Preventing Inventory Shrinkage Using Your Computer

Article written by EricBank

The National Retail Security Survey (NRSS) reports that Inventory shrinkage -- the vexing disappearance of items for sale -- bled U.S. retailers for over $34 billion in 2011. Small businesses are especially vulnerable, because they may not have good controls or systems to fight shrinkage. However, a small investment in a computer system and perhaps some security cameras can make a big improvement for not much money. Here's is how a small business should proceed.

Data Capture

The first order of business is to detect where shrinkage is occurring. Identifying your vulnerable areas lets you know where to allocate your time and money. It's pretty easy to track inventory nowadays thanks to cheap and sophisticated barcode technology. In fact, barcoding has allowed many merchandisers to adopt a perpetual inventory system, giving them timely information regarding the location, count and movements of inventory items. The scanners are not expensive, so you can deploy them wherever needed, from your receiving area to your cash registers and shipping dock. Using off-the-shelf software, you can quickly compare warehouse scans with order invoices to discover items missing from a shipment. Portable scanners let you make surprise spot checks at any time and may indicate areas where you need security cameras.

Employee Theft

The 2011 report from the NRSS estimated employee thefts to account for 43.9 percent of all shrinkage, the largest component of the problem. Having identified the problem locations in your store, vehicles or warehouse, you can use work records to see if there is any relationship between shrinkage incidents and certain employees. Analysis might reveal suspicious patterns involving workers who drive delivery trucks or work in your storage areas. Broadcast the fact that you are taking steps to catch employee stealing -- this alone can be a deterrent, especially to the casual perpetrator. If you catch a worker red-handed, you should prosecute them to set an example and show that you are serious. You should also set up fake thefts to see how well your system catches it.

Shoplifting

Shoplifting is common at retail locations. You might detect the most vulnerable merchandise by frequently spot-checking your inventory reports against physical counts. Once identified, you can post signs, install extra lighting, station store security persons strategically, add monitoring equipment -- anything to tip the scales in your favor and away from shoplifters. Your computer system can alert you to missing items that never passed through the scanners at your cash registers.

Errors and Fraud

A computerized system helps prevent honest errors, such as entering the wrong numbers or illegal item codes on orders, invoices and other documents. Beware the rogue employee who occasionally games the system. For example, in a manual environment, a purchasing manager might try to enter an inventory receipt for goods never ordered and then steal the payment made to a non-existent supplier. The right surveillance and computer equipment can prevent you from paying for imaginary inventory. Prominently display your daily system reports such as cancellations, returns and voided transactions, in order to deter theft by checkout employees.