Reduce Inventory Shrinkage

By: jimhawkins
A previous article outlined the horrific costs associated with Inventory Shrinkage in the retail industry - approximately 4% of the total annual inventory costs. A good POS (Point of Sale) system can help cut this in half by helping to eliminate two of the major causes of Inventory Shrinkage - internal theft and "messed up paperwork". The last article dealt with the "carrots" you can implement with a good Point of Sale system to reduce the internal theft component of Inventory Shrinkage. It covered things like improved communications, profit sharing, employee discounts, and the tracking and offering of sales commissions, SPIF's, etc. In this article, I'm going to show how a Point of Sale system can be used to reduce internal theft using the "stick" of increased security measures. A following article will discuss how to improve "messed up paperwork".

A good Point of Sale system should balance between carrots and sticks, but sometimes the only way to reach some employees is through a "stick" of an effective security program and a straightforward policy of prosecuting any employee caught stealing.

Here are some sticks that a good POS can give you.


?Each employee should have a username and password required to log on to the Point of Sale system. This promotes accountability, especially if they know that transactions can be immediately traced back to an individual
?Run frequent Administrator Reports - daily or at least once a week. By keeping a close eye on sales and inventory and by immediately following up on discrepancies, staff will soon learn that nothing gets by "ol' Eagle-eye"
?Prevent unauthorized "markdowns" by setting security levels to reflect what the individual needs to do. Frontline salespeople don't need to access the Accounting backend, and only those responsible for receiving inventory should be able to adjust stock levels. Your POS should have complete flexibility to customize security access and "clone" settings, so all Salespeople have similar security access
?There will always be situations where Salespeople may need to offer a discount to make a sale. Make sure your POS can handle predetermined sales discounts on a per item basis - with or without a "Manager's Override" required
?Brazen theft of cash from the cash register is reduced when your POS can give real-time reconciliations simply and quickly, and with the complete itemized list of who did what transactions
?Refunds are often an area of "vulnerability" that is open to employee abuse. Your POS should be able to quickly access the original sale based on the item being returned. A complete sales history of both the customer and the inventory item, coupled with the salesperson involved, can also identify any suspicious activity
?Receiving and Shipping are also areas prone to potential "mishandling". Your POS should automatically handle Purchase Orders, generate Receiving forms, and easily handle short-shipped and backordered items. All this information should be immediately and easily available for spot checks

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