What Is Inventory management? How to Prevent Inventory Loss in Retail?

What is Inventory?

Inventory is the raw materials, equipment, and finished goods that a business sells or uses in manufacturing. Accounts treat products as valuable. Accountants use information about inventory levels to record the correct cost on the balance sheet.

Inventory management helps companies know how much money to spend on time. It tracks inventory from buying to selling products. This practice identifies and responds to the process to ensure that there is always enough stock to meet customer orders and properly warns of shortages.

After selling, the stock becomes money. Before sale, inventory (although described as an asset on the balance sheet) is associated with cash. Therefore, a large inventory costs money and reduces investment. One of the most effective inventory management is inventory turnover. An accounting measure, inventory turnover reflects how often goods are sold over some time. Businesses don’t need more inventory than sales. Improper stock handling can result in dead or unsold stock.


Stock vs Inventory

Inventories are often referred to as products in retail businesses: Managers often use the term “market in hand” to refer to products such as clothing and household items. In all industries, “inventory” refers broadly to the stock market and the raw materials and parts used in manufacturing.

Some people also say that the word “stock” is often used in the UK to refer to goods. Although there are differences between the two, the terms trade and product are often used interchangeably.


Types Of Inventories

There are 12 different types of inventory: raw materials, work in progress (WIP), finished goods, maintenance goods, safety goods, packaging materials, circular goods, work goods, transportation, regulatory, inventory, and maintenance. , maintenance and repair (MRO).


How is inventory management different from other processes?

People sometimes confuse inventory management and related practices. Inventory management controls all company inventory. Supply chain management manages the process from the supplier to the delivery of the product to the customer. Warehouse management is part of inventory management and focuses on products in one place.


Inventory Control vs Inventory Management

Inventory management is part of the overall inventory management process. Inventory control manages the movement of materials through the warehouse.

How to Prevent Loss in Inventories

1. Conduct a good selection process

Create a robust selection process for candidates and ensure it is in POS. A proper inspection will reduce the risk of inventory loss caused by employee theft.

2. Scan and install the security system

Investing in security measures can have a big impact on your inventory. Integrate multiple security features such as code lock systems, security guards, video surveillance, and an integrated security dashboard. If the loss persists, review your current security measures to see if they are still adequate or not.

3. Do Multiple Inventory Flow Checks

Many checks must be ordered and entered by the manufacturer, such as during the import and export process. Anyone responsible for these services should double-check and compare the inventory and current invoice numbers.

4. Filter sellers

If your company deals with multiple suppliers, be sure to vet each potential supplier. Check the reviews of these providers and make sure they are listed publicly, with no history of legal issues or criminal charges. This is to reduce the possibility of supplier fraud.

5. Improve visibility of product loss issues

Behind the death prevention or reduction success stories identified by this group is good death data. Timely, accurate, and actionable data available to all the right stakeholders, broken down by item and by store, leads to better collaboration, and more appropriate actions, and enables the continuous tracking of results and performance trends.

Today, the only way to obtain this data is to perform regular cycle counts in-store. Tomorrow, the hope is that smart shelf technology, including radio frequency identification (RFID), will bring that visibility faster, at a lower cost, and with a higher degree of accuracy.

6. Seek to fix what you can control first

Industry information suggests that perhaps two-thirds of all losses are due to processing failures, miscalculations, poor inspection, damage, waste, labeling, and more. , or stealing from within. Compared to external theft, these two causes of death are often under the control and influence of retailers, which often means that death prevention teams focus on these potential issues. give back quickly.

Also, it has been found that by focusing specifically on system failures, many opportunities for theft can also be reduced.

7. Invest heavily in data collection and analysis

A rigorous analysis of all possible data, including POS transactions, non-cash transactions, return rates, lost data, user engagement, compliance data, and much more, is the main motivation for third-party involvement. in the organization and developing the right way. To solve the problem properly.

The main focus of the analysis should be the identification of the best market and maximum growth opportunities that can also reduce inventory losses. A detailed analysis of the data can begin to challenge the concept of loss and can reveal previously unknown issues.

8. Manage changes in group losses

The risk of loss is not evenly distributed across the different channels in the market, with some categories having a higher rating than others. Jewelry, spirits, underwear, electrical appliances, ready-made food, and flowers are the categories where the risk of loss is high. At the same time, types such as canned food or color are a small risk. Retailers and manufacturers should reflect in their overall group plan the level of appropriate loss per group and include the cost of the required loss solution.

This approach is perfect for team planning that requires a strong connection between the stores, loss prevention, central stores, and the department management team of retailers and manufacturers.

9. Eliminate opportunities for brutal losses

Individuals usually think of four questions before they start stealing. First, what is the risk of arrest? Second, how easy will it be to do the activity? Third, is the likely reward worth it? Fourth, if I get caught, what is the likely punishment? To solve the problem of malicious loss, retailers, third-party sellers, and manufacturers must recognize this criminal concept of making the right decisions and work together to reduce the opportunities for thieves to – understand the risk of arrest. low crime.

They can do this by removing some of the possibilities of their planning and career choices. For example, the downside for many supply chains is finding ways to simplify and speed up the flow of goods from warehouse to store. However, it can increase the risk of theft on the go and in the back office. Another option would be to put more research and security checks on the movement of expensive products to prevent these opportunities for theft.

10. Design the experiment properly and document the results

Learning how new solutions and processes work in the real world where complex factors, such as changes in-store staff, prices, and weather, make it difficult to know what works and something that doesn’t exist. To reduce these risks, the ECR team promoted the value of a robust approach based on the use of matched controls and test stores to isolate the effects of tested interventions. In addition, by documenting successful experiments, teams build a knowledge bank of what works and what doesn’t, preventing costly mistakes in the future.



Inventory management is a very important part of business operations. Good inventory management depends on the type of business and the types of products it sells. There may not be a perfect inventory management model, as there are pros and cons to each. But implementing the most appropriate inventory management model can go a long way.

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