| The way I hear it, the "typical" annual rate of inventory | | | | compensation, a good working environment, |
| shrinkage in the retail industry is in the order of 3 to 5% | | | | employer-sponsored activities that improve morale, |
| - let's split the difference and say 4%. "Industry | | | | good communication and concern for the success of |
| Experts" (whoever they are...) suggest that of that | | | | a company. |
| total inventory shrinkage, 50% is due to external theft; | | | | The only way to reach some employees is through a |
| 30% is due to internal theft; and 20% is due to | | | | "stick" of an effective security program and a |
| "messed up paperwork". Other reasons for business | | | | straightforward policy of prosecuting any employee |
| losses, such as breakage, robbery, and vandalism, are | | | | caught stealing. A good Point of Sale system should |
| separate problems that we're not going to deal with | | | | balance between carrots and sticks. This article will out |
| here. | | | | line some carrots, while the next in the series will be |
| Do the math in your head - what's 4% of all the stock | | | | the sticks. Note: Any additional cost from "carrots" will |
| you've ordered this year worth? Pretty grim numbers. | | | | be more than made up by savings from reduced |
| If you're still with me, I'd like to suggest a way to | | | | inventory shrinkage. |
| reduce these figures by almost half - a way to reduce | | | | • Reward good salespeople by paying |
| inventory shrinkage to a more manageable 2%! I work | | | | commissions. Even a small percentage sends a good |
| for a company that develops an integrated point of | | | | message. Your Point of Sale system should be able to |
| sale software system that ties together the front end | | | | easily track and report on commission sales • |
| point of sale with inventory control and back-end | | | | People like discounts, and to save yourself from the |
| accounting, so it should come as no surprise that I'm | | | | "five fingered discounts", set an Employee pricing level |
| going to suggest such a system as a solution to | | | | for some or all of your inventory. Your POS should |
| reduce inventory shrinkage. Many of our clients have | | | | help identify the profitability of inventory items, letting |
| reported a dramatic savings, enough to pay for the | | | | you set a variety of pricing levels. You can even |
| software and then some in less than a year. | | | | expand on this by allowing staff to sell a certain |
| What I'm not going to do is suggest that our Windward | | | | amount of inventory at Employee discounts to friends |
| System Five is the only quality product that does what | | | | and family (it does wonders for their ego). Monitor |
| I'm going to cover - so do your homework and | | | | these amounts through your POS • Move old stock |
| consider any POS system that measures up. A good | | | | and improve staff morale with the use of SPIFs (Sales |
| Point of Sale system can help eliminate internal theft | | | | Promotion Incentive Fund). A couple of movie tickets |
| and "messed up paperwork" that accounts for 50% of | | | | or a gift certificate awarded with a little bit of |
| the total inventory shrinkage. | | | | ceremony can go a long way. Any cost is more than |
| In this article, I'm going to show how a Point of Sale | | | | made up by having moved stale inventory. Your POS |
| system can be used to reduce internal theft by using | | | | should be able to easily report on specified SPIF-eligible |
| various positive measures. Following articles will deal | | | | sales • Profit sharing is the quickest way to make |
| with reducing internal theft through increased security | | | | all staff feel they have a vested interest in making the |
| measures, while the last article will address how | | | | company profitable. Think about re-investing the |
| eliminating the "paperwork mess" can help reduce | | | | money saved from a successful inventory shrinkage |
| inventory shrinkage. | | | | reduction program back in to the company in the way |
| "Why would my staff steal from me!" you say? The | | | | of a profit sharing program. Your POS system should |
| retail industry attracts unskilled workers, often at | | | | integrate fully with an Accounting backend, so profit |
| minimum wage. Some will be tempted steal, for | | | | can be monitored on an ongoing basis, rather than a |
| whatever reasons. What we will try to do is shift the | | | | month or two after year-end • Good |
| Risk/Benefit ratio to a point where the risk of being | | | | communication goes a long way to make staff feel |
| promptly caught is much greater than the minimal | | | | they're part of the company. Use the CRM part of |
| benefits they can gain. Think of it as the ol' "carrot and | | | | your POS to keep track of employee birthdays and |
| the stick" approach. The "carrot" includes things like fair | | | | special events. |