How can you use shrinkage measurement to improve inventory accuracy?

1 What is shrinkage measurement?

Shrinkage measurement is the process of comparing the actual inventory level with the recorded inventory level. The difference between the two is the shrinkage rate, which is usually expressed as a percentage of the recorded inventory value. Shrinkage measurement can help you identify the sources and causes of inventory loss, as well as the areas and items that need more attention and control.

2 How to measure shrinkage?

Different methods can be used to measure shrinkage depending on the type and size of your inventory. Periodic physical counts, cycle counts, and book-to-book comparisons are all common methods. Periodic physical counts provide a snapshot of accuracy, but can be time-consuming, disruptive, and prone to errors. Cycle counts are more timely and accurate, but require more resources and coordination. Lastly, book-to-book comparisons help detect discrepancies and errors in your data, but may not capture all sources of shrinkage.

3 How to analyze shrinkage?

Once you have measured your shrinkage, you need to analyze it to understand the patterns and trends of your inventory loss. Pareto analysis can help you focus on the most critical and costly items in your inventory by ranking items by their shrinkage rate and value, while root cause analysis can help you trace the shrinkage back to its origin and identify underlying factors. Additionally, a shrinkage dashboard can be used to create a visual representation of your shrinkage data, providing a useful tool for monitoring and communicating your shrinkage performance and goals.

4 How to reduce shrinkage?

After analyzing shrinkage, it is necessary to take action to reduce it and improve inventory accuracy. Strategies and practices such as implementing inventory policies and procedures, training and educating staff, and installing security and surveillance systems can help reduce shrinkage. Establishing and enforcing clear rules and guidelines for managing inventory can help standardize processes and reduce errors. Updating staff with the necessary skills and knowledge can improve their competence and accountability. Additionally, using devices and software to protect inventory from theft and vandalism can deter unauthorized access and activity.

5 How to optimize shrinkage?

To optimize your shrinkage measurement and reduction efforts, you can use different methods and metrics. Setting shrinkage targets and budgets can help you balance accuracy and profitability, while measuring and evaluating your performance can assess your progress. Additionally, adjusting and improving your shrinkage actions can address gaps and challenges to achieve goals. Overall, these steps can help you get the best results and benefits from your efforts.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?