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7 Proven Ways to Reduce Item Loss and Boost Your Bottom Line

Minimize inventory shrinkage with these best practices and technologies

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Item loss due to damage, expiry, theft, or inefficient processes can significantly eat into a business's bottom line. In fact, inventory shrinkage costs retail companies alone over $50 billion annually!

However, there are proven strategies and technologies any business can implement to reduce item loss and improve profitability. In this comprehensive guide, we'll explore the top 7 ways to minimize inventory shrinkage and stop avoidable losses.

1. Implement Asset Management Software

Investing in a modern asset management software should be the first step for any business looking to reduce item loss. These systems provide total visibility and control over your entire inventory.

Features like real-time tracking, low stock alerts, usage analytics, and automated reorder points enable you to closely monitor stock levels. Any unusual variances or shrinkage become immediately apparent.

For example, ToolWorks software allows you to maintain a centralized catalog of all inventory items complete with product details, quantity, and location. You can track tool ownership to prevent loss and get instant insights into availability across the organization.

With detailed tracking, you can identify anomalies in product usage as well as losses. Recurring inventory audits further help minimize discrepancy between the catalog and your physical stock.

ToolWorks also provides mobile app access so you can manage inventory on-the-go. Field crews can easily order, transfer or check in/out items remotely.

With such end-to-end inventory visibility, it becomes much harder for items to fall through the cracks. Inventory management software also eliminates manual errors in stock-takes or order shipments that often lead to unexplained losses.

Implementing these systems ensure all stock is accounted for accurately. Any missing items raise red flags for further investigation.

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2. Perform Regular Inventory Audits

Even with inventory tracking software, regularly conducting physical inventory audits is still important. These routine cycle counts enable you to match software records with actual physical stock on hand.

Audits essentially validate your perpetual inventory system, revealing any losses, damages, thefts or order errors that may have occurred.

Make audits a consistent process by:

  • Scheduling counts on a weekly or monthly basis
  • Rotating through different product lines or warehouse zones
  • Assigning audit responsibility to specific staff
  • Following count procedures accurately each time

ToolWorks has an Asset Audit feature that lets you tag items and scan them during an audit to confirm ownership and location details. You can schedule recurring audits and track asset movement history.

Regularly auditing and reconciling any differences minimizes inventory inaccuracies over time. While no system is perfect, diligent cycle counting makes large unexplained shrinkage less likely.

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3. Improve Internal Processes

Another key area to address is internal inventory management processes between receiving goods and shipping orders.

Review your workflows and procedures around:

  • Receiving stock and verifying shipments
  • Putaway methods and storage locations
  • Securing high-value items or hazardous materials
  • Stock transfers between locations
  • Pick and pack fulfillment processes
  • Shipping documentation and confirmation

Look for potential gaps or blindspots where inventory could be misplaced or redirected. Implement controls like requiring a chain of custody and sign-offs for transferring custody of high-value goods.

Upgrade any outdated legacy processes to leverage barcode scanning and inventory software at each step. This further reduces the likelihood of errors or loss.

Analysis by ToolWorks can detect anomalies in asset usage that may indicate gaps in processes. Detailed tracking provides accountability and transparency for each step of the chain.

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4. Limit Employee Access

Many inventory losses occur due to employee theft. Limit access to stock only to staff members who need it for their job.

For example, use lockable storage cages, tool lockers, and restricted areas to house extra inventory not required on the retail floor or production line. Require supervisor permissions for access.

ToolWorks enables you to assign specific tools or items to employees during use. Unique login credentials ensure accountability for who checked items in or out.

You can also set up hierarchical store locations with transfer permissions. This models real-world scenarios while controlling inter-store movement.

The more hands that touch inventory, the greater the loss risk. By reducing unnecessary access and using accountability features, businesses see substantial reductions in item loss.

5. Video Surveillance

Expanding video surveillance coverage across warehouses, loading docks, and stockrooms acts as a powerful theft deterrent while also helping identify causes of unexplained shrinkage.

Make sure critical inventory storage areas are monitored 24/7 by security cameras, especially high-value items. All access points should also be covered.

Consult with a security professional to ensure adequate camera resolution, storage and placement. Integrate video systems with inventory software or access control systems for enhanced monitoring.

Video evidence helps resolve investigations into missing stock by showing any unauthorized activity or removals. In many cases, just the presence of surveillance results in dramatic reductions in inventory loss from theft.

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Inventory management software provides invaluable data, reports and analytics that can reveal the underlying causes of inventory shrinkage in your business.

Analyze usage trends and loss patterns across:

  • Products - are certain items going missing more frequently?

  • Locations - are losses concentrated in one warehouse?

  • Days and times - do losses occur on certain days or times?

  • Employees - is shrinkage higher when a certain team works?

  • Suppliers - are losses higher with shipments from specific vendors?

Identifying specific shrinkage trends enables you to pinpoint higher risk situations and take corrective action. Continually optimize based on data insights from your inventory system.

ToolWorks Analytics provides out-of-the-box reports on inventory costs, consumption, transactions, maintenance and more. You can customize reports or export data to uncover patterns.

7. Tag Products

Tagging products with security devices can deter theft and make stolen goods harder to resell.

Anti-theft tags that sound alarms if not detached at point-of-sale significantly reduces shoplifting from retail stores. Certain tags also destroy the product if removed improperly.

For industrial inventory, RFID tags allow for real-time asset tracking as items move through facilities. ToolWorks enables RFID tracking by reading RFID tags using smartphones. This provides flexible visibility over asset location and loss prevention.

Even simple measures like prominently tagging or engraving equipment makes them less desirable targets for thieves.

Product tagging combines with video, access control and inventory systems to multiply shrinkage reduction.


Left unchecked, inventory losses from damage, expiry, process gaps and theft can quickly eat into your bottom line. But implementing proven best practices significantly reduces shrinkage.

Modern inventory management software gives complete visibility over stock and analytics to detect loss patterns. Improved internal controls, audits, surveillance and product tagging further minimize gaps that lead to missing inventory.

Leverage the tips outlined here to strengthen your defenses against avoidable item loss. With lower shrinkage, businesses see increased profits from reduced costs and optimized operations. A focus on inventory loss prevention provides a competitive advantage in any industry.

The time to take action is now. Prioritize these best practices and technologies to boost productivity, lower expenses and improve your bottom line through lower inventory shrinkage. Your business growth and profitability depend on it!

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