- The people in your sales department promising your customers apparel or footwear that appears to be in stock but isn’t actually available to deliver
- The additional cost to replace the missing material
- Paying your employees to search for missing products
4 key causes of shrinking inventory
- Theft: This is the number one cause of a shrinking inventory, and it often comes from employees who help themselves to your stock.
- Careless record keeping: If everyone involved is not attentive to recording all transactions, it affects inventory.
- Errors: When a shipping clerk packs seven pairs of shoes instead of six, or you return a dozen boxes of buttons to your supplier but only reduce your inventory by one box, you are causing inventory discrepancies.
- Vendor Fraud: A dishonest vendor bills you for a quantity of material but ships less than promised
Solutions for inventory shrinkageMinimizing inventory shrinkage starts with accurate inventory tracking. This is accomplished with frequent cycle counting and the use of Enterprise Resource Planning (ERP) software that is optimized for the apparel and footwear industry and is fully integrated with warehouse and inventory management components. This ensures that inventory numbers are up to date and accurate across all systems, and will improve key aspects of your fashion business operations, including reduced inventory, better customer service, and fewer data entry errors.
While it may not be possible to totally prevent inventory shrinkage, you can significantly reduce it by having a strong knowledge of your inventory status. An ERP system, specifically designed for your fashion enterprise, will assist you in keeping accurate counts at all locations and verify the quantity of items in your shipments, thus avoiding most “honest” shrinkage. And transparent and methodical procedures, along with well-trained and trustworthy employees, will go a long way to reducing “dishonest” loss.