Shrinkage can reduce profit and cause problems for small business owners, especially those in retail. It means that you lost physical inventory for a variety of reasons such as errors in moving products, theft, and spoilage just to name a few. However, it is possible to prevent inventory spoilage.

 

Here are ways that prevent inventory spoilage in your supply chain operations.

 

Proper Training of Employees

If you train your employees properly, you’ll reduce the costs of turnover while also reducing or eliminating shrinkage. Employee theft occurs regardless of the size of a business. You need to show your staff the consequences and penalties of theft. You should also train staff on how to identify thieves’ techniques and possible security gaps in your warehouse. You can also change the way you store items in your warehouse. Keep expensive inventory locked in a safe or case, or place them at the back of your warehouse.

 

Double-Check System

Sometimes warehouse staff miscounts inventory. They input a particular item twice, thrice, or never at all into your system. This creates possibilities of shrinkage because your warehouse team may have forgotten about or double counted inventory. Implement a system of double checks to eliminate mistakes in accepting and organizing inventory.

 

Monitor Inventory Quality and Quantity

Always keep an eye on your warehouse’s or store’s inventory levels. Determine a minimum threshold so that if your inventory is close to that level, you’ll order new stock. Avoid ordering too much inventory because this leads to overstocking. Excess inventory can decay, become obsolete, spoil, or incur damage. Use a forecast to determine the amount of items you’ll need to meet the demands of your customers. Regular quality control allows you to identify inventory that is about to spoil or become obsolete. This provides you with enough time to either dispose of those products or sell them at a marked-down rate.

 

Automate Inventory Management

Reduce shrinkage in your supply chain operations by automating your inventory management system. A manual system is error-prone and inefficient. Upgrade your system to make monitoring inventory levels easier. An automated system also schedules orders properly, generate reports you can review in real-time, improve quality control and others. Identify a system that is within your budget and is easy to implement. Train your staff so they can use this tool effectively.

 

Improve Security

One of the ways to reduce shrinkage is by bolstering the security of your warehouse or store. Achieve this objective by installing security cameras in different areas and blind spots, corridors and just outside your warehouse or store. This allows you to monitor the movement of people who come and go. Install a digital door in your warehouse wherein just key personnel can enter. You can use a traditional lock and key, but only give access to key personnel as well.

 

Product Rotation

Consider rotating products; these are items that become obsolete quickly. Use a system that allows you to monitor inventory shelf-life and alert you when a product is almost out-of-date. This technology allows you to identify fast-moving and slow-moving items in your warehouse. This data enables you to implement strategies that move high quality products quickly and reduce shrinkage.

 

These are some of the ways you can reduce shrinkage in your supply chain operations. These practices reduce costs and waste, while allowing you to reach your target profit. We at Robookkeeper can provide you with affordable outsourced bookkeeping services. Our team of freelance bookkeepers managed by D&V Philippines can update your accounting books for you.