4 Ways to Reduce Inventory Shrinkage


If your business carries inventory, you can’t avoid shrinkage...but you can manage it. By knowing the cause(s), businesses can reduce it to a manageable level. 


Here are four ways businesses can reduce shrinkage:


1. Counting your inventory regularly

Counting your inventory regularly will help your inventory be organized in the right section, look organized and help reduce inventory shrinkage. Set the minimum level of your inventory, and reorder products only when they get close to that level. Counting regularly will give you full visibility on which products may be expiring soon or not selling. Ensuring that you’re not over-ordering can prevent inventory damage, loss and carrying costs.

Counting your inventory regularly will also reduce the likelihood of employee theft. Employee theft is much more likely to occur if inventory systems are unorganized, untracked and improperly run. To reduce your business’s shrinkage, count your inventory regularly and keep track of any shrinkage trends.

2. Train your employees and communicate policies

Inventory theft isn’t always internal. In fact, shoplifting can account for a large part of inventory shrinkage if the retailer doesn’t have proper policies in place to deter shoplifters. 

For retail stores, all employees should be trained using guidelines in place to handle thieves. Bringing attention to the issue of shoplifting may increase employee awareness when shoplifters enter your store. As a rule of thumb, all expensive items should be locked away in a case or placed at the back of the store. You should also consider having an employee stationed at the front of the store to greet customers. If thieves are greeted as soon as they enter the store, it may deter them from stealing as they’ve already been acknowledged within the store.

For internal theft, you should train your employees on all company policies and communicate those policies consistently. Your store should have a policy in place for managing employee purchases and returns, authorizing customer discounts and handling damaged or returned products. Once these policies are put in place and your team understands them, your entire team can work together to prevent loss and theft.

3. Store your inventory in a safe place

It’s not uncommon for inventory to be damaged while in storage or on display. Careless handling or storage of products can result in inventory breaking and being permanently damaged. You should always remember inventory storage best practises such as:

  • Store heavier items on lower shelves
  • Match the storage solution to the product (For example, is your item perishable? If so, it should be kept in a fridge or freezer, and not on regular dry shelving).
  • Avoid storing inventory near high traffic areas
  • Install inventory protectors or barricades for further protection

4. Create a barcode and SKU for each item

Though this may seem obvious, not all retailers have barcodes or SKUs for every product item. Barcodes and SKUs are essential for both inventory counts and inventory tracking. Labeling your items ensures all items are recorded into your inventory system and can prevent inventory loss.

PureCount’s inventory counting system uses inventory barcodes to track each individual item and calculate variance. If you don’t already have a barcode system in place, consider creating barcodes for each product so you can keep accurate records of your inventory and reduce the likelihood of shrinkage.

Interested in learning how PureCount can help reduce your business’s shrinkage problem?

Reach out to our team today for more information. 


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