A growing and largely invisible threat is taking root in supply chains: shadow inventory. This refers to stock that appears in systems as “in transit” but is, in reality, delayed, misplaced, or sitting idle in overflow yards, border crossings, or vendor bottlenecks. 

“Near-shoring creates shorter shipping distances but more complex handoffs,” Stephen Dyke, Principal Solutions Consultant Manager at FourKites, explained. “When cargo moves through congested border crossings like Laredo—which handles US$27.6 billion in goods annually—a single delay can make inventory disappear from systems.”

This isn’t just a visibility problem—it’s a financial one. Many teams show delayed goods as “in transit,” even while incurring detention fees. That discrepancy becomes critical during peak seasons.

“For seasonal merchandise, timing is everything,” Dyke notes. “Halloween costumes arriving 1st November aren’t worth much, and holding costs eat directly into margins already squeezed.”

The ripple effects of delays and data gaps can turn strategic stocking into financial deadweight. With geopolitical tensions and post-pandemic recovery driving erratic freight patterns, some companies overcorrect. “Commerce Department data shows businesses add inventory at a US$160 billion annualised rate in Q1,” Dyke says. “Meanwhile, 12 percent of small businesses report overstocked conditions in June—nearly double May’s figure, according to NFIB surveys.”

The result: overstocked shelves, forced markdowns, and painful year-end write-offs. “What looks like prudent planning in July becomes a margin killer in December,” Dyke warns.

Three red flags

Traditional signs—missed ETAs, stagnant tracking data—remain relevant, but subtler warnings often surface first. 

Early peak-season surcharges – When carriers start charging extra per container months earlier, it signals tight capacity.

Sudden capacity contraction – Air cargo from Asia to North America fell 10.7 percent year-over-year in May, pushing more freight into congested ocean and ground routes.

Concentrated blank sailings – When 66 percent of cancelled Trans-Pacific departures cluster in a five-week window, delays ripple throughout the network.

These signs compound. “If you see two together, reconcile your purchase orders against actual freight locations immediately,” Dyke advises. Gaps often appear with smaller suppliers who can’t connect their systems to yours. Planning software shows expected ship dates, but someone still needs to confirm actual movement.

AI isn’t just for data

Technology helps, but only if it does more than collect information. Modern supply chains need systems that take action.

“Smart exception management identifies which delays threaten revenue and automatically resolves routine issues,” Dyke explains. “A load stuck in traffic gets rerouted; a driver breakdown triggers a replacement. Only true problems—like a customs hold on critical inventory—get escalated to human teams.”

This automation keeps teams focused on high-stakes decisions instead of drowning in routine notifications. AI also enables dynamic adjustments in real time. Traditional warehouse systems often can’t see beyond their docks. They may show catalytic converters arriving Thursday for Friday’s production run, but miss that the truck is delayed until Saturday—potentially shutting down an assembly line. Integrating real-time tracking with warehouse platforms prevents costly, last-minute expedited decisions.

AI also bridges gaps with smaller vendors, who often lack integration tools. “Since 68 percent of companies still collaborate through email, forcing everyone onto sophisticated systems isn’t realistic,” Dyke says. AI can read emails, PDFs, or spreadsheets from vendors and convert them into structured, trackable shipment data. “This eliminates the traditional barrier where smaller suppliers couldn’t integrate via API or EDI.”

Adaptability is the asset

As 2025 nears, Dyke sees companies taking two paths—trimming inventory buffers or doubling down to hedge against trade risks. “According to S&P Global, many chains carry elevated debt from advance purchasing, increasing obsolescence risk,” he notes.

Rather than one-size-fits-all, he recommends segmentation: keep buffers for long-lead or single-source items, run leaner with faster-moving goods, and build flexibility into supplier contracts to adjust volumes without defaulting to premium freight.

Start small. “The biggest mistake is thinking you need to overhaul everything at once. You don’t. Modern platforms can plug into existing systems with minimal disruption. Start with visibility, add automation to clear noise, and let your people solve the problems that matter,” Dyke says.

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