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Reducing Inventory Loss

Let’s face it: inventory disappears once in a while. Materials get lost, damaged, or pilfered on a daily basis in America, and over time, those losses can add to real and significant dollars. The good news is that there are some simple steps one can take to minimize the impact of inventory loss on a business.


Let’s start with damage, one of the most common types of inventory loss. To think about what is causing damage and how to avoid it, first think about where and when damage occurs. Is your damage happening in inventory? Or in transit? Warehouse damage is often caused by one of two major factors: packaging or handling. It is important to understand the capabilities of your corrugate boxes or other storage conveyance and how those materials will stand up to the conditions in the warehouse. For example, in hot, humid Memphis, Tennessee, a box will sag and possibly fall over far more quickly than in the bone-chilling cold of a Michigan winter. Also consider the empty space at the top of a package, also known as “headspace.” If your materials do not completely fill your packages, you are inviting an opportunity for a creased seam or crushed box that could cause a domino effect throughout the warehouse.

For materials damaged in transit, it is very important to consider loading technique, platform composition, and trailer properties. Loading technique refers to the method used by the material handler at either the shipping or receiving facility. Is that person properly trained? Does s/he take proper care when handling the product? Taking a walk out to the loading dock might surprise you. Platform composition simply refers to what, if any, materials are used to hold the product in the trailer or container. Grade A heat-treated pallets are very reliable and sturdy, but can run upwards of $10 each for the convenience. Slipsheets are simple corrugated platforms that can help shield goods from splinters in the trailer floor or walls. Speaking of the trailer floor or walls, the composition of a trailer itself can be a big reason for product damaged in transit. Wood-sided walls and floors are less expensive than their metal counterparts, but have a higher frequency of leaks and splintering, which is very risky. Be careful to consider these factors when shipping product.


While this piece addresses inventory loss in general, sometimes inventory in a warehouse simply… gets lost. A robust inventory auditing and cycle counting program can provide numerous returns, including a reduction in simply losing inventory. In this arena, technology can help as well. Many current warehouse management systems (WMS) offer “count-back” functionality wherein a person who picks product from a specific location is asked to validate the remaining inventory in the location before moving on to his or her next task. Even without expensive technology, simple cultural shifts can be almost as effective. If you see a pallet of product sitting in an aisle, is there a process for how to find out where that pallet should be? Is every location where someone might put product labeled appropriately with clear and effective signage? If not, think about what cultural shifts you might need to make.


While many do not want to think about it, there are just bad actors out there, and proper precautions can help ensure that they do not do damage to your bottom line. Warehouse theft is most common in warehouses where the products stored are either high value or easy to fence. If you look around your area and walk the local flea markets, take a look at the items that are selling popularly. You will typically see food products, household goods like soaps and paper products, and others. In today’s times, ebay and Craigslist are also common marketplaces for stolen goods. If your company makes products like this, you may be at risk for pilferage, and it may be time to take action. A clear, consistent, and fair inspection program could be valuable, wherein you search the bags of employees, executives, and visitors alike. Video cameras are also helpful as both a deterrent and investigatory tool. Yes, a person has a reasonable expectation of privacy, but advance notification and implementation that does not show bias or discriminate are well within the rights of an employer.

These are just a few tips to get you thinking about what might be slipping through the cracks in your distribution network. In the end, careful consideration and some simple changes can be a big step in the right direction. Finally, simple measurement of loss, damage, and pilferage is the best way to start setting the baseline for understanding what you are missing.