It’s estimated that Australian wholesalers and retailers lose an average of 1.24% of total turnover per year through various forms of inventory shrinkage.
That adds up to a huge amount of money — last year alone, it was estimated that a staggering $4.5 billion was lost due to inventory shrinkage in Australia’s retail, warehousing and distribution sector.
Most businesses attribute a large portion of these losses to theft and breakage. While these factors do play a significant part in lost capital, there’s no denying the huge losses that are caused by inefficiencies and errors.
By inefficiencies, I mean:
- Unchecked stock variances, or the excessive monitoring of variances
- Invoicing errors
- Administrative mistakes
- Double-handling of inventory and tasks
And the worst part?
Often these expensive drains on productivity are either passed onto our customers, or simply taken as a hit to the company’s bottom line.
So, how can businesses, like yours, minimise their costs when it comes to dealing with variances and shrinkage?
The best way is the adoption of process automation.
See how process automation can help you control costs: HARMONiQ’s Controlling Margins and Costs eBook
How manual processes are wasting your time
The following are just two of the many examples where the speed and productivity of a business is drastically affected by processes that have not yet been optimised.
Inefficient Exception Reporting
Exception reporting is the process of flagging any discrepancies between a company’s actual and expected performance. It is an essential part of controlling costs and tightening margins, but completing it manually causes all sorts of problems.
There are so many points in the reporting process that are prime opportunities for errors and inefficiencies:
- Scrutiny of inbound stock data
- Analysis of outbound stock data
- Data entry across a number of different points
- Reconciling data across different systems.
Not only is this hugely inefficient, but an error in any one of these steps means massive inaccuracies across all reporting.
Needless to say, the whole process is prone to administrative and paperwork errors that can contribute in driving your business’s inventory shrinkage.
Delayed Variance Investigations
A good example of a knock-on effect from inaccurate reporting is the way it can affect stock variance.
Adjustments and variances tend to pile-up. If you’re waiting weeks, or even months, before you sift through paperwork and complete investigations, then you’re in huge danger of chasing red herrings and failing to identify the real source of the issues.
By this time these situations will have become not only more difficult to identify and resolve, but more expensive as well.
For example, you might discover that you have been short-delivered stock far too late. Obviously, this is not ideal for a myriad of reasons, but it’s the lost capital that’s going to hurt the most.
That’s the advantage of process automation — real-time alerts of excessive variances and the easy identification of problem areas.
How you can get a better grip on your stock — and your margins
Although it will likely always be a factor for any retailer or warehouse, inventory shrinkage can be massively reduced with greater automation.
See how process automation can help you gain visibility and increase efficiency: HARMONiQ’s Controlling Margins and Costs eBook
Automating inventory parameters
Once you have process automation integrated within your business, you can set parameters to avoid various triggers of inventory shrinkage. With these parameters you can set alerts for whenever you go above or below acceptable stock levels.
This way you can make sure that you never promise a customer a product that you don’t have, or over order stock that will pass a use-by date before it is sold.
Automated stock adjustments
Process automation can also let you know when stock adjustments have been completed. This means any issues that come up relating to invoicing or stock levels can be immediately dealt with.
With this process in place you will know in real-time if you need to chase up that supplier who forgot to deliver that one extra pallet before it becomes an issue for your customers.
The best part? Implementing process automation doesn’t have to be difficult
HARMONiQ has already helped many wholesalers, retailers and distributers reduce their inventory shrinkage, and ultimately create a much healthier turnover.
HARMONiQ can provide you with
- Real time alerts
- Accurate adjustments
- Easy reporting
- Stock investigations
To learn more about the capabilities of our system, check out our eBook.
In my next blog I’ll be talking about how process automation and cost controls can contribute to a competitive advantage.
In the meantime, book an online demo to see how process automation can benefit your business.
Drew Arthur is the Managing Director of Micronet Systems and is focused on helping business leaders overcome inefficient sales, inventory, and customer relationship management practices by leveraging cutting edge technology.