Regardless of the industry, inventory management stands out as one of the most common areas where costs rack up needlessly. From the sprawling warehouse of pallets and shelves to the local restaurant’s pantry and walk-in, and the trucking systems that link them, the proper tracking and management of inventory is essential to keep costs low and a business working smoothly.

Unfortunately, it is not uncommon for businesses, even large ones, to fly by the seat of their pants with regards to inventory, relying on outdated systems that expose them to outright losses, damages in transit, and even theft.

Managers that work without a Warehouse Management System or WMS are practically working blind. Though they are not infallible, companies relying on old, non-automated systems are more likely to face heavy shrinkage rates.

Shrinkage refers to all losses related to damage, theft, and accounting error. The average shrinkage rate across most industries lands somewhere between 2% and 6%.[1]

As shrinkage rates begin to climb in absence of proper management and management tools, its effects grow exponentially. Trust begins to erode between management levels. Delays at the loading docks can degrade the morale of drivers that are already suffering a shortage, potentially delaying future deliveries, and so on.[2] Pallets get abandoned and lost track of, either counting as an outright loss or even displacing another pallet that should be in its correct place. Costs begin to build beyond the simple missing inventory.

Restaurants work on a smaller scale than manufacturing or retail warehouses, but with a much more delicate product. Most restaurants devote 25-35 percent of their expenses to inventory each year.[3]

Mismanagement can balloon those costs, and often do. During the rush, staff often are not considerate of the cost of food waste or portion size. Chefs and managers need to keep the team on the same track, sending out reasonably sized dishes while minimizing waste along the way.

All industries cannot underestimate the asset a WMS and integrated inventory system can provide. With tech from firms like Oracle, Fishbowl, or Infor, inventories can be tracked more reliably while connecting them with business information databases. Cloud-based connectivity across a company make the whole team more efficient and decision making more holistic.[4] Troubles in the distribution line could be the cause of dissatisfied customers at the storefront, but without a bird’s eye view, the problem would remain a mystery.

From retail to hospitality, it is clear that the impact of inventory management and the shrinkage that dogs it cannot be underestimated. While there is no single area in the process that is most responsible for shrinkage, its solution is all-encompassing and could help to change a company for the better, and for good.

 

[1] https://yourbusiness.azcentral.com/impact-can-shrinkage-company-2937.html

[2] https://www.newcastlesys.com/blog/the-invisible-inventory-whats-missing-in-your-warehouse-management

[3] https://pos.toasttab.com/blog/reasons-your-restaurant-is-losing-money

[4] https://veridiansol.com/lost-warehouse-inventory/