A large order comes in and you need to ship the items as soon as possible. You know the items are in stock but when retrieving them, you find they aren’t there. If this has happened to you or if an inventory count has revealed you have less inventory than you should, then you have suffered from inventory shrink. It remains one of the more challenging aspects of parts inventory management. The causes and solutions for inventory shrinkage include the following:

Theft

This is a very common problem. Stores selling goods to the public can lose inventory from both customer and employee theft. Goods can be shoplifted from the store shelves by customers, while goods can be taken from both the store shelves and the backroom by employees. For businesses that sell to other businesses, the problem of theft is an internal one.

Preventative measures include security camera placement, placing inventory in highly visible areas, restricting inventory access to a few responsible individuals, and keeping an accurate count.

Dishonest Vendors

Always verify quantities of items received from vendors. Even if you have done business with them for years, verification is important because it’s good practice. Vendors have employee turnover. Honest employees can move on to other positions and dishonest employees can take their place.

Lost Items

Items can be lost or damaged in transport from one inventory facility to another. Periodic inventory transfer, whether between buildings or within a very large warehouse is an inefficiency that should be avoided. When large quantities of items are moved about, there is always the possibility of inventory loss. This is particularly true when movement is handled in an unsystematic manner or if it’s an operation that doesn’t occur very often. Operations that don’t occur often means you have little experience doing it. Moving your company to a new location is an example of this.

Accidents

Accidents that cause inventory damage is a common occurrence and it can happen in a variety of ways. They can be caused by natural disasters such as earthquakes, hurricanes, flooding, etc. Fires and human error are other reasons for inventory damage. Human error can be minimized through proper training and hiring practices as well as using well thought out handling procedures.

Large and complex inventory systems are prone to shrinkage. Preventing shrinkage requires a good assessment of your inventory status. Keep an accurate count using cycle counting. Cycle counting entails counting only a small amount of your inventory every day until you get through the entire lot. When completed, the count is started over again. It is less disruptive than shutting down operations to do a full inventory assessment. A good inventory management software is also essential for tracking inventory levels and movement. The use of spreadsheets are inadequate for staying on top of large inventory systems.

If you would like to learn more about improving the management of your inventory through the use of a Sage 300 ERP Inventory Control system, please contact us.