Posted on: 26 January, 2021
Author: Keri Bolton
See how to minimize inventory shrinkage to ensure your stock is handled rightly. These 8 effective strategies are quickly implementable and have definite results. Are you struggling with inventory shrinkage? Do you need some tips to prevent this? Read below, you’ll find your solutions. This will take around 6-8 minutes to read. So before beginning the prevention strategies, you need to know what inventory shrinkage is, how you can calculate it and what can be the reasons for its root. Inventory Shrinkage Inventory shrinkage is simply defined as the loss of physical inventory that affects revenue in every business — especially retail business. More specifically, it refers to the amount of inventory that you lose or fail to sell during a specific time period. This problem could be slowly draining your profits without you knowing it. You can calculate the inventory shrinkage by finding the difference between the following two: Inventory Shrinkage = Recorded Inventory - Actual Inventory The following factors can cause inventory shrinkage: Therefore, you have to handle this before it’s too late and a big amount of your money is wasted. 8 Effective Strategies to Protect Your Stock So, in this post, you are going to read the following 8 effective strategies to prevent inventory shrinkage. Incorporating employee screening can help with organizational theft and fraud. Blaming employees is something that directly affects the company’s reputation — even though the accusation is true. But sadly, lots of stock can be stolen by unethical staff members. According to the NRF research, two-third of the retailers face theft by sophisticated criminal gangs - the unethical staff. So to prevent such thefts, you need to implement employee screening when hiring new staff. For that, you need to check proper references and background. Their identities should be clear. It may cost you losses if you just quickly hire someone grasping a successful interview without knowing his past. One of the checks can be carried out by contacting previous employers. This practice can help you find out: Thus; trustworthy employees, managing your inventory, can provide priceless peace of mind and reduce the danger of any falsehood. This technique to inventory shrinkage helps with lost products. So let’s check firstly what an SKU is about. It stands for Stock Keeping Unit. An SKU is a combination of letters and numbers. It’s unique for each retailer. It gives each product variant a unique identity to help keep stock levels accurate. So you need to intelligently define an SKU for every product. These SKUs are lifesavers. All you have to do is, make sure your SKUs are as clear and simple as possible, and scalable enough to accommodate new products. Note that: an SKU is not a barcode. Unlike the barcode, an SKU alone can let a human recognize a product. The products with SKUs allow the warehouse staff and administrators to track inventory levels more efficiently and smoothly. 3) Analyze your stock levels regularly This prevention tip helps you catch inventory shrinkage at an earlier stage. So you should analyze your stock levels regularly. If your business is of large scale and it’s hard for you to check regularly then try an automated tool. So you can automate inventory management with software. I’m using a software tool, named Stock Konnect, that works for me in this regard. It helps me with the inventory management of my eCommerce business. This tool efficiently manages the stock of my multichannel inventory. It saves me from stockouts and overselling as well. But for the manual procedures, stock level analysis can be carried out by regularly taking a physical count of inventory. Compare the totals of your recorded inventory levels with each count of your physical inventory. Then calculate the percentage of inventory shrinkage. Ideally, this number should be reduced over time as you refine your inventory management strategies. Therefore, for this job, you can assign your team to weekly count this shrinkage value so that you can nip the shrinkage in the bud. Giving your team proper training helps you reduce human-errors. Employees must be well-aware of the whole terminology of inventory shrinkage, and the negative consequences it may cause to the business. They must know that a little repeated mistake, that seems neglectable for a time, may affect the bottom line. So this attentiveness should be practiced on both sides. Employers should also provide the necessary course of action to minimize errors and prevent carelessness. 5) Track receiving and stocking processes Track receiving and stocking processes to avoid vendor fraud or error. Errors and fraud by vendors seem to be one of the least common sources of inventory shrinkage annually. Yet this smallest percentage can leave a bigger impact. Thus, it’s still worth fighting for prevention. This means, you need to take the following steps in this regard: For the quick and easy booking-in new inventory, you can use a barcode scanner. This can help you ensure complete deliveries and catch frauds or errors way earlier. 6) Incorporate double-checking policies The double-checking policies can help you minimize booking-in errors. The action has done twice to confirm accuracy is referred to as double-checking. The actions regarding inventory management need to be done twice in the warehouse to ensure accuracy. For example, there can be multiple actions that involve two doers. These actions can be: Inventory shrinkages can be unidentifiable sometimes. So it’s better to incorporate a barcode scanner for a quick and easy double-check to ensure order accuracy before shipping. As the title suggests, this prevention can minimize product damage. Appropriate inventory storage is extremely important to prevent product damage while being stored in the warehouse. Especially for the products that are fragile or perishable. So what you need to do is: These actions will ultimately help you reduce inventory shrinkage. Enhancing security measures definitely reduces thefts and frauds. You may face some unexplained and undetected theft at some times. These unidentifiable sources may come from either employee or outside the business. So to avoid such causes of inventory shrinkage, you need to invest your time and money in enhancing security. The following strategies can help you increase your business security. Professional thieves can go unseen most of the time. Make sure your warehouse is secure enough systematically to be safe from them. Final words Neglecting minor inventory shrinkage daily can lead to bigger issues in the end. This mistake can cost you heavily. Therefore, the aforementioned eight strategies for your business can definitely prevent such issues as much as possible. And squeeze a lot of costs that go wasted in the long run. Source: Free Articles from ArticlesFactory.com I am an experienced professional, owning a multichannel eCommerce business. Moreover, I have experience of over 8 years in writing for the eCommerce and web development industry. Contact me here to get my stated services. Stock Konnect is an ultimate eCommerce solution that provides multichannel listings, inventory sync, and order shipment - all through one platform.