How to Avoid Shrinkage for Your Small Business
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Shrinkage, or loss of inventory, is an inevitable occurrence that no business running a physical inventory can totally avoid. However, this doesn’t mean that it has to be taken lightly. After all, a shrink in your inventory directly affects your profit margins. 

The higher your shrink rate is, the more you lose in revenue as well. With that said, it’s important to at least mitigate the risk of inventory shrinkage. And most companies do this by depending on third-party ecommerce fulfillment companies for inventory planning and management. 

Indeed, working with such an organization can effectively deal with this kind of issue. However, it’s also important that business owners take proactive approaches in handling the matter on their own as well. With that in mind, here are 7 ways you can prevent inventory shrinkage in your company.

1. Be Meticulous in Hiring Employees and Third-Party Companies

Admittedly, it’s quite tough to find reliable employees or third-party organizations, but it isn’t entirely impossible. Do not neglect simple procedures such as checking their background or references. Although these tasks might seem like a waste of time, they can at least give you affirmation that you’re working with people or companies you can really trust.

2. Train and Educate Employees

According to Forbes Magazine, 43% of inventory shrinkage is caused by employee theft. However, this statistical data is not meant to scare you. Instead, it aims to make you aware of how important discouraging fraudulent employee behavior is.

To do this, proper training and education is a must. It’s vital that you give priority in instilling ethical values to mold your employees into better individuals. Furthermore, additional training can also be a good way to reduce administrative errors in inventory management and product handling. Altogether, correcting these can effectively lower risks of high shrinkage rate.

3. Monitor and Track Inventory

The only way to track shrinkage is to monitor your inventory closely. This is why it’s a primary step in prevention. By keeping a keen watch on your inventory, you know exactly what goes where. Thus, you are not totally clueless about inventory operations. Besides, it can also help you close in on the trigger point of a shrinkage in the event of one.

4. Review Sales Transactions

Keeping tabs on your sales transactions is helpful in spotting and preventing fake sales and retail theft. As much as possible, carefully inspect your records for any anomalies in sales and purchases. It’s also good to conduct an audit for both sales and inventory from time to time.  

5. Establish a Surveillance System

Close surveillance can also help discourage your employees in engaging in fraudulent schemes. It’s best to invest in a good surveillance system that can effectively strengthen security in your facilities and shops.

6. Invest in an Inventory Management Software

In the past, inventory management was done manually. But luckily, we now live in an era that enable us to use technological tools in improving business operations. With that said, it’d be a good idea to add a digital touch in executing tasks within your company.

Speaking of which, incorporating a barcode-based system in managing your inventory can be useful in avoiding shrinkage. It will make monitoring activities and eliminating errors concerning your inventory a lot easier.

7. Hire a Third-party Company

If you don’t have the time or resources to incorporate some of the helpful methods listed above, you can opt to hire a third-party company instead. There are various advantages that come with working with another organization. For one, you can rest easy that no in-house employee theft will take place since you are outsourcing. Next, you’re given more time to focus on internalization. And lastly, you can cut costs on inventory management, order fulfillment, and logistics management.

Summing it all up, inventory shrinkage is a pressing concern that a lot of small companies face from time to time. And if not addressed immediately or properly, it can lead to a lot of lost profits. However, prevention is always better than cure in this case. And instead of acting on it after it happens, it’s best to stay one step ahead and implement preventive measures, like the ones listed above, from the very start.

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