There are many terms for inventory shrinkage: warehouse shrinkage, product shrinkage, loss of product. They all amount to the same thing — your merchandise is missing from the warehouse shelves.
For businesses that sell physical things, some amount of shrinkage is unavoidable. At point of sale, stores can experience retail shrinkage from breakage and shoplifting. ECommerce businesses experience inventory shrinkage when items are damaged on warehouse shelves or disappear during shipping or receiving.
It’s important to understand your shrinkage rate because it affects your bottom line. Here’s everything you need to know to calculate and prevent inventory shrinkage.
Inventory management is a critical area for most companies. And breakthrough improvements require a process based inventory turnover improvement strategy.
Too much inventory, especially the wrong inventory, can negatively impact cash flow, return on investment, customer satisfaction, and profitability. Too little inventory, especially the wrong inventory, can result in lost sales, inability to delivery to customers, and also impact cash, ROI and profitability.
Despite these devastating and far reaching implications of poor inventory management too often this area is not given the respect and attention that it deserves. You cannot just wave a wand a wish inventory levels will be magically lower.
Brute force approaches will at best result in short term gains. In our experience the best way to systemically, and sustainably, optimize inventory is to take a process based inventory turnover improvement approach.
As we come to the end of our 3rd year here at Supply Chain Game Changer it is time to publish our semi-annual 2019 Top 10 List.
First we want to thank our readers. Our audience and reach continues to expand with Supply Changer now being ranked as one of the Top 20 Supply Chain blogs in the world and one of the Top 15 Procurement blogs in the world. Both are record achievements for us.
Second we want to thank our guest contributors. With dozens of writers and articles we continue to fulfill our vision of sharing expertise and experience from all over the world.
We thank you for your ongoing support and ask you to continue to spread the word about Supply Chain Game Changer. There is truly something of value for everyone no matter what challenge you are facing each and every day.
Here we present our Top 10 list for the second half of 2019. Enjoy!
At Supply Chain Game Changer we believe in sharing experiences and expertise from people in every industry and from across the globe. As such we have introduced our “Seasoned Leadership in Action™” Interview series at Supply Chain Game Changer. This interview is with Drew Morgan, Director, Global Supply Chain and Procurement at ModusLink.
By definition, Supply Chain is responsible for the continuity of supply and inventory of goods and services. If supply lines are disrupted, or if inventory runs out, Supply Chain is on the hook to restore supply.
Supply disruptions can bring a company to a grinding halt, compromising customer deliveries, revenue and profitability. With the stakes so high it should be no surprise that the very prospect of supply continuity issues can create fear and wreak havoc on the time, focus, and mental well-being of Supply Chain professionals.
How does this Fear of Running Out (FORO) manifest itself in the planning, processes and attention of those in Supply Chain?
Keeping track of your business’s inventory is essential to its success and profitability. To help accurately account for what’s coming in and out, and what is stored in a warehouse or at an external storage facility, businesses need to reconcile their inventory records with actual stock levels—a process known as inventory reconciliation.
This process involves tracking inventory transactions, calculating quantity differences, and performing balance checks to ensure the accuracy of records. Read on for more information about why inventory reconciliation is important for the health of your business, and how you can go about doing it effectively.
Many overwhelming strategies, processes and techniques will come your way if you have to learn and perform inventory management. It can be hard to make sense of the overall framework you need to use for any of the small business inventory management tips and techniques.
But it’s certainly possible to deal with them with some of the trusted practices in the industry. Large businesses have already pushed limits to minimize human error, and it’s high time you build solid inventory management for growing your company.
The company I had just joined went to market declaring that it was a world leader in Distribution and Logistics. That was a clear contradiction to the Inventory Turnover Mystery I was about to discover.
As I settled into the job and started learning, and studying, the various Supply Chain metrics I was surprised when I looked at the Inventory Turnover performance of the company.
Looking at recent and historical Inventory performance I could see that turnover always stayed around 5-6 turns with little variation. Everyone seemed content with the situation and unmotivated to make it better.
For a company that declared their world leading capability I was astonished. 5-6 turns? True leadership in this areas would require double digit turns.
I needed to figure out what was truly going on and get this Inventory Turnover mystery solved. This was another case for the Supply Chain Detective™.
Due to the intense competition and quick pace of the apparel industry, it’s no surprise that new apparel trends and styles appear with each passing season.
This essentially means that companies that operate in the apparel industry must be able to quickly change and update their latest apparel collections to stay relevant to their prospective customers and remain competitive.
And in order to achieve that, companies in the apparel industry need to have a dependable and efficient inventory management system in place to stay one step ahead of their competitors in a market that moves so swiftly and places such high demands on its participants.
The decision by President Trump to tell 3M to stop shipping masks to Canada and Latin America is astonishing given that all of humanity is facing the same crisis.
Supply issues started with chronic shortages of toilet paper, hand sanitizer and food goods of all kinds. Store shelves have been emptied of the most basic items that we all take for granted.
And then it quickly evolved to shortages of personal protective equipment (PPE) for our Healthcare professionals. The very people whose tireless efforts and personal sacrifices on the front lines of this pandemic don’t even have the basic equipment they need to do their jobs while protecting themselves and their patients.
I never knew what an N95 mask was, nor did I know that there were actually national stockpiles (now proven to be insufficient) of these masks and ventilators and other PPE.
Trump’s action with 3M raises questions for any country about what their Strategic Stockpiles should be and whether future sourcing decisions and actions should be based on parochial nationalistic needs or magnanimous global needs.
Inventory makes the world go round. Stockpiles of raw materials, components, sub assemblies, finished goods, returned goods, and reclaimed and refurbished materials enable all aspects of industry to function and all aspects of the economic engine to run.
Trillions and trillions of dollars of inventories exist all over the world in every conceivable form and in every conceivable channel. Inventory levels will determine whether any company will survive or die. Too much inventory can result in cash flow problems that lead to bankruptcy. Too little inventory can result in an irretrievable loss of business that can lead to business failure.
Given its incredible importance we’d like to explore what may seem to be a simple, yet complicated and truly strategic, question.
Everyone and every company has inventory of some kind or another. In your cupboards and closets, attics and basements at home you have an inventory of goods. At your place of work, whether that be in an office, on a manufacturing floor, or a warehouse, you are surrounded by inventory. And certainly, any store you go to, whether in person or online, has shelves stocked with inventory.