3 Ways To Reduce Inventory Shrinkage

6 strategies to reduce inventory shrinkage

You shouldn’t have to check every shelf to know when to reorder. Inventory software can alert you when stock runs low, generate reorder reports automatically, and even trigger a purchase order. Go over them with staff during training and post them in key areas like stockrooms or loading bays. Also, track them with barcodes, RFID tags, or other inventory tagging systems to know their status. With it, you can see what’s in stock, where, and how it moves.

Best Practice: Count Inventory Regularly and Accurately

• Unlike dead stock, which refers to stock that’s sitting on shelves and unlikely ever to be sold, inventory shrinkage is any loss of inventory that isn’t due to stock being sold.
• It will also speed up the process of inventory count, cash management, better insight holdings, and more.
• In some cases, the customer just goes and buys the item elsewhere, then forgets about it.
• This “surprise” inventory audit should occur completely at random, preventing any advanced planning or number manipulation ahead of the count.

Only authorized personnel should be able to enter these spaces. In addition, visible security measures can act as deterrents for potential thieves. In the event of an incident, alarms can alert staff to the problem, enabling a swift response.

• Now that we’ve established the significance of preventing inventory shrinkage, it’s time to explore some proactive strategies to safeguard your stock.
• We’ll offer practical solutions for inventory management to help you control this problem.
• First, your business should focus on auditing its stock levels regularly.

Maintaining Effective Inventory Management

Our inventory management software helps businesses keep track of their products, including maintenance and checkouts. Reporting errors, data input errors, and problems reconciling the accounts contribute to administrative inventory shrinkage. When inventory shrinkage leads to stockouts or delayed orders, customer satisfaction inevitably suffers. In today’s competitive market, where customers expect quick and reliable service, such issues can lead to lost business and damage to the company’s reputation.

How cycle counts can improve your inventory management process

One of the most impactful things an ecommerce business can do to reduce inventory shrinkage is to clarify company policies. Creating a system of reports and checklists helps to reduce human error, make employees more productive, and hold employees accountable. It also provides management with an invaluable resource for overseeing employees and solving problems as they arise. They will also conduct regular audits of your inventory levels and stockroom procedures. In addition, they may also be able to provide training for your employees on how to properly handle and store inventory. To solve or reduce your company’s inventory shrinkage problems, it’s crucial to understand exactly where the loss is coming from.

Train Employees on Inventory and Theft

Conducting regular risk assessments can help identify unknown causes of inventory shrinkage. Preventing inventory shrinkage requires active involvement from all your employees, from stockroom clerks to your accountants. While this type of shrinkage doesn’t always mean a direct cost loss, it translates to lost profit because projected revenue doesn’t align with your actual inventory levels. Inventory shrinkage refers to losses not caused by sales (i.e. inventory shrinkage is different from inventory loss, but inventory loss covers inventory shrinkage). An automated inventory system helps the company to escape from depending on manual labor. It will also speed up the process of inventory count, cash management, better insight holdings, and more.

Preventing Inventory Shrinkage and Theft

With theft being the biggest cause of inventory shrinkage, there should be sufficient security measures in place to keep the threat at bay. Relying on a single supplier for critical inventory can be risky. If that supplier experiences delays, it directly impacts your ability to fulfill orders. Instead, work with multiple suppliers and have backup options for key products. 3 Ways To Reduce Inventory Shrinkage This way, if one vendor runs into issues, you can quickly source inventory from another, avoiding costly stockouts and delivery delays.

These effective measures include improving your security measures and inventory management strategies. It might result from employees damaging items in the warehouse or customers damaging them in stores. It may even be a result of bad weather (flooding) or other factors you can’t control.

This will help you regularly identify any theft, misplacement, or damage occurring. You should also regularly implement cycle counting, a smaller-scale inventory audit that happens daily, weekly, or monthly as needed. This helps keep your employees vigilant and allows you to regularly stay on top of your overall inventory and any problem areas. Inventory shrinkage is a severe problem for ecommerce businesses, which can significantly impact the bottom line. Limiting access to storage areas can greatly reduce the opportunity for theft.

This will ultimately result in a reduction of errors and losses in the process. Administration errors mean the reason for the appearance of inventory shrinkage in the books is because of administrative fault. This can be because of wrong data entry, errors in cash counting, not recording the sales right. The average inventory shrinkage rate differs depending on the industry of the business.

When a supplier says they’ve sent five pallets of an item but only sent four, that’s fraud. Another example is if there should be a dozen items in a case, but there are only 10. If your receiving department doesn’t notice the difference, they’ll record the wrong number. Administrative errors in inventory management can also cause shrinkage. This situation occurs when your receiving department records the wrong number of items. The problem comes when you pay for the number of items recorded instead of the number received.

Best Practice: Categorize Inventory With ABC Analysis

Not all of your employees need access to your storage or stockroom. The fewer people who handle inventory, the easier it is to track problems. Inventory shrinkage isn’t just a minor loss, but a multi-billion-dollar problem.