An inventory discrepancy is a disparity between the recorded amount of product in a business’ inventory system and the actual quantity that exists, resulting in either a surplus or shortage of stock. Every retail business faces inventory discrepancies at some point, however those that happen frequently or on a large scale can negatively impact a business in several ways:
- Financial loss caused by loss of sales or costly write-offs
- Customer dissatisfaction
- Increased operational and labor costs
- Inaccurate financial reporting and forecasting
- Production delays
This blog examines the causes of inventory discrepancies and proposes effective retail management methods that can prevent them from occurring frequently.
What causes inventory discrepancies?
Although the majority of inventory discrepancies result from poor inventory management, understanding the other potential causes will help your business prevent them occurring.
Inventory discrepancies are often caused by unintentional human error. This could be everything from mistakes made during inventories or stock organization – such as data entry errors, miscounts and mislabeling – to supplier errors involving the dispatch of incorrect items, or the incorrect quantity of items. A loss of inventory could also be attributed to an intentional human action – theft, either internally from employees or externally from customers.
Outdated technology can also cause inventory issues, including Point-of-sale (POS) or warehouse management systems failing to sync with the main inventory system, and as a result not updating stock levels accurately.
How to reduce inventory discrepancies
Using both technology and common sense strategies, there are several ways in which you can reduce retail inventory discrepancies.
Regular audits and cycle counts
Instead of waiting for your outlet’s yearly stocktake, get in the habit of conducting frequent, small counts of specific inventory sections (also known as cycle counts) to catch discrepancies early. Ensuring physical stock is in line with recorded data will help identify patterns of errors or theft.
Leverage technology
Barcode scanners or RFID tags which work in accordance with integrated inventory management software enable retailers to accurately track stock in real-time, and include features like low-inventory alerts, giving staff immediate insight into stock levels. By automating stock renewal, manual data entry is reduced and there is less margin for error.
Monitor for theft and shrinkage
Fixed video cameras are fundamental in helping to create a safe retail environment. Mounted across the premises, from parking lots to store rooms to store entrances, they act as a deterrent, providing indisputable evidence, and maintaining staff and customer safety. Capturing instances of theft or damage will support inventory dispensary investigations, as well as help you to understand its impact on stock accuracy and prevent it occurring again.
Safety can be further enhanced with intelligent access control technology, monitoring those entering and exiting key areas including stock rooms and preventing unauthorized entry. It also provides staff with hands-free access and instantly detects if a door is propped open.
Deliver comprehensive staff training
Ensuring all retail staff are thoroughly trained in inventory management procedures and technology use is key to minimizing inventory discrepancies. Implementing standardized processes will help to foster a culture of accountability and continuous improvement, so staff can catch and correct their own errors. This should include how to maintain a well-organized warehouse to prevent misplacement of stock, and how to verify and check a shipment to confirm stock quantities and specifications match.
Training should also cover the impact of discrepancies on business, helping to motivate staff to be more diligent. As well as acting as a deterrent against anti-social behavior and capturing indisputable evidence, equipping teams with body cameras also helps to make staff more aware of their actions, reducing errors and promoting more professional conduct. The captured footage can be crucial in supporting staff training: employees can view their own actions and their colleagues ‘after-the-fact’ to understand how they can both provide better service and prevent theft where appropriate.
As a trusted provider of retail technology, Motorola Solutions delivers integrated solutions that simplify operations, enhance security and reduce inventory discrepancies in retail environments. From intelligent video security to real-time communication solutions, our ecosystem is designed to help you build a safer, smarter, and more profitable retail business.
