You might have a certain inventory count on your books and a totally different but smaller number of products in your warehouse. This phenomenon, known as shrinkage, can happen for various reasons, including shoplifting and record-keeping mistakes. When you do your best to keep this shrinkage to a minimum, you will have more merchandise available to your customers and more money in your profit column.
1. Implement solid inventory management strategies
Your first line of defense against shrinkage is to invest in a high-caliber inventory management system. Generally, this can be part of your point of sale (POS) solution. Once you put it in place, your POS-driven system can track sold, damaged, and returned items in real-time, giving you more control.
In addition to automated tracking, you should institute regular audits of your inventory as well as cycle counts. When you do, you can spot theft or loss right away and identify errors in your record-keeping that you can then correct before they have negative consequences.
Robust inventory management also requires attention to your employees. Assign different employees to do various product-related tasks like ordering and receiving. This spreads accountability across employees, reducing the chances that one person can steal. Along the same lines, establish clear procedures for bringing new inventory into your stock room, and only allow access to those who need it.
Since shoplifting is also a major source of inventory shrinkage, you need to take steps to make this crime more difficult to perpetrate. To that end, ensure that there is a clear line of sight to all parts of the store, and keep high-value items visible or locked up. You might also consider using mirrors to minimize blind spots.
2. Create a security-aware culture
Tracking materials and products is essential, but it needs to be supported with an overall focus on security throughout the workplace, from the boardroom to the mail room. This begins with a solid set of procedures that are reinforced with regular employee training. An important subject to cover should be how to spot suspicious behaviors from customers or fellow employees. Also emphasize inventory handling best practices as well as strategies for accurate and timely record-keeping.
The hiring process gives you the perfect opportunity to review a candidate’s background so that you can identify potential risks. Once people are hired, foster a workplace that has integrity and accountability as its priorities. Furthermore, you should encourage open communication and provide clear procedures for reporting any suspicious or concerning issues.
3. Utilize technological solutions
A secure POS system from your merchant service provider is capable of tracking sales and returns to spot patterns. These can identify various types of employee theft and fraud. The system can also be integrated with access control systems that limit entry into restricted areas to only those who require it.
Additionally, modern innovations can help you to get an even more granular idea of your inventory. Radio frequency identification (RFID) gives real-time visibility into your merchandise by tracking products at every step of the supply chain, giving you an effective way to identify where your losses are happening.
Finally, you should protect products in the store. Use strategically placed surveillance cameras in high-risk areas, keeping in mind that visible cameras are excellent deterrents. Augment these with electronic article surveillance (EAS) security tags that notify you when an item is removed from the store without being purchased.
4. Tighten your operational practices
Security policies are not the only ones you need to modify. Be sure that your return and exchange protocols are clear so that your number of fraudulent returns is reduced. Additionally, keep in mind that suppliers and other vendors can also be a major cause of shrinkage. Establish clear procedures for them, including physically counting delivery numbers and reconciling inventory.
Because a certain amount of shrinkage will take place no matter what you do, it is important to analyze it in order to keep it under reasonable control. Data from your security software, POS system, and inventory management tools will furnish you with the details you need as you develop and refine future policies.
Maintaining strict control of your merchandise is a must if you want your budget to remain in the black. Implementing these strategies will go a long way toward making shrinkage due to theft and errors nothing more than a minor problem.
North is a leading financial technology company that builds innovative, frictionless end-to-end payment solutions designed to simplify and grow businesses of all sizes. From the front door, to the back office, the developer world, and partnerships that expand the payments landscape, North offers proactive, comprehensive merchant services, in-house processing, and more.
