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What Is Inventory? How to Control and Prevent Inventory Loss in Retail?

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Inventory losses are a big deal in the retail industry. In the retail world, shrinkage, or shrink, is the term used to describe stock depletion due to shoplifting, employee theft, administrative errors such as record keeping, pricing, cash counting, and supplier fraud. One more category of shrinkage, represents all the unknown causes of damage in your store. While retailers suffer losses in their bottom line, it is an expensive problem for all retail industries.

This is why more retailers have to develop and implement a loss prevention strategy for their stores. 80% of retail businesses are investing in the budget to control inventory losses.

# What is Inventory/Stock In Retail Businesses?

The term inventory/ stock is used for goods (Products/Items) available for sale and raw materials used to produce goods available for sale. Inventory represents one of the most important assets of a business because the inventory represents one of the primary sources of revenue generation and subsequent earnings for the company’s shareholders. 

# What is Inventory/Stock Management?

Inventory refers to the goods kept for future use. Each retail chain has its own warehouse or store to stock the goods where the current stock is replenished and it is also the storage of products used in times of crisis. The retailer keeps track of stocked goods and ensures that there is a surplus inventory to avoid being “out of stock”. Such a process is called inventory management.

# What is Stock Control?

Stock control is also known as inventory control. It is used to show how much stock you have at one time, and how you track it. It is the process of maintaining a reasonable quantity of stock, so a business can meet customer demand and needs without any delay.

Efficient stock control allows you to have the right amount of stock at the right time, right place. It ensures that capital is not tied unnecessarily & protects production when problems arise along with the supply chain.

Stock control is important because it can be the difference between profit and loss. It keeps costs down while increasing its profitability on every sale. There are several stock control methods, including:

    • Just-in-time (JIT)

    • FIFO

    • Economic Order Quantity

    • Vendor-managed inventory

    • Batch control

Regardless of which method you use, you need a stock control system. Stock control systems range from traditional pen and paper to inventory accounting software.

# Why Stock Control is Required?

Stock Inventory control should be a priority for every business owner. When you control your stock, you will see improved warehouse efficiency, better customer service, and clear visibility of stock price and profit margins.

The main purpose of stock control is to reduce the cost of stock holding while ensuring that you can meet customer demand and ensure that there is enough material for production. As a businessman, you should always have a ‘safe’ amount of stock so that you can react and cover any unforeseen issues. Here we will explain some benefits of stock control for your business.

# 5 Benefits of Stock/Inventory Control:

How stock under control will be beneficial for you:

1. Increase productivity and efficiency: As a Wholesaler, distributor & retailer you can make fundamental improvements in productivity and efficiency in your inventory  When you implement inventory management software. The software will eliminate time-consuming manual processes & in result it will provide time for employees to focus on other areas of the business.

2. Set up warehouse: cluttered warehouse creates hundreds of problems – staying on top of inventory is one of them. When you have a clear stock management strategy, it becomes very easy to organize and manage the warehouse.

3. Running out of stock: For a company to do business successfully, they must have the products, materials, or services that the customer requires. Out of stock occurs when a product, material, or service is not available to meet customer demand, and typically occurs when demand exceeds the normal sale. Running out of stock not only hurts the reputation of a business, but it can also cause major financial losses due to lack of sales.

4. Your customers will come back for more: If your customers know that your products are always available and they complete their orders in good time, they are likely to return. To remain competitive and gain an edge, you need to be able to meet customer demand in the most efficient way.

5. Sell ​​your products easily using multiple channels: If you are selling products on multiple channels such as Amazon, Flipkart, phone, or stores, then staying on top and manually tracking these orders from all channels can become a minefield. With fully integrated software, your stock control will be managed from each channel so that stock levels remain up-to-date and keep customers happy.

# What is a Stock Loss in Retail?

Any damage to the stock before the sale that prevents it from being salable is considered as stock loss and adds to a retailer’s shrinkage calculation. If stock loss is due to theft and robbery, then we should have evidence of that to consider is as Loss..

Depending on the business model and the type of goods sold, stock damage may be a minor or significant issue. Trade value, fragility, and seasonality all increase the need for careful consideration of the best strategies to ensure maximum sales through stock at full price.

Each retailer will have to watch their actions closely to determine the causes of stock losses that most affect their business. One of the primary reasons for fashion retailers may be cuts or marketdowns due to the stock season. For luxury retailers, this can result in malfunctions as a result of fabric pulls, leather marks, and other forms of damage that make the product uncontrollable. Supermarket causes of stock loss may include:

  • Deduction: Product that must be gone before any date

  • Wastage: Stock that goes into bin due to bad or inefficient part

  • Shrinkage: Unacceptable or unavailable for share due to an administrative error, theft, flawed recording, or any other unknown reason

Having an awareness of the causes of stock losses in their specific context allows retailers to develop initiatives that can help to reduce losses.

# 7 Strategies to Control the Loss of Stock in Retail Business?

There are many strategies to control the loss of stock in your retail business. Hopefully, they can have some impact on reducing costs for your business. We have prepared a list of 7 strategies to control stock losses-

1. Use an EPOS system:

Your EPOS (Electronic Point of Sale digital) System is a big asset to your business, many businesses have no idea what it can do. It is an expensive tool but is often used as a cash box rather than managing stock and cash flow more efficiently. Use it to track transactions, restrict employees to what authority they have. Set the system to allow rebates, refunds or rebates to be granted by the manager only.

2. Find out who is stealing:

There are several potential culprits causing the decline in your stock. Your customers, employees, or suppliers are all possible threats to your business.

  • Your customers – usually for personal use or for resale. 

  • Your employee – There are many reasons why employees steal from their companies to lower prices for friends, dissatisfaction at work. A modern EPOS system can reduce this.

  • Your suppliers – suppliers and contractors may overcharge you, resulting in costs for services or products that you do not actually receive.

  • Incorrect pricing – Pricing items incorrectly will be examples of both errors that will add significant losses.

3. Keep security in place for both customers and employees:

  • Install CCTV – Installing visible security cameras throughout stores and storerooms has proven to detect thieves. Review the cameras weekly, even if there is no clue of shrinkage.

  • Correct signs – Post-anti-theft signs around the store, warning of penalties resulting from theft.

  • Secure Stockrooms – Ensure that your stockrooms are not readily available to all staff members in all cases. Having limited access allows you to choose who has contacted the backroom stock, cutting into potential theft.

4. Beware of scams:

Make sure that your employees are aware of any scams you hear about, new tricks always appear that are difficult to keep on top of. Try and be aware of these and keep your employees in the loop as well. Lakhs are lost every year due to scam artists.

5. Know what stock you have:

Your stock is your livelihood; It is essential that you know what stock you have because there is a lot of delivery and sales process every day. Ensuring that you carry stocktakes as often as necessary.

6. Run a live-stock system:

Have a system, which enables you to follow the motion of each item in stock at the click of a button. Having control over your stock from arrival to purchase will help eliminate discrepancies and make them easily identifiable. Using a system will allow it to run more smoothly.

7.  Check for Discrepancies:

When it arises that a discrepancy has occurred, it should be noted, Investigate which products are causing problems through stocktaking or analysis of a specific department. If these are due to breakdown, it is ensured that they are recorded and have no accounts.

The last note here is to remember that everyone in your store is responsible for missing, stolen, and broken items. Employees will always be more careful knowing that they are responsible for any discrepancies that occur under their watch.


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