Dollar General's Inventory
How too much cash flow forced Dollar General’s inventory overstocking mistake, leading to a $95 million hit to operating profit, and what to do to avoid the same.
At the height of the pandemic, there was too much cash flow, and the demand for household goods soared. Dollar General, a major American discount retailer, tried to capture every sale. It stocked up fast, filled trucks, trailers, and warehouses with items customers needed.
The move brought early gains, but what followed was costly. What began as smart planning quickly became a logistics and inventory collapse, leading to an $95 million loss.
This story of Dollar General’s inventory overstocking shows what happens when forecasting fails and systems break. For African supply chain leaders, the lessons are urgent. Inventory is cash, and warehousing is control. Miss the signs, and recovery becomes slow and painful.
How Dollar General’s Inventory Overstocking Began: Chasing Demand During a Storm
At the height of COVID-19, Dollar General became a winner as shoppers avoided unnecessary spending. They bought food, cleaning products, and non-perishables from nearby stores. And Dollar General’s rural network became a safe haven. Sales jumped.
In Q1 2020, same-store sales rose by over 21% and net sales grew almost 28%. The company’s response was logical; spending more and restocking inventory made more sense. It increased orders across product lines, especially non-consumables.
Leadership believed the boom would continue. They feared stockouts and wanted to keep shelves full. This is where the mistake began. The company kept buying instead of adjusting to new data as 2021 arrived. It assumed consumer behavior would remain the same. It didn’t.
Demand for seasonal, apparel, and home goods slowed, but orders kept flowing in. Inventory climbed. By 2022, Dollar General’s supply chain had no room left.
Read more: How Massmart’s supply chain survived South Africa’s 2021 unrest.
Dollar General’s Breakdown: From Overstock to Shrinkage and Chaos
The company ended up with about 10,000 trailers of overflow inventory. Its warehouses were overwhelmed, and some distribution centers had rows of trailers parked outside, filled with goods no one could move or track. Internal tools failed to manage the load.
Dollar General rented 14 off-site facilities across the country to store the excess. These ranged from 50,000 to 500,000 square feet. However, despite their best efforts, some goods sat idle for weeks. And in this chaos, products expired, got damaged, or went missing.
The chaos triggered a retail supply chain breakdown. Stores couldn’t keep up, backrooms overflowed, and exits were blocked. As if that wasn’t enough of a problem, in 2024, U.S. regulators fined the company $12 million for safety violations.
Labor officials cited blocked fire exits and hazardous storage conditions.
Theft became rampant. Overstuffed stores with low staff oversight were easy targets. Dollar General recorded nearly $95 million in operating losses from shrinkage. A significant part of that came from shoplifting alone. The rest included spoilage, internal theft, and misplacement.
Self-checkout systems made theft easier, so the company removed them. Transportation costs also rose. Trucks waited to unload, and routes got messy. Freight inefficiencies cost another $40 million.
As losses grew, investor trust dropped. The company’s stock price fell. Its operating margin shrank. Gross margin dropped by 138 basis points in Q4 2023. Earnings fell by 29%. What started as a demand win became a supply chain crisis.
How Did Dollar General Respond to The Inventory Overstocking Mistake?
By late 2023, Dollar General made leadership changes. The CEO stepped down, and Todd Vasos, a former CEO, returned to reset the company. For Todd and the leadership, the priority was cutting SKUs, and that is what they focused on.
The company planned to remove about 1,000 low-performing items. It slashed the inventory of discretionary goods and prioritized core consumables.
Dollar General invested $25 million in better forecasting tools. It upgraded planning systems to match buying with actual sales data, closed the 15 overflow warehouses, and expanded permanent distribution centers in Nebraska, Georgia, and Texas.
Safety and shrinkage control became new focus areas. The company hired safety managers and restructured store layouts to clear blocked exits. Shrink controls included better monitoring, employee training, and loss prevention systems.
