How to Solve the Problem of Shrinkage in Grocery Stores

How To Solve The Problem Of Shrinkage In Grocery Stores

Ah, shrinkage, the silent bottom line killer, destroyer of employee morale, and an avid mutilator of customer satisfaction. Inventory shrinkage is absolutely the reason why finding the right inventory balance
for your grocery store is vital.

But inventory shrinkage is more common in your grocery store than you realize. In fact, many retailers expect 1 to 2 percent of inventory shrinkage, which seems minimal, but had an overall cost of $61.7 billion in the retail industry in 2019.

Therefore, dealing with inventory shrinkage requires strategies that reduce its rate as much as possible. And that starts with understanding what inventory shrinkage really is and how it happens.

What Is Inventory Shrinkage?

As you work on getting products on your shelves faster
, you quickly forget to keep track of the actual inventory you have vis a vis the amount of stock you have in your records. The difference between the two is what is referred to as inventory shrinkage.

Granted, poor inventory management for a grocery store poses the risk of significant losses. As such, things like expiry dates and replenishing stock become essential when making your inventory orders.

So, if you are missing any inventory that is otherwise present in your digital records or order list, you have retail shrink. How does it happen? The primary causes of inventory shrinkage are employee theft, vendor theft, inventory control and administrative errors, and shoplifting. Tackling each of these issues is a gateway to solving the problem of shrinkage in grocery stores.

Let's Start With Vendor Theft

Vendor fraud was the second most prevalent fraud recorded among global businesses
between 2016 and 2017. The unincumbered truth is that you are vulnerable to vendor fraud if you rely on suppliers. There is nothing wrong with putting trust in the relationship you've built with your suppliers over the years.

But you owe it to yourself to double check and triple check your vendor documentation to ensure everything is provided as indicated. Your vendor might be honest, but the people in charge of delivery and packaging might not be so kind.

So, check all the items are delivered and not damaged, confirm that the pricing is correct, and remember to check the expiration date of all your perishables since it affects your shelf life. Use your inventory management system to organize purchase orders, book-in process, and stock count.

Then Focus On Your Employees

Your employees play a significant role in reducing your shrinkage as much as possible because they are one focal point within your business processes. Admittedly, your employees affect three causes of inventory shrinkage: employee theft, customer theft, and inventory control and administrative errors. Let's explore:

1. 
   Employee Theft
   

Like your vendors, your employees might not be as trustworthy as you'd like them to be: some have been known to create fraudulent relationships with your vendors. In some cases, well-meaning employees offer customers discounts or favor family and friends at the cost of your bottom line.

Therefore, start by ensuring you screen all your employees before hiring them. Take background checks seriously, check referrals, and follow up on their references. During the onboarding period, ensure that all your employees know your company policies.

Create and distribute a company handbook with all your policies, including one on employee theft in case of monetary, intellectual property, actual goods, or any other type of theft. Add the documentation to your company app to make it readily accessible.

Don't forget to ensure every employee has read and understood the documentation by requiring a signatory submission.

2. 
   Shoplifting
   

Retailers lose $13 billion worth of goods to shoplifters annually
. This makes about $35million worth daily. To reduce the rate of shoplifting in your grocery store, train your employees on tactics to prevent customer theft.

Start by creating awareness of the different tacts customers use, like product returns or distractions with children. In your training manual, include the procedures employees should follow if they notice any suspicious activity in your grocery store.

3. 
   Inventory Control And Administrative Errors
   

Human error also impacts your inventory shrinkage significantly. As such, automate your systems and standardize everyday operations. An inventory management system, for instance, will improve your inventory control and reduce the manual work from your employee responsibilities.

This leaves them with essential tasks like logging damaged items in the digital system to help keep track of your inventory. Create a daily checklist for each job title, so your employees know what to do, then make a reporting system where employees submit their achievements for the day.

Use this to enhance employee motivation by including a reward system for the best employee of the month. Or encourage your employees to include their challenges and suggestions for improving systems.

Technology Is A Mast Have!

Technology will be the saving grace you need to reduce your inventory shrinkage. Here's how:

• Technology like video surveillance keeps employees and customers from stealing your grocery store products. And in case theft occurs, you have evidence ready to incriminate the culprit and get compensation for your loss. Surveillance also helps your employees to watch suspicious customers in your store.

• Add frequent inventory audits, like calculating your inventory using the FIFO method
  to keep track of your business assets. An excellent stocktaking app, for instance, tells you the quality and quantity of your grocery products, making it easier to identify issues that cause shrinkages like damage, theft, or product misplacement in real-time.

• Implement a two-person system that checks stock counts to help reduce employee theft. It also encourages accountability within your entire staff.

• Barcodes are also excellent technological tools for managing your stock-keeping system. They also speed up your checkout line, increase sales, and maintain an accurate inventory count.

Overall, automate any processes you can to enhance the accuracy of your inventory, optimize, your processes, and reduce errors. An automated system also records all your data which you can use to gain insights that help reduce inventory shrinkages.

For instance, once you notice that specific items are privy to shoplifting, you can relocate them to the most visible locations in your store. Or you can use mirrors to make hidden spots more visible to employees in your store.

How Erply Can Help

Erply's POS system is designed to make all your processes simpler, optimized, and more effective. For instance, our Erply POS is an employee management system that keeps track of your employee activities using logins.

Therefore, you have real-time access to employee sales, returns, inventory adjustments, and other records, increasing employee transparency and reducing fraud. Also, the POS acts as a communication system that helps your employees quickly identify shoplifting incidences and communicate them to relevant employees through the in-app chat.

The POS system reduces your grocery store's friction by optimizing your business operations. For instance, the Erply POS maintains a clear pipeline of your products, orders, payments, and purchases, regardless of the number of vendors you have.

This keeps your best products stocked and vendors in check. It also reduces the burden on your employees, which improves their morale and honesty. Keeping that in mind, you can enjoy this and so much more if you try Erply with the 60-day free trial
.