3 Ways to Combat Inventory Shrinkage

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Inventory shrinkage creates problems for businesses as it leads to a loss of sales and profits. A 2016 National Security Survey found that inventory shrinkage costs businesses $45.2 billion in 2015.

In this article, we explain what inventory shrinkage may mean for your business and provide some useful tips for avoiding it.

What causes inventory shrinkage?

There are multiple things that can cause inventory shrinkage, including everything from inventory theft to damage, miscounting, incorrect units of measure, evaporation, and other issues. It is also possible that shrinkage can be caused by supplier fraud, where a supplier bills a company for a certain quantity of goods shipped but does not actually ship all of the goods.

How can you avoid it?

Tip 1: Enhance Security Measures

Tighten security around your shop or business by:

  • Installing cameras in both employee and customer areas
  • Restrict access to only allow higher-level employees access to excess stock
  • Lock any backdoors and hire a security service to guard your store if customer theft is high in your area

Tip 2: Employee management

Designate only specific employees to accept, open and distribute new shipments where they belong. The items inside the box should be compared to your order sheet, not the shipper’s packing list, and immediately logged into an inventory system or book as received before they are put away. Have the associates sign off on the packing list once the items are verified as correct.

Tip 3: Verify all stock

Verify any purchase orders, invoices, shipping receipts and signed packing lists are correct before they are filed. Organise this paperwork in binders or a file cabinet or scan in copies of the forms to a computer system and save a backup copy. If your business is cutting down on paperwork, consider using an inventory management software to have a digital trail of your transactions.

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Melanie - Unleashed Software

Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.

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