Stop Potential Inventory Leakage

Bill McCurry

“Like a punch to the gut,” the retailer sighed. “I didn’t see it coming, but I felt it long afterward.” What he felt was a substantial amount of inventory misappropriated by a “trusted employee” who took advantage of a lapse in loss prevention measures.

My July 2016 column and article on loss prevention provoked a slew of impassioned stories and/or inquiries from readers. With thanks to all who called or emailed, here’s a synopsis:

“It’s not comfortable to talk about it, so we don’t. It’s ‘head in the sand’ thinking, but it’s more comfortable to ignore than deal with until we discover there’s been a significant loss. Then we wish we’d had the courage to be proactive instead of a victim.”

“We’ve allegedly got policies. The employees don’t know them all, but it’s immaterial. We don’t enforce them.”

“Our inventory never balances. We blame it on ‘clerical errors’ and don’t invest the labor to get correct reports. We really don’t know what our inventory losses are. We tell ourselves we’re okay when our cash flow is very tight.”

When spoken honestly, management looks like an easy target for employees, vendors or outsiders tempted to take advantage of a lax situation. The most common question has centered around: “How do I tighten up my loss prevention policies without accusing everyone of being a crook?”

First, decide how serious you are about tightening up your loss prevention. Don’t raise the issue if you won’t enforce your policies. Think about these suggestions only if you’re committed:

- Hold one-on-one meetings with top employees: people aligned with your values and your success who can be thought leaders for your team.

- Explain the cost of theft to U.S. retailers. (According to the 27th Annual Retail Theft Survey, dishonest employees steal over six times the amount stolen by shoplifters.) Explain you need their help to keep honest employees honest. They must be leaders in embracing new loss prevention policies and/or enforcing existing policies.

- Emphasize that everything positive in your company revolves around profitability. Without profit you’re working only for the landlord, vendors, taxes—everything except the owners and the employees. Profits fund employee raises, new equipment, expansions and other fun things.

- If you’re lax with loss prevention policies you provide temptations for otherwise honest employees to “borrow” corporate assets. Management owes diligence to their employees.

After your thought leaders have bought in, hold team-wide meetings to announce your “new” attitude toward your loss prevention policies, explaining what you told your thought leaders. Seek their understanding and support.

Changing corporate culture is difficult. Just do it! Insist that every time product moves off the property, whether to a landscaping job, a customer purchase or shipped to another location, there’s serial-numbered paperwork documenting the transaction. The delivery person shouldn’t write up the paperwork. A third party should do it. The receiver signs for it and that signed copy is checked against the shipment. All discrepancies are instantly investigated. If the office doesn’t receive the signed receipt copy within 24 hours, start an urgent hunt for the shipment and/or paperwork.

Soon employees will understand inventory can’t go missing without someone noticing. It’s a lot of work if current systems are sloppy. You’ll find tightening up the process delivers better information for inventory control and marketing successes. You’ll know what you do and don’t have in stock. Plus, you’ll sleep better knowing you’ve closed one avenue of potential inventory leakage. GP

Bill would love to hear from you with questions, comments or ideas for future columns. Please contact him at wmccurry@mccurryassoc.com or (609) 688-1169.