Every retailer has to deal with product loss. In 2016, retail businesses experienced an average hit to their bottom line of 2% due to inventory shrink, a common accounting term used to describe the loss of inventory due to the following:
Data entry errors
The latest research on inventory shrink also indicates a continued increase. This will affect profits and cut into cash flow, two areas of major concern for any business.
Building a Plan of Action
Many of these problems with shrink are preventable. If you believe your business could do better with product loss, start with a strategic plan of action. Simple plans have 3 steps: research, development, and implementation. Strategic plans for loss prevention take time, so allow yourself an hour a day to work on the plan. Experts also encourage employee involvement to increase their engagement with the business.
1st Step: Research
A loss prevention plan begins with research. It’s the best way to find out if you have a problem and how big it is. Start a thorough review of store polices. You may need to shadow your employees to get a clearer picture on how they perform their duties.
Next phase of research is to analyze historical data. Your inventory management system should have some excellent reporting tools to indicate any patterns in the data that may point at seasonal rises in preventable losses or employee errors. Theft and fraud are difficult to track, except when you find the holes in the data that indicate something is missing.
2nd Step: Development
Through your research, you’ll be able to develop a more proactive and coordinated approach to loss prevention.
There are two types of losses, malicious (theft and fraud) and non-malicious (accidents will happen). Your loss prevention plan should differentiate between the two. Plus, it should maintain a running record of non-malicious losses due to the following:
Problems at checkout
Many of the problems that occur in non-malicious losses can be prevented through policy changes and employee training. Product spoilage and obsolescence can be tracked better through your point of sale software. Correcting these errors will improve the way you do business.
If you are not familiar with theft prevention strategies, now is the time to learn about employee training and surveillance technology. Theft prevention means taking away the opportunity to steal. You can do this through posting signs, installing surveillance technology, mirrors and increased employee awareness. With a proactive plan in place, you’ll take away the opportunities many thieves take advantage of.
Now is the time to get things on paper, so document your processes and findings when forming your plan. Policy changes need to be clear and concise. Also, you’ll need to keep your employees informed and trained on these new policies. Communication is the key to bringing everyone onboard during the implementation phase.
3rd Step: Implementation
Development and implementation of a loss prevention plan can save hundreds, if not thousands of dollars. With a clear plan and new policies put in place, your roadmap will ensure the successful implementation of your loss prevention strategies.
You may need to make small changes to your plan that account for real-world situations. Gathering employees’ feedback helps you see what is working and what’s not. Try not to change too much, because big changes could derail your efforts. Remember, this plan is based on research with proven strategies to prevent losses. If you stick to it, you’ll see noticeable improvements in the management of your inventory and your bottom line.