Inventory shrinkage can create major problems for businesses because it can result in a loss of sales and profits. The 2016 National Security Survey revealed that inventory shrinkage costs businesses a staggering $45.2 billion in 2015 alone. To help combat this expensive problem, here are five proven ways to reduce inventory shrinkage by putting some simple processes in place.
Increase employee accountability
Over 35 per cent of inventory shrinkage is due to employee theft. This makes it important to have training procedures in place, so that staff members know how to handle inventory stock properly. Also, by increasing employee accountability, this can help effectively reduce inventory shrinkage. By designating specific employees to accept, open and distribute new shipments where they belong can better monitor inventory shrinkage. The items should be compared to your order sheet, not the shipper’s packing list, and immediately logged into an inventory management system as received before they are put away.
Implement checks and balances
One way to prevent errors in inventory management and stocktake is to have more than one designated person do a check when accepting inventory stock and the processes to validate invoices. This check and balance method not only can help reduce inventory shrinkage but can additionally help pinpoint and rectify any stages in the inventory management process where mistakes are occurring.
Strategically reduce shoplifting
Tighten security around your business by installing cameras to deter shoplifting, and even train staff about security operations. Staff should be knowledgeable about how to best prevent shoplifting. By establishing guidelines and procedures for how your staff can report suspected theft, it will allow them to feel comfortable and confident in expressing their observations.
Automate with inventory management software
Many discrepancies in inventory stock levels are due to human error. Items should have unique identities such as SKUs and UPCs to ensure your recorded stock levels are correct. By streamlining and organising your inventory stock using a sound inventory management solution, you can reduce manual handling and processing of inventory stock, and cut down on inventory shrinkage due to administrative mistakes.
Track inventory shrinkage
When counting the physical inventory in your business compare your actual numbers of your recorded inventory levels against the expected amount, and calculate your percentage of inventory shrinkage. If the percentage of inventory shrinkage increases, examine why this might be happening and review the methods above to ensure you have proper monitors and controls in place.
Reducing inventory shrinkage involves closely monitoring the daily operations of your business so that you increase your awareness of where things are going wrong. It is only once you have identified the problem that you can take action to remedy it. A great place to start is by streamlining your inventory management processes to reduce inventory shrinkage and mitigate against the costly repercussions of this problem.
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.