What Factors Contribute to or Cause Inventory Shrinkage?

If you work in warehousing, shipping, and distribution, manufacturing or other similar industries, inventory accounts for a considerable amount of your assets. In order to maximize productivity and profitability, it’s critical to focus on inventory shrinkage prevention and strategies to reduce the loss of valuable products and equipment. While eliminating loss entirely is virtually impossible in most high-volume settings, it is well within reach to adopt best practices for protecting your goods. Learning about what causes inventory shrinkage is the first step in preventing product damage.

If you’re looking for ways to improve your bottom line and operate more efficiently, consider these common causes of inventory loss with ideas on how to prevent them.

common causes of inventory loss

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Malfunctions to Equipment or Machinery

A hydraulic lift that gives out at the wrong time, bins and containers that fall apart while carrying a full load, and many other equipment and machinery malfunctions are among the most common enemies of inventory loss prevention. In addition to choosing quality equipment suited to your specific applications, businesses can lower damages and maintenance expenses by training employees to recognize causes of inventory loss. From walk-around inspections of machines before every shift to spotting advanced signs of wear and tear, a diligent and aware team is your first line of defense.

Concentration Lapses

Products and materials get destroyed when workers are lackadaisical or distracted. Dropped packages, improperly labeled and stored containers, and misplaced items are what cause inventory shrinkage for all types of industries. Prevent loss by consistently communicating the importance of focusing on the work environment, providing breaks to help keep employees fresh and alert, and eliminating distractions such as cellphones and excessive noise levels.

Avoidable Accident

It’s a fact of life that accidents happen, but it’s still among the most frustrating causes of inventory shrinkage because most times it’s avoidable. Keeping a log of incidents, such as dropped, misplaced or improperly stored products will help you identify elements of your operation that require correction, as well as employees who need additional training. Everyone on your team must be held accountable for his or her actions and responsible for taking the initiative to keep accidents to a minimum.

Manual Handling of Materials

There are many warehousing and material-handling applications that are too demanding for manual labor. Selecting equipment suitable to your particular needs will minimize damages while speeding up your operation. From utilizing hydraulic lift tables and roller skids to investing in electric pallet trucks and powered handcarts, having the right tools will help your team get more done with less loss while also eliminating many common workplace injuries.

Dirty and Disorganized Jobsites

Unclean and cluttered environments are the cause of inventory shrinkage in a variety of situations. Dirty floors and disorganized warehouse spaces result in damages and loss from drops and collisions, moisture and mold, and even fires. Keep your operation running smoothly by cleaning regularly and utilizing containers, racking and decking systems designed to improve organization.

Unsafe Work Environments

Maintaining a safe jobsite is critical to inventory loss prevention as well as minimizing injuries. Take a proactive approach to safety by using floor tape and visual signage to keep aisles and corridors clear and traffic moving smoothly. Provide proper lighting to allow employees to better see what they’re doing and spot potential dangers. From using protective netting to catch falling objects to storing hazardous materials in specialized cabinets, you can control a variety of factors that cause inventory shrinkage.

Careless Product Placements

Accidents and product damages occur when you overload racks and shelves and exceed weight capacities. Guard against inventory shrinkage by teaching your workers proper techniques, such as storing heavier items lower to the ground, and give them the right equipment, making sure they understand capabilities and capacity levels.

Using the Wrong Pallets

All pallets are not the same, nor are they created equally. One of the primary causes of inventory shrinkage in warehousing and material handling is use of improper pallets. Choosing pallets that will not collapse under your heaviest loads, can withstand impacts and guard against product contamination is vital to protecting your inventory during handling.

Minimize Inventory Shrinkage In Your Warehouse with Cherry's Industrial

Now that you have a better understanding of what causes inventory loss, it’s time to take preventive measures to stop them. For more information on inventory loss prevention and a variety of products designed to improve warehouse and storage safety, organization and efficiency, contact Cherry’s Material Handling today.