Inventory Shrinkage

Using data to reduce inventory shrinkage and employee theft

Inventory shrinkage is like credit card debt: it starts off small, almost unnoticeable, but over time it picks up speed and starts to snowball. Before you know it, you are trying to dig yourself out of the avalanche.

Shrinkage is the loss of inventory caused by various factors, including internal and external theft, administrative errors and damaged or expired goods. If left unaddressed, it can create a serious difference between the recorded inventory and actual inventory. According to a National Retail Security Survey, the total inventory shrinkage in 2011 amounted to $35.28 billion dollars. What hurts the most is that employees account for 44.2% of that loss.

Believe it or not, there is a silver lining.Retailers collect an enormous amount of data which, when used correctly, can help identify and prevent this type of internal fraud. In Walmart’s case, they produce over 2.2 Petabytes worth of transactional data each day. Transactional data that can be mined with exception-based reporting tools to discover outliers and patterns that can indicate fraud - and that is just one source of data. Outside of transactional data, there is recorded video, sensors, access control data, and more. With this pool of data, an analytics platform like Solink can help to further uncover the hidden patterns and red flags that ultimately lead to inventory shrinkage.

By marrying video data from surveillance cameras with transactional data from Point-of-Sale (POS) systems, you can better understand the context of any event in your store. Video analytics allows you to automate the reporting system and receive updates in real-time, alerting you of unusual activities.

For example: if a POS system records an item refund, but a video analysis of the surveillance video can’t detect customer presence during the transaction, that could be an indicator of fraud. This scenario demonstrates the value in combining disparate sources of data in a single application and it’s just one of the many use cases of video analytics when it comes to targeting inventory shrinkage.

In order to be truly data-driven an organization has to make properly informed decisions. Decisions that examine All available data, in timely and efficient ways. At Solink, we believe that shrinkage shouldn’t have the power to shrink your business. While you might not be able to eliminate it completely, you can mitigate the risk from shrinkage by targeting large contributors, i.e., internal fraud, using the pools of data that already exist in your business.

"Shrinkage shouldn't have the power to shrink your business" -TWEET IT

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