Managing Inventory Shrinkage

Managing Inventory Shrinkage

One of the more difficult variables to account for in operating a c-store is inventory shrinkage. Inventory shrinkage occurs when items you thought you had in stock turn out not to be there. While this occurrence can often be a fact of life for any retail store, it can also contribute to out of stocks, and even increased operating costs.

What Causes Inventory Shrinkage?

Inventory shrinkage occurs for various reasons. Employee theft, shoplifters, or suppliers failing to keep accurate records are all possibilities. Regardless of the reason behind it, managing your inventory shrinkage is an important part of C-store management.


Logically, many owners tackle inventory shrinkage with stricter employee oversight, tighter security around storage, or increased inventory counts. While all of these can be helpful, there is one underlying reason for inventory shrinkage that these methods don’t address.

Managing Item Level Inventory (or Line Item Inventory)

Often, shrinkage occurs not due to nefarious behavior, but rather because of poor inventory management. If this is the cause, then simply counting your existing inventory more frequently isn’t going to help much. Even if it does, such tasks can eat up large chunks of your, or your employee’s time.


A key component of managing inventory shrinkage is to account for products at the item level. Item level inventory management means you are counting individual units, rather than relying on case counts. This creates a more accurate picture of your inventory and will lead to better accountability.


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For an example, many C-store owners have run into this issue with cigarettes. You know you have X number of cartons, however unless you only sell whole cartons and not packs, it can be easy to lose count.


If your system only reads that you have X number of cartons, but you sold Y number of packs from the cartons, you can have a major headache when it comes time to manage your inventory. It’s easy for packs to “disappear,” or simply become lost in the chaos. They were probably sold, but how can you be sure?

Implement a Better System

If shrinkage is an inventory problem plaguing your store, it may simply be a result of an outdated process. Even if you’ve managed to eliminate waste and employee theft and have made inventory storage air tight, it may be something as simple as one part of your inventory management systems not playing nice with the other.


For instance, at CStorePro, it’s simple to have inventory management software communicate with daily operations systems, as well as accounting systems. When everything utilizes the same software, it ensures that communications throughout the program remains constant.


Properly implemented, an effective inventory management system enables you to:


  • Easier check-in of incoming deliveries
  • Manage inventory at the line-item level, meaning you have a better understanding of what is on your shelves as well as what has already been sold
  • Easily generate accurate P&L reports
  • Easy daily, weekly, or monthly reconciliation


As more stores are making items directly in store, the need for proper inventory control is more present than ever. And while taking a daily headcount will help, it all comes back to automation. Through implementing a better software system, the risk of lengthier inventory tasks can be avoided.


In the end, managing inventory shrinkage effectively means you’ll spend less time and money on waste. Leaving you free to concentrate on running your business.


Want to learn how? Read more about Item-level inventory here and Schedule a Free Demo today to see how we can help you achieve your goals.

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