Every business that sells or manages products must have an inventory. Simply having an inventory, though, is pointless if it is poorly managed. Understanding which products go where, or how much of a product is in stock, is crucial to the operation of a warehouse. If miscommunication occurs at any level, it can cost a business money and hurt its reputation.
Inventory shrinkage is just one example of a miscommunication. Inventory shrinkage is the result of the physical inventory having a count that is lower than the count recorded in the company’s documentation. Essentially, it means having less than you think/say you have. Inventory shrinkage happens in a variety of ways:
Inventory shrinkage is a problem because it creates discord within your business, but it also makes your company look like it’s worth more than it really is. False inventory records can lead to a business being charged with accounting fraud. It is important for businesses to regularly take inventory, and record any discrepancies that occur.
In addition to regularly taking inventory, there are a few things companies can do to ensure inventory shrinkage doesn’t occur.
Maintaining the warehouse can prevent products from being damaged. Buildings that are old or poorly built are a hazard, not only to employees, but to inventory as well. Leaky roofs can damage products or cause them to rust. Updating the structural integrity of an older building or ensuring that the wiring is not deteriorated can prevent collapses and fires. Water damage and electrical fires could damage much more than just inventory, so it is important to make sure both are prevented.
Preventing employees from making mistakes when counting can be tough. For the most part, mistakes won’t be made. However, pinpointing how and when they are made can be tough. A good way to prevent miscounting is by implementing a barcoding system. Unlike people, a barcode scanner will not make mistakes. Using a barcode scanner to track inventory is the most foolproof way to prevent miscounting.
Installing precautions like an alarm system and putting anti-theft tags on your products should greatly deter thieves. Security cameras and mirrors can also be useful for keeping an eye on employees and any others who may enter your warehouse. Most employees would refrain from stealing when cameras are watching them. Performing background checks and in-depth interviews can also help businesses hire honest employees.
Inventory shrinkage can be a dangerous problem. When physical and recorded inventory don’t match up, problems arise in all facets of a business. If these problems reach the customer, then your business has failed. Although it may be impossible to completely eliminate inventory shrinkage, there is much that can be done to prevent it.
Sign up for Retail IT News or Supply Chain Insider to keep up with the latest industry trends and important updates from AML.
AML was founded in 1983 to respond to a need in the barcode data collection marketplace for high performance, easy-to-use, and cost-effective barcode and data collection products. Our goal is to provide sensible solutions for mission critical activities, to improve efficiency and productivity, and to make barcode data collection applications worry-free.
We believe there is more to buying a product, than just the product. It's also the service and support that is available before, during, and after the sale.
It's being able to communicate when you need to, and get action and responses that work for you. It means not being at the mercy of anyone, but rather being the recipient of stellar customer service and support. That's AML.