Warehouse or inventory shrinkage describes inventory loss in a warehouse or distribution center that is not accounted for. There are three primary reasons for inventory shrinkage — theft, damage, and operational errors. This discrepancy between inventory on record and inventory on hand can lead to a significant loss in revenue, operational issues, compliance risks, lower customer trust, and a competitive disadvantage.
When you work with a third-party logistics provider (3PL), you can identify vulnerable areas in your operation that lead to ways to reduce warehouse shrinkage.
Warehouse shrinkage is a significant challenge for many organizations. It impacts profitability, operational efficiency, and inventory accuracy. It is important to note that some level of inventory shrinkage is acceptable, and some fulfillment centers will stipulate their own shrinkage allowance.
Considering the primary reasons you may see inventory shrinkage may assist you in finding ways to mitigate this issue.
Reducing inventory shrinkage involves making changes to several warehouse operations. Strengthening security measures, offering comprehensive employee training, updating inventory management processes, and a dedication to continuous improvement all form part of these operational changes.
Implementing strategies to increase security and accuracy throughout the warehouse is the first step in inventory control methods. The next step focuses directly on the inventory, ensuring items are logged with accuracy and transparency.
Whatever the reason for your inventory shrinkage, it’s in your organization’s best interest to prevent it where possible. Calculating the shrinkage rate reveals the cause of warehouse shrinkage.
For example, if the numbers typically remain consistent and see a sudden spike, it can be due to an admin error. Consistently high rates, however, can indicate a more serious issue. Use this formula to calculate your warehouse shrinkage rate:
Multiply by 100 to get your shrink rate percentage.
Integrating technology into your warehouse operations ensures efficiency across the board. At Keller Logistics Group, we employ the following technologies to support our clients:
Partnering with a reputable 3PL lets you leverage their expertise and resources to lower shrinkage rates. By outsourcing inventory management, your 3PL can enhance operational security, accuracy, and quality control in a collaborative effort to reduce shrinkage.
Emphasizing communication and transparency, you and your 3PL partner can work together to identify bottlenecks, implement solutions to overcome these, and ultimately lessen warehouse shrinkage. By cultivating trust, respect, and a commitment to this partnership, your organization can build a long-term partnership with your 3PL to ensure continuous warehouse efficiency.
Start your 3PL partnership with clear and open lines of communication. Regularly share information, updates, goals, and points of concern to ensure you can adapt strategies as necessary. Transparency fosters a mutual culture of accountability. Additionally, collaborate on identifying causes of your warehouse shrinkage and work on implementing the solutions together.
Organizations must implement robust inventory management systems to combat warehouse shrinkage, provide comprehensive employee training, conduct regular audits, and enhance security systems to improve warehouse processes. Partnering with a 3PL can optimize your workflows and reduce product handling as your warehouse operations streamline.
Keller Logistics Warehousing & Co-Packing manages over 3 million square feet of warehouse space across the United States. Since 1978, we’ve offered various transportation, warehousing, and logistics services under a single 3PL umbrella. We’re ready to assist with trucking, freight solutions, co-packing, and technological implements to lower warehouse shrinkage and streamline your operations.
Complete our online form for an obligation-free quote, or call us at 419.780.3767 for urgent queries.
Learn more about what makes Keller Logistics Group and its affiliates the best choice for your company’s 3PL logistics needs. Contact us to learn more about our services and request a no-obligation quote. Call 419-780-3767 or return our online contact form today.