ESSAY: Causes of Inventory Shrinkage

After reading this week’s material, answer the following question in the Forum:

– Discuss the types of threats commonly encountered in retail loss prevention

– Identify strategies for neutralizing these threats

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Causes of Inventory Shrinkage


Shrinkage has been acknowledged to be a significant inefficiency that few businesses are willing to manage. Some of the main threats encountered by enterprises in retail loss prevention include shoplifting, employee theft, vendor fraud, administrative errors, and unknown losses. Most businesses have significant exposure to both inner and external theft cases from both the staff and the clients. A study conducted by Fabregas (2019) demonstrates that shoplifting accounts as the leading cause of inventory shrinkage. More than 36% of shoplifters take advantage of overlooked parts in a business store. Staff theft is also a significant cause of inventory shrinkage. More than 34% of employees take advantage of their management positions, making it challenging to spot theft cases. In most cases, employees involved in theft cases have access to reserved parts of business stores and are accustomed to sales and inventory control processes. Most businesses have implemented access controls to specific staff.  However, restricting access has not been found to deter employee theft. Administrative errors also account to more than 16% of shrinkage. Most…

            Some of the main strategies that can be utilized to neutralize these risks include: implementing inventory management processes. They ensure stock revenues, destruction tracing, and cycle counts are managed accurately. Retailers should also develop and disseminate crime audit methods that aim at reducing staff theft, embezzlement, and frauds (Hayes, 2007). Businesses should also utilize barcode scanners for scanning item labels to prevent retail errors. Barcode scanning excludes purchased items during checkouts and also keeps the business’s sales, and inventory counts accurate. Other cooperative approaches of crime prevention such as investing in security measures such as the implementation of CCTV cameras in overlooked parts of a business, changes in security management and strict access control policies are likely to help reduce ..

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