Delivery times improved. And the company reported a 470 basis point rise in on-time performance. It also saw a 900-point improvement in full deliveries. But the recovery took months, and some losses were permanent.
Read more: Unilever Nigeria’s local sourcing strategy that beat forex challenges.
Inventory Management Mistakes and the Lessons They Hold
This event, although catastrophic, holds hard truths for supply chains across the globe, especially those in Africa. Businesses and their supply chains must study these missteps to avoid similar damage. Each mistake reveals a fixable flaw.
1. Don’t Let Fear Guide Forecasting
Dollar General feared empty shelves, so it reacted with bulk orders. From one extreme to another. This fear created the very shortage it wanted to avoid — space. Inventory that didn’t sell blocked the goods that could have been sold.
Forecast with discipline. Use real-time sales data and avoid guessing as much as possible. Watch sell-through rates, and cut slow-movers early.
2. Warehousing Chaos Creates Shrink
When goods pile up without space or tracking, they vanish. Items spoil, break, or disappear. Theft grows when systems fail. Monitor warehouse capacity, use FIFO (first-in, first-out), label inventory clearly, conduct cycle counts weekly, and keep exits clear.
3. Self-Checkout Without Supervision is a Risk
Dollar General removed self-checkouts after theft surged. These tools save labor costs but invite abuse if not monitored. In Africa, many retail chains are adopting digital tools. But don’t cut staff too soon. Train supervisors. Use smart cameras. Track items scanned.
4. Overflow Facilities Delay Real Solutions
Dollar General used temporary warehouses to store overstock. This move hid the problem. It didn’t solve it. Don’t build a second warehouse before fixing the first. Clean your processes before adding space. Run space audits. Set reorder points carefully.
5. Staff Burnout Leads to Errors and Loss
Dollar General’s store staff couldn’t manage the stock. Morale dropped. Errors rose. Theft increased. Hire early when stock rises. Cross-train teams. Set targets for the stockroom order. Reward staff for low shrinkage.
Supply Chain Planning in Africa: How to Apply These Lessons
Retailers and distributors across Africa often face the same pressure when demand spikes happen, whether it is during holidays, elections, or crises. Here is how to avoid the same trap.
1. Set Inventory Guardrails
Use min-max levels. Monitor stock by category. Build dashboards showing slow-moving stock. Act fast when thresholds are crossed.
2. Train Supply Chain Teams to Think Ahead
Run training every quarter. Teach how to read sales patterns. Explain expiry tracking. Show how to use WMS or manual logs. A skilled team will spot mistakes early.
3. Start With Visibility
You can’t control what you can’t see. Barcoding systems, spreadsheets, or mobile stock trackers are a must. Even simple apps can track what is on each shelf.
4. Keep Inventory Lean — But Not Empty
Build safety stock, but only for fast-moving goods. Avoid hoarding items with low turnover. Keep replenishment cycles tight.
5. Think Beyond the Boom
Plan for the downturn before the peak ends. Set markdown rules. Know how to liquidate stock. Build supplier terms that allow for flexible returns.
Read more: How Kellogg’s supply chain navigated the 2021 workers’ strike.
Retail Supply Chains Must Stay Smart — Even During Growth
Dollar General’s inventory overstocking mistake happened because the company chased growth, but forgot to prepare for what followed. Growth is good. But in the supply chain, growth without planning becomes waste.
African supply chains face similar tests with political disruptions, disease outbreaks, or sudden consumer shifts. The solution isn’t to buy more. It is to plan better.
Inventory forecasting failures hurt everyone, from the driver to the shelf stocker. But any supply chain can stay sharp with simple tools, real checks, and clear thinking. Plan with care. Store with purpose. Sell with speed. That’s how supply chains win.
Obinabo Tochukwu Tabansi is a supply chain digital writer & ghostwriter helping professionals and business owners across Africa explore various strategies that work and learn from the success and failures of various supply chains across the globe. He also ghostwrites social content for logistics & supply chain businesses
