How to Reduce Inventory Shrinkage

Avoiding inventory shrinkage is key for a successful warehousing fulfillment operation. Inventory shrinkage is when a retailer has fewer items in stock than in the inventory list either due to a clerical error or due to goods being damaged, lost, or stolen between the point of manufacture (or purchase from a supplier) and the point of sale.

Education and training the right way is an important aspect of warehousing that is often overlooked. Having a Standard Operating Procedure (SOP) manual for employees to follow such as Inventory Management Procedures, Loss-Theft Prevention Procedures, and Returns Policy Procedures are important to ensure how an employee should handle damaged or missing items. With clear procedures implemented in a manual, employees are less inclined to commit theft as the consequences of these actions have been adequately communicated.

Employers should require all employees to thoroughly read the manual and, in some cases, even take it one step further by quizzing employees on material covered in the manual. It is advisable to instruct the employee to review all procedures and to sign a form indicating that they have read and understand the company’s commitment to a safe and theft-free workplace to avoid any potential future liability.

Another way to reduce shrinkage while also improving warehousing fulfillment operations is to have a planned system for scanning and re-scanning inventory. Rolling, rotational inventory scanning is one of the many ways to verify and maintain the correct stock level. With this method areas are scheduled for scanning on a routine basis (either daily or weekly) rotating through each location until the entire warehouse is scanned.

Upon completion of scanning the entire warehouse, the inventory scanning begins again, on a continuous rolling cycle. This ensures effective tracking on all merchandise and allows a manager to easily pinpoint when and where an inventory discrepancy occurred.

At Logistics for Hire we provide our SOP manual on the employees first day of work. This manual is complete with all protocols and procedures on how to handle damaged, lost, or stolen items along with a whole host of other workplace procedures.

We like to keep a clear and healthy communication flow between all of our employees, and we recommend using this path to keep your workplace environment safe, friendly, and at a lower stress level.

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