Inventory is one of the most critical assets in a business, and therefore an effective inventory management system is one of the most fundamental business management tools in a business organization. Undoubtedly, managing inventory doesn’t merely include classifying the lists of items according to their perspective usage, but also, it involves making specific provisions to prevent the undesirable inventory loss. Usually, these losses occur due to following reasons:
- Employee theft
- Administrative error, e.g. – shipping errors, warehouse discrepancies, and misplaced goods.
- Vendor fraud
- damage in transit or in store
- erroneous stock taking
- Miscellaneous or unknown reasons
Inventory loss or Inventory shrinkage is an accounting term which is defined as the difference between stocks as recorded in the accounting books and that which are physically available in warehouses or stores etc.
According to the 2008 National Retail Security Survey conducted at the University of Florida, shrinkage rate is found to be close to 2%, which in absolute term is nearly $40 billion. Such a huge loss is detrimental to the growth of any industry, not just, retail industry. Other industries, including manufacturing, supply chains have also reported facing such issues in their business operations.
Had they been able to either eliminate or at least reduce the inventory losses or shrinkages, the entire business environment could be robust and enriching each enterprise, entrepreneurs, and individual employees. And, that wants for inventory management solutions, which could plug the loopholes in the inventory management.
Now, as the nature of business organizations in the contemporary times have been greatly changed as compared to previous days. Now, the enterprises operate at the global scale- multiple countries, heterogeneous societies, cultures and markets and so dealing with multiple currencies, products among others.
This makes the entire inventory management a complex task, which is almost to perform manually and using traditional means- pen and paper, spreadsheets. In this case, the responsible employees are required to take down the minute details of the products whether in store or on shipment, such as the product code, types, quantities etc.
This task becomes more complex, when you have set up multiple warehouses, stores. Unless, you are updated with inventory across the entire organization in the real-time, you are unlikely to achieve your goals- of preventing inventory shrinkage.
A cloud based inventory management system is the best bet here. Let’s look into this briefly, what are the specific features that such solution contains, which helps you:
Quick Barcode Scanning– With the objective to eliminate manual handling of the inventory, such system automatically scans the barcode displayed on the products and register into the system with each fine details, such as- product name, type, weight, dimensions, etc. The system enters them the database which can be accessed by the authorized users only.
Multiple Organizations, Business Units & Locations- Such system organizes the inventory items according to organization structures, which often include- multiple organizations, business units and locations. This gives a big picture of the entire assets in the organization, and paves the way for effective decision making regarding inventory management.
Multi-Platform & Global Accessibility- The best part of an online inventory management solution is that it can be accessed from any part of the global from any type of mobile device- whether Laptops, Tablets or Smartphones. Moreover, if they run on any platform like- Android or iOS. This way, such system facilitates the mobility of the users in the organization, and enables the real-time updating of the business critical data.
Let’s take a relook into the original question- how to prevent the inventory shrinkage?
The usual answer may be- to make aware the employees about inventory shrinkage and train them accordingly. The duties of the employees may be kept rotating so that employee theft may be prevent. You may secure your warehouses or stores by deputing trained and armed security guards to shoplifting. You may set-up in-store surveillance suing CCTV Cameras to eliminate the possibility of theft even during working hours.
Yes! That helps, but subscribing a cloud based inventory management software is far more affordable and effective solution that would help in meeting these issues in an effortless manner. It’s evident that each inventory items, apart from being included in accounting books, will also be verified physically using barcode scanning device, and updated in real-time. This prevents any kind of disparity, and so inventory shrinkage, such as – erroneous stock taking.
As such a system maintains the fine details including expiry dates of perishable items whether edible or non-edible, it helps in avoiding the shrinkage due to spoilage or obsolescence.
The employees, especially labors, dealing with inventory are usually under a responsible supervisors who has opened a user account within the automated cloud based system. It prevents the chances of employee theft.
As such a system has automated numerous manual processes, it helps in eliminating the administrative errors in a great way.
Cases of vendor fraud can be minimized by ensuing the effective vendor management and incorporating order and invoice templates to accelerate the enterprise-vendor transactions in a transparent manner.
Last, but not the least, Mobility feature in such system helps in promptly recognizing damage in transit or even in distantly located warehouses or store.
Thus, we can see how a cloud based inventory management system can drastically your business loss due to inventory shrinkage.
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