Don’t Let Theft Shrink Your Business! Here’s How Technology Can Help Reduce ShrinkageJason Siddall
Theft is not something from which businesses can afford to, well, shrink away. Shrinkage – particularly in the retail industry – costs companies heavily every year. In the US alone, retailers lost over $42 billion in 2017 – half of all the money lost to shrinkage worldwide that year.
Defined simply as “a loss of physical inventory,” shrinkage affects the bottom line of every single business. Essentially, it’s the difference between what your accounting records say you should have – usually calculated from purchase orders and receipts – and your actual, physical inventory. Although theft is a significant contributor to shrinkage – particularly in retail – it can actually take many different forms, including bookkeeping errors, damage and vendor fraud.
In retail, employee theft is the main cause of shrinkage and includes blatantly stealing merchandise, pocketing cash from the tills, under-ringing for friends, and the abuse of refunds and discounts. Shoplifting is another culprit, with customers not only pocketing merchandise and leaving the store without paying for it, but also swapping or altering price tags.
Physical security – such as surveillance cameras and security guards – are the traditional methods used to counteract this kind of theft, but they are not always an adequate deterrent or apprehension method. More and more, businesses are realising the valuable role technology – such as Artificial Intelligence (AI) and the Internet of Things (IoT) – can play in reducing shrinkage.
Technology’s Role In Reducing Shrinkage
Many businesses have been making use of some kind of technology in shrink prevention for many years. Electronic article surveillance and hi-tech video cameras are two of the more common strategies. More and more companies, however, are beginning to embrace the improved security offered by IP cameras, for example, which offer more comprehensive data and in-depth analytics into the nature and manner of loss.
Experts predict that, increasingly, we will see radio frequency identification tags (RFID), artificial intelligence and computer vision enter into the everyday business realm as companies strive to cut back on the telling losses created by shrinkage. In fact, a recent study showed that as many as 80 percent of US retailers have allocated budget to spend on visibility platforms, such as RFID and IoT devices. And of course, RFID has the added advantage of being able to perform double duty – for both access control and theft protection.
Other ways in which technology can be used to reduce shrinkage include:
Automated Cash Management Technology.
By taking over many of the tasks your staff would traditionally be required to do by hand, automated cash management technology reduces the instances that they have to come into direct contact with cash. This effectively increases both the security and efficiency of your day to day operations, yet gives you complete control over tracking the movement of cash through your business from transaction to processing.
Automated Accounts Payable Technology
This is a highly effective way of reducing vendor fraud, which accounts for hundreds of millions in losses every year. Of course, not all your vendors are high risk, but it makes sense to leverage the multitude of benefits inherent in cloud computing to analyse invoice and vendor records and identify any practices that deviate from the norm. Data points, such as contact information, banking details, general ledger or approved amount, can all offer valuable insight into who executed a given action, and when.
Inventory Management Technology
Keeping on top of your inventory is critical to help prevent loss in this area. When your stock controls are outdated, products get lost in the system and discrepancies go unchecked. This is why a robust inventory management system is so essential. With the right technology, accurate – and frequent – stock counts are easy to carry out.
Radio Frequency Identification
RFID comes in the form of chips embedded in product packaging or tags. On these chips is a wealth of valuable information that allows retailers to optimise their stock control methods, giving them real-time accuracy when it comes to inventory. RFID is a vital weapon in the fight against shrinkage – not just at end-user stage, but also throughout the supply chain and distribution. It also makes stock counting much quicker and more efficient – allowing the stock to be counted using a hand-held reader while still in its boxes.
At Strategic Asset Management Solutions we consult on, supply and install all the technology that secures, manages, stores and reports on your business building, business data, staff access and management, and data collection. Talk to us about how we can help you reduce your business shrinkage through the smart application of relevant technology.