – not having enough inventory on hand to meet demand. This often leads to delays in field operations, missed SLAs and frustrated customers.

Common causes of understocking:

• Poor inventory planning
• Delays in restocking due to manual tracking
• Lack of predictive maintenance data
• Miscommunication between field teams and inventory managers
  
  

Consequences:

• Unplanned downtime due to unavailable parts
• Delays in service delivery
• Emergency procurement costs
• Customer dissatisfaction and churn

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Overstocking vs Understocking

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Real-World Example: When Inventory Imbalance Hits Hard

A facility maintenance company experienced an HVAC unit failure during a peak summer month. The required compressor was out of stock due to an understocking issue. The team scrambled to procure it, facing high express shipping fees and a 3-day delay. The client (a major hotel chain) wasn’t happy.

On the flip side, the same company had 30 units of a discontinued fan model sitting in the warehouse for over a year. This is a classic case of overstocking, costing thousands in unused capital and wasted storage.

Best Practices to Avoid Overstocking & Understocking

• Use data analytics to forecast demand based on historical usage and seasonal trends
• Set automated reorder points with dynamic inventory thresholds
• Regularly audit inventory to avoid stock discrepancies
• Integrate inventory data with maintenance schedules and work orders
• Collaborate across departments to improve visibility and communication

Final Thoughts

Balancing inventory is about more than numbers – it’s about operational resilience. Overstocking eats into your profits; understocking damages your reputation. Both disrupt the flow of work, create stress for technicians, and hinder customer satisfaction.

By leveraging intelligent inventory tools like FieldEx, companies can strike the right balance, ensuring the right part is always available at the right time – without overburdening storage or budget. Learn more by booking a free demo today.