Retailers can avoid many types of inventory shrinkage by ensuring the products themselves aren’t causing self-inflicted harm and by deploying technology and data tracking to catch errors before losses mount.
Packaging and price file considerations
Retailers must always address proper robust packaging with their suppliers. Proper packaging prevents damage, holds up through a multi-layered supply chain, is easy to shelve and ensures multiple barcodes aren’t visible.
Crates that arrive in a retail warehouse are often meant to be broken down into smaller sets for shipment to stores. “Creating clear messaging on packaging around resale and multipacks minimizes confusion for employees who are marking products as received,” Peel said.
Clear labeling is also key to ensuring customers don’t accidentally ring up an individual item instead of the full packaged set, such as an individual soda can that is part of a six-pack. Making sure the correct barcode is easy to scan also minimizes the chance of customers placing the item in their cart without scanning, or of an employee using generic “dump codes” to quickly move past an item.
New self-checkout video technology helps retailers detect not only theft but also accidental mis-scans, promotion errors, and non-scans by customers in real time.
Video technology helps customers quickly and correctly identify the proper item by narrowing selections based on item size or color. If the video system recognizes a potential error, it can automatically notify the check assistant overseeing the self-scan area. This helps employees monitor more checkout lanes.
Additionally, machine learning technology can enable a video system to improve its recognition of questionable behaviors, based on previous pattern observations. “Retailers benefit through real-time insights into the products or customer patterns that are driving retail inventory shrinkage at self-checkout areas,” Peel said. “This method means retailers can capture, correct and quantify loss quicker.”
Related: Six principles of effective shrink management at the checkout
Continuous Data collection
Retailers need continuous data collection to proactively identify and eliminate sources of inventory shrinkage.
This requires a team capable of analyzing all this data from video and self-checkout machines.
“Traditionally loss prevention teams are field-based and look after individual store clusters,” Peel said. “This team needs to be centrally based and looking at all shrink from a bird’s-eye view across the entire enterprise.”
That said, the analysis of this data needs to be available to local stores, to give their owners and operators a view into location-specific anomalies that may indicate an opportunity to reduce inventory shrinkage.
An effective retailer data team operates outside of traditional operational areas. Teams must talk to peers in innovation, strategy, technology, category, marketing, and packaging to catch potential problems before they have a chance to impact operations at the store level.
Peel offered a recent example in the UK. When the government passed a sugar tax, it layered an additional process point onto an overwhelming volume of products, creating widespread opportunity for error within price files, barcodes, packaging, and more. A coordinated team is crucial to ensuring those changes don’t lead to inventory shrinkage.