Mitigating Shrinkage- Strategies for Securing Store Operations in Retail Environments

Mitigating Shrinkage- Strategies for Securing Store Operations in Retail Environments

Importance of having action plans around shrinkage

Having action plans around shrink prevention is essential given the enormous losses businesses incur due to shrinkage. Apart from short-term revenue loss resulting from losing merchandise, shrinkage can also mean an increased cost for running the remaining stock (Beck & Peacock, 2007). As the operational costs go higher, the retail store may end up transferring them to consumers. That can lead to a loss of customers.

Having appropriate shrinkage prevention strategies can also help a business detect operational mishaps that cause merchandise loss. That concerns firms that already have ways to prevent shoplifting and employee theft but still incur losses (Beck & Peacock, 2007). Such losses may have been caused by inefficient accounting and administrative systems that fail to keep appropriate inventory and cash flow records.

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Strategies for managers to utilize inventory adjustment reports to reduce shrinkage in their stores

Inventory adjustment reports help the retail store to detect and alleviate errors and omissions caused by human beings. An inventory management software program can help the business record inventory in the business and send reports without the need for manual handling of goods. The program helps keep all inventory handlers accountable by tracking stock movement from shelves to the point of sale.

The primary shrink-impacting operating process most vulnerable to theft and how to fix it

The leading cause of inventory shrinkage is shoplifting. Some customers employ various ways to exit the store with goods that have not been checked out yet. A common practice by such customers is stuffing products in their pockets or clothes (Beck et al., 2003). The business should install CCTV cameras to prevent this shrinkage-impacting operating process.

Metrics that will determine if the installed CCTV cameras are effective

Tracking inventory shrinkage will help the business determine whether the strategies it applied to prevent shrinkage are working. That involves counting inventory and comparing it to previous numbers (Beck et al., 2003). If there is a decrease in shrinkage percentage, then that means the retail methods to reduce shrinkage are working. However, if the shrinkage percentage keeps rising over time, then the retailer should implement alternative shrinkage prevention strategies.

References

Beck, A., Bilby, C., & Chapman, P. (2003). Tackling Shrinkage in the Fast Moving Consumer Goods Supply Chain: Developing a Methodology. Security Journal, 16(2), 61–75. https://doi.org/10.1057/palgrave.sj.8340133

Beck, A., & Peacock, C. (2007, November 1). Lessons from the Leaders of Retail Loss Prevention. Harvard Business Review. https://hbr.org/2007/11/lessons-from-the-leaders-of-retail-loss-prevention

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Instructions
Use the content of this week’s readings and videos and additional research to complete the following:
Explain why having action plans around shrinkage is important.

How can managers utilize inventory adjustment reports to reduce shrinkage in their stores?

Select one major shrink-impacting operating process that you believe is most vulnerable to theft (by customers or associates). Propose one recommendation for reducing or eliminating theft in this area of your store’s operations.

How will you measure whether your recommendation is successful? What metrics or reports will show an improvement or a change in levels?