Inventory shrink, or the loss of product due to shoplifting, employee and vendor theft and administrative errors, costs retailers billions of dollars. The NRF and the University of Florida provided survey results this week stating that in 2014 inventory shrink averaged 1.38% of retail sales, or $44 billion.
Shoplifting accounted for 38% of the loss, followed by 34.5% in employee theft. The rest consisted of 16.5% administrative errors, 6.8% vendor fraud or error and 6.1% unknown loss.
While grocery chains have the highest shrink rate, home center/hardware/lumber/garden reported average shrinkage of 1.09%.
Tracking inventory effectively is key to managing shrink. Actual and accurate inventory counts eliminates the over/under counting in the results. Verifying product delivered is what was ordered and is accurately described in systems is also paramount – if an expected-sized item was not available, and the vendor ships a different size, but that difference is not noted, a retailer can end up with a surplus of one size, a shortage of another, and a dent in their inventory valuation. Inventory measurements should be looked at in both units and dollars. A retailer could be 99.5% accurate in dollars but only 94% accurate in units.
Shrink-related data is stored in different applications such as POS/point of sale, inventory, receiving and store applications. Having the ability to obtain reports that combine point of sale and inventory data in a timely fashion is imperative to take action quickly before the data becomes outdated.
Accelerated Analytics is a comprehensive service for collecting, analyzing and reporting on POS point of sale and inventory data, to increase sales, optimize inventory, recognize inventory shrink and respond faster to this information.
Source: Chain Store Age, ProSales
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