14 Steps for Retailers to Reduce Inventory Shrinkage
KARTHIK PANDIYAN
Information Technology Manager @ Amazon Web Services (AWS) | Project Management Specialist
Reducing inventory shrinkage is a top priority for retailers, but it can be a daunting task. Inventory shrinkage refers to the loss of products due to theft, damage, or error. In fact, inventory shrinkage is a major challenge for retailers, and it can cost businesses thousands of dollars each year.
However, there are steps that retailers can take to reduce inventory shrinkage and protect their profits. In this article, we will discuss 14 effective steps that retailers can take to reduce inventory shrinkage.
Inevitably, somewhere between the manufacturer and the cash register, some of your merchandise disappears. Every retailer has this problem; in fact, it adds up to more than $42 billion in annual losses nationwide. The three biggest causes of shrinkage are administrative errors, employee theft, and customer theft. Here’s how to counteract them.
1. Use a good inventory management system.
Wherever human beings are doing the counting, organizing, and recording, errors are sure to happen. Choose software that:
2. Tighten up your inventory receiving process.
To minimize mistakes:
3. Record sales consistently.
Any currently available POS system will do this automatically.
4. Take physical inventory.
It’s the only way to reveal discrepancies between what your inventory software says you have and what you have. Cross-reference the manual counts against software records to see where shortages are occurring, for example with a particular cash register or employee, or during the same shift and day every week.
5. Train employees in loss prevention.
Letting everyone know that you have a strong plan to stop theft can deter both employees and customers.
6. Improve pre-employment screening.
The reality of retail is that employee turnover is high and company loyalty usually low. Besides, employees have less supervision and easy access to your valuables. Do your due diligence in hiring people with no history of dishonesty, including nationwide criminal background checks and verification that resumes are complete and truthful.
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7. Install a security?system.
Large, visible cameras act as warnings to thieves to pick an easier target. They also help catch and convict criminals after thefts occur.
Inventory shrinkage is a challenge that will never go away. And that means your efforts towards loss prevention can never stop either. Success lies in ongoing processes and continuous attention to keep your merchandise right where it belongs.
8. Implement a Robust Inventory Management System
One of the most effective ways to reduce inventory shrinkage is to implement a robust inventory management system. This system should include real-time tracking of inventory levels, regular inventory audits, and the use of barcodes or RFID technology to track items. By implementing such a system, retailers can reduce the risk of stockouts, overstocking, and errors in inventory management.
9. Train Employees on Inventory Management
Another important step in reducing inventory shrinkage is to train employees on inventory management. Employees should be trained on how to use the inventory management system effectively and accurately. They should also be trained on how to identify and report any potential issues with inventory, such as missing items, damaged products, or incorrect stock levels.
10. Increase Security?Measures
Security measures can be effective in reducing theft, which is a major cause of inventory shrinkage. Retailers can install security cameras, implement access controls, and use anti-theft devices such as electronic article surveillance (EAS) tags. Increasing security measures can help deter theft and reduce the risk of inventory shrinkage.
11. Improve Product Visibility
Product visibility is another important factor in reducing inventory shrinkage. By improving product visibility, retailers can ensure that products are easily accessible and visible to customers and employees. This can be achieved by organizing products effectively, using clear signage, and ensuring that products are properly labeled.
12. Analyze Sales?Data
Analyzing sales data can help retailers identify patterns and trends in sales, which can help them make informed decisions about inventory management. Retailers should regularly review sales data and use this information to optimize inventory levels and reduce the risk of overstocking or stockouts.
13. Conduct Regular Inventory Audits
Regular inventory audits are critical in identifying any discrepancies in inventory levels. Retailers should conduct regular physical inventory counts and compare the results to the inventory management system. This can help identify any missing or damaged products and ensure that inventory levels are accurate.
14. Partner with a Professional Inventory Management Company
Partnering with a professional inventory management company can help retailers reduce inventory shrinkage and improve inventory management. These companies have specialized expertise in inventory management and can provide retailers with a range of services, including real-time inventory tracking, regular inventory audits, and customized inventory management solutions.
In conclusion, reducing inventory shrinkage is a critical challenge for retailers, but it can be addressed through a combination of effective inventory management, employee training, increased security measures, improved product visibility, data analysis, regular inventory audits, and partnering with a professional inventory management company. By implementing these 14 steps, retailers can reduce inventory shrinkage and protect their profits.
Chief Executive Officer at Sri Sairukmani Enterprises
2 周A proactive approach to minimizing inventory shrinkage begins with effective inventory management. To effectively reduce inventory shrinkage, addressing excess inventory is key. Excess inventory not only ties up capital but can also lead to increased shrinkage through theft, damage, or loss. Overstocked items are more difficult to monitor and organize, creating gaps in inventory control and amplifying the risk of administrative errors or unnoticed theft. Retailers can mitigate this by using accurate sales forecasting and robust inventory management systems to maintain optimal stock levels, thereby reducing the vulnerability of inventory to shrinkage. This targeted approach aids in minimizing loss while enhancing profitability.