Beat The Shrink: How Inventory Management Can Help Reduce Shrinkage

By Paul Trujillo

Retailers ate losses of more than $45 billion thanks to shrinkage in 2015, a $1 billion jump from the 2014 total. If this trend continues, the 2016 figure could exceed $47 billion!

How can so much inventory just walk out the door? According to the National Retail Federation, there are five main ways for your supply to disappear.

Sometimes it doesn’t even make it to the store. Roughly seven percent of shrink comes from the vendors in the form of overcharges or undersupply. Small businesses can be especially vulnerable to this if they operate on more informal bases with their supply companies. Check your contracts and make sure expectations are clear.

Human errors count for another 16 percent. Maybe someone ordered too much product to move in a realistic timeframe. A stocker accidentally slapped the wrong price on an item and led to an impromptu sales event. It could be something as simple as poorly-inventoried stockrooms that harried employees tally by physical count and tally marks.

Other times, though, goods may get a helping hand out the door.

Shoplifting counts for 38 percent of loss. People may steal for personal use. They might need to make fast money from a resale. It could be nothing more than they steal because they can, but the end result remains the same: Lost revenue and unbalanced books.

Employee theft comes in as the second largest cause at 35 percent. You never want to believe someone you trusted to work in your business would ever steal from it, but disgruntled personnel could see it as a way to get back at the boss. A “discount” on something could be an attempt to woo a potential sweetheart.

Both shoplifting and employee theft share a common trait: Smaller thefts often go unnoticed. Even when the discrepancies are found out, it isn’t difficult to explain away how a few things here and there “fell behind a shelf” or “must not have been logged correctly.”

The remaining four percent don’t fall into any of these categories and are generally chalked up to “acts of God” or left as unsolved mysteries. You can only do so much to combat the last group: Insurance, smoke detectors, and a healthy dose of luck play as much of a role in loss prevention as anything else. That still leaves 96 percent. What can you do to keep your shrink down (and your doors open)?

Know those who fill your storerooms

You want to trust the people you patron for your supplies just as you want your customers to trust you. You want fair deals for your money and to receive that for which you paid. But can you always trust when someone tells you, “Hey, I know a guy…”?


Ask around and see if any of your colleagues do or did business with the vendors you are checking out. Look up their credentials and business standings through any regulatory offices in their local area. Hit the Internet and look over Yelp, Google, Go to the full article.

Source:: Business2Community