What comes to mind when you hear the work shrink? Do you vision a psychologist or an object becoming smaller?
To most business owners with inventory, the term shrink may want them to see a shrink. The actual definition of shrink is a loss of product outside the normal sales cycles shown as a numerical difference from point of sales software tracking and physical inventory counts. This could be a person with sticky fingers, an employee not properly trained, or even perishables beyond their expiration.
From multiple articles online on the topic, you will see the national averages of what business studies have found in regards to shrink types. The highest percentage factor of shrink came from employee theft between 35-45% while a very consistent 36% was from shoplifting. Of course, there are other factors to look into.
As I grew my experience as an Inventory manager, there was something that stuck out to me. Most cases of shrink were not from theft but from poorly managed inventory. In most cases, the reason something was missing was from not training the employees on situations where they were not able to find an identification number (UPC, EAN, Part number, etc.) of a product and made a foolish assumption or guess in the point of sale system. The other side of this was how employees were aware of their surroundings. Most people are trusting and wouldn't give a second thought to most of their customers, however, a shoplifter can easily be thwarted by a friendly and attentive employee checking in continuously and monitoring the sales floor.
As you begin your analysis of your inventory counts, keep in mind what the affected items are and focus on those areas. The biggest asset in shrink prevention is properly training your employees (or even yourself). If you have any questions in regards to your shrink, or inventory as a whole, shoot me an email at jonathan@jpvirtualconsulting.com or give me a ring at (480) 630-5885.
Below are some great articles to read and learn more about what you can do and how to take action. This way you won't have to see that shrink.
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