Prevent inventory discrepancies in retail

The four most important reasons for inventory differences:

Theft by customers or employees

Of the 4.1 billion euros in lost sales mentioned at the beginning, 3.5 billion euros are due to theft alone. Two thirds of this, in turn, is caused by customers and customers show ingenuity in doing so: they put new goods in their bags, try on new clothes and leave their old ones behind, exchange goods in boxes and buy expensive items as cheap ones and much more.

But employees also turn out to be thieves: some feel underpaid and want compensation. Others are looking for a kick or want to keep up with friends. Still others are motivated by social need.

Which encourages theft:

• a lack of awareness of the problem: training for employees draws attention to the issue.
• an unwise arrangement of the material: High-value and particularly theft-prone material should be stored in a place that is easily visible.
• a poor working atmosphere: where employees have resigned internally, the likelihood of theft increases.
• Isolation of staff: Where employees work alone, the risk of theft increases because they feel unobserved. In salesrooms, employees feel unprotected in the event of theft: Should they intervene? What happens if the thief or thief becomes aggressive?
• Obvious lack of interest: Security personnel or cameras indicate that someone is watching.

If the company is large enough, it is worth separating the incoming goods department functionally from the other areas of the company: For example, the goods receiving area should not be a passageway for staff. Employees’ cars should not be parked near the goods receiving area. It goes without saying that only authorised personnel should be in the incoming goods area (3).

Error in goods receipt

Inventory discrepancies also occur directly in the incoming goods department – because the material is incorrectly recorded, counted and labelled or put away in the wrong place. To avoid errors, BBE Handelsberatung (3) suggests the following, for example:

Immediacy:
Check incoming goods immediately for completeness, defects and identifiability. Mark defects clearly, document them with a photo and report them to the supplier. Enter appropriate notes in the system. Immediacy prevents potentially unpleasant work steps from being postponed and forgotten.

• Four-eyes principle:
  Stock management and stock accounting must not be carried out by one person. Positions that control each other must not be in the hands of one person.
• Process reliability:
  Express deliveries must be handled in the same way as other goods. They must first be recorded in the incoming goods department before they reach the sales floor.
• Uniqueness:
  To ensure that delivered and already accepted goods are not confused, the goods receiving area should be separated from other areas of the company. Possible buffer areas should be labelled as such.
  Invoices and delivery notes should arrive separately in the administration department. This is the only way to ensure a clear comparison between invoiced and delivered goods.

Spoilage, breakage and wardrobing

Damaged or broken material must be recorded in the system. To reduce the proportion, it is worth talking to the supplier about break-proof packaging. A consistently consumption-orientated ordering system helps to prevent spoilage.

Wardrobing is a relatively new phenomenon: customers order goods, wear them for a while and then send them back. Retailers are experimenting with different models to combat this: Some grant discounts if no goods are returned. A generally recognised and viable solution has yet to emerge.

A completely different source of error lies in excessive bureaucracy: if the issue of consumables is tied to complicated procedures, this leads to undesirable self-organisation by employees and private storage locations.

Detect and correct inventory differences

What to do if it does happen – if stock differences occur despite the best preparations? With Inventory 365, you can easily reconcile the stock values with the debit values in the general ledger. Inventory 365 solves the problem of the usually tedious analysis and reconciliation between the general ledger and sub-ledger of current assets.

If you would like to see for yourself, take part in one of our next webinars: we will introduce you to Inventory 365 and answer your personal questions.