6 Effective Ways to Reduce Inventory Shrinkage & Maintain Correct Inventory Levels
Inventory is a valuable asset for any company, especially those engaged in retail, wholesale, and manufacturing. In order to be able to meet their customer demands, they have to be able to manage their inventory properly. However, holding a large amount of inventory is risky. Companies often find it difficult to identify inventory theft, damage, miscounting, incorrect units of measure, and similar issues. Thus, it’s very important for companies to develop effective and efficient inventory management strategies. Here are six effective ways to reduce inventory shrinkage and maintain its level.
1. Find the right responsible person.
Assign one of your employees to act as an inventory manager. The person in charge of the inventory must really understand about inventory management. They should be able to provide in-depth inventory reports, including the quantity on hand, incoming and outgoing stocks, stock valuation, and many more. An inventory manager is also in charge of stock adjustments, inventory audits, good returns, restocking, and so on.
2. Improve warehouse security.
One of the most effective ways to reduce inventory shrinkage is to increase security in your warehouse and store. Security optimization is very mandatory especially if you have a large store which holds large amounts of stocks. Install CCTV cameras around your warehouse and use a digital door lock. Provide access to the warehouse just for those responsible for your inventory.
3. Label all the inventory items.
Labeling all your items will make it easier for you to perform inventory tracking. It is an important chore that helps you ensure all the items are well recorded. Make sure that each item has a SKU and UPC code so you can easily track them with a SKU scanner or a barcode scanner. You can use an integrated barcode system to make it easier for you to track and generate new barcodes.
4. Set stock reorder point.
Determining stock reorder point will prevent you from inventory shrinkage. Set your minimum stock number. If the stocks are less than the minimum level, then a new order should be placed immediately. Don’t order too many items, because excess inventory leads to more issues, such as damage, decay, obsolescence, and more. Therefore, it is important to conduct inventory forecasting so you can figure out the right number of stocks to order.
5. Conduct regular inventory audit.
There’s no better way to reduce inventory shrinkage than conducting inventory tracking on a regular basis. Compare the number of stocks you have in the warehouse or in the store to the number of stocks recorded in the system. This method is also called stocktaking. Make sure that the inventory quantities are exact. There is no particular time to perform inventory audit so you can do it whenever necessary.
6. Implement an automated system.
The most effective way to keep your inventory in place is to automate your inventory management. Tracking inventory manually is time consuming and inefficient. For best results, I highly recommend that you use an inventory management system. It helps you automate your inventory management; from tracking inventory levels, controlling procurements, speeding up ordering process, to generating in-depth and accurate inventory reports. A good inventory management system can be integrated with barcode scanners to accelerate inventory tracking.
Related article: The Importance of Stocktaking for Retail & Wholesale Businesses