Inventory loss (also known as inventory shrinkage) costs the American retail industry over $45 billion annually*. Improper inventory management is a key component of inventory loss.
While shrinkage is often the result of shoplifting or employee theft, sometimes loss is unintentional. In fact, administrative errors account for approximately 34% of inventory loss.
Shrinkage, the enemy of a healthy bottom line, is the difference between what your book inventory says you should have in stock, and what a physical inventory count confirms you actually have in stock.
Shrinkage is caused by two things—theft and error. The unintentional loss of inventory value, with no dishonesty involved, is classified as error.
Success Story: Improper Inventory Management
A retail client recently utilized the DIGIOP dashboard and POS exception reporting data to uncover a significant discount error related to improper inventory management.
Administrative errors such as inventory mispricing can cause a significant loss of profit. When a DIGIOP client recently reviewed their POS exception reports, they found an employee was tagged as giving massive discounts on a particular product. On the face of it, the discount looked fraudulent.
The item in question retailed for $75 but was being rang up as only $4.29, a significant difference. However, the mistake was not nefarious as the selling unit had been set up incorrectly, selling the item by case quantity for an individual price.
The inventory was quickly reprogrammed and all employees were made aware of the case quantity versus individual pricing.
It’s important to understand that error is not always the employee’s fault, but regardless, the loss remains the same. Inventory mispricing and improper inventory management can cause significant loss of profit to any type of business.
Take control of inventory mispricing and improper inventory management with DIGIOP’s powerful suite of loss prevention solutions.