Our warehouse manager is consistently hitting their target for low inventory carrying costs, but we are facing constant stockouts that delay production. How do we adjust their scorecard numbers so they stop gaming their performance at the expense of our operations?

Question

Tyler Smith · Accepted Answer

To stop your warehouse manager from gaming the low inventory carrying cost metric, you must pair it with a counter-balancing metric. Tracking a single number in a vacuum always invites manipulation. If your manager is only evaluated on keeping carrying costs low, they will naturally under-order, which causes the stockouts that are currently crippling your operations.

The solution is to introduce a second, tension-creating metric on their scorecard: raw material stockout incidents or production downtime hours caused by missing parts. In the EOS® system, we look for balance. By forcing the warehouse seat to own both inventory carrying cost and stockout downtime, they cannot win on one by destroying the other.

This forces the seat owner to find the optimal equilibrium. They must run the operation with surgical precision rather than taking the easy path of slashing inventory to look good on paper. If they GWC™ the seat, they will understand that their true accountability is operational continuity, not just a low warehouse bill.

Review these two metrics side-by-side during your weekly Level 10 Meeting™. If carrying costs drop but stockouts spike, you have immediate data proving that the system is out of balance. This allows your leadership team to use the IDS® process to find the correct inventory thresholds rather than operating on guesswork or managing through crisis.