Effect of Inventory Shrinkage on an Organization
Many companies do not understand the true impact of inventory shrinkage or loss. For example: If your company’s inventory shrinkage this year is $100,000, that’s $274 in shrinkage every day. Is that the total impact on the bottom line? Consider this: For your organization to simply recover or break even on a $100,000 inventory shrinkage or loss, you would have to sell an additional $13,700 every day! ($274 divided by .02% profit margin) This is on top of your normal sales. Think about this…how many more items would you have to order, receive, count, mark, prepare paperwork for, stock, and finally sell just to produce these extra sales to break even? Add to this the fact that inventory shrinkage really cannot be recovered. You then begin to understand why one third of US business failures are blamed on corporate theft. The obvious solution is to prevent the theft, errors and abuse that cause inventory shrinkage and loss in the first place.