The holidays are upon us! This is undoubtedly your busiest time of the year, and it’s quite possible things might get mixed up or even go missing on the back-end of your operations. As an eCommerce business you are no less susceptible to inventory theft by employees than your brick-and-mortar counterparts.
In fact, your use of warehouses and the sheer amount of stock within makes would-be thieves confident in their ability to slip under the radar – after all, in a warehouse with tens of thousands of items, a missing item or two would be written off as an accident.
Inventory theft can range from seemingly harmless acts of convenience, like – taking a cellphone charger or two from the bin in a warehouse, to the more deliberate – like how a Nike promo product manager ordered pre-production sneakers directly from Nike’s factory in China and sold these limited, never released designs to sneaker collectors.
With employee and internal theft amounting to 34.5% of all inventory shrinkage in 2014 according to a survey by the National Retail Federation (NRF), it’s no wonder companies are spending more on loss prevention measures.
So how do you prevent inventory theft in addition to the 6 million things you need to get done this holiday season? Here are some quick tips:
Educating your staff is always a good start. Few people see taking everyday items as a serious crime – after all, with hundreds of identical items in the bin, one of the many in a huge warehouse, who’d notice if an item or two went missing?
inventory management software. Seriously. With inventory management software, inventory theft can no longer be disguised as human errors and written off as such.
Also, it’ll let you switch from a periodic inventory system to a more efficient perpetual one. As its name suggests, a periodic system keeps count of inventory changes at specific intervals, making it easier for inventory theft to go undetected until the end of a period. On the other hand, a perpetual inventory system tracks the movement of inventory in real time, accurately reflecting the level of goods on hand.
Hire the right people
High-risk employees exist, and while people shouldn't be judged on their past, employee theft is one of the biggest causes of inventory shrinkage. This is hardly surprising since employees have direct access to the stock as well as the security codes. When hiring, investigating a potential employee’s past conduct through background checks, multiple interviews, and references can help in identifying potential high-risk employees.
To dissuade employees from inventory theft, many retailers employee a carrot-and-stick approach. On one hand, 95% of those surveyed by the National Retail Federation (NRF) have an anonymous hotline for tip-offs – and there’s no better way to dissuade those with sticky fingers than to convince them that they’re always being watched. On the other, 54% offer honesty incentives like cash and discounts which allows employees access to highly desirable items... without the risks and repercussions of committing a crime.
In the same vein of surveillance, security cameras are an effective deterrent for would-be thieves. Placing these near entry and exit points, or near bins with suspiciously high levels of missing inventory are a reminder to would-be thieves that they are being recorded and the possibility of investigation if things go missing.
As Uncle Ben told Peter Parker aka Spiderman, ‘with great power comes great responsibility’. Limiting access codes to a select few senior employees who understand that power comes with responsibility also limits opportunities for inventory theft. After all, when only a few people can enter restricted zones or move around after hours, it’s easy to zero in on suspicious activities – especially if someone is somewhere he/she shouldn’t be.
Keeping an eye on your employees with cameras may sound like you’re becoming Big Brother, but as Oscar Wilde put it, “I can resist everything but temptation.” So the less tempting and easy inventory theft appears, the less chance it has of happening.
Ok, I’ll stop with the quotes now!
Monitor inventory closely
If you’re still relying on spreadsheets and paper, it’s time to start thinking about getting an inventory management software. Seriously. With inventory management software, inventory theft can no longer be disguised as human errors and written off as such.
Also, it’ll let you switch from a periodic inventory system to a more efficient perpetual one. As its name suggests, a periodic system keeps count of inventory changes at specific intervals, making it easier for inventory theft to go undetected until the end of a period. On the other hand, a perpetual inventory system tracks the movement of inventory in real time, accurately reflecting the level of goods on hand. So how can you use this increased visibility and control of your inventory levels to stop inventory theft? For starters, give individual log-on details to every employee, so you’ll know who the culprit if someone’s been in the system editing the numbers. Also, with the inventory management software tracking the movement of every SKU in real time, it’s easy to trace the point where the numbers no longer tally.
By reducing inventory theft and by moving to a cloud-based inventory management system, you’d also reduce the chances of inventory shrinkage occurring, saving your business an average annual shrinkage of 1.38%. Better yet, in addition to busting thieves, an inventory management system will help prevent overselling, along with reducing unnecessary staffing costs… Which is a win-win situation for you!
We hope the tips we’ve provided will help you protect yourself from inventory theft. The holidays are a time for generosity and the good feels. But don’t let your generosity be taken for a drive!