industry focus
Why inventory accuracy deserves as much attention as theft and fraud
In the retail and logistics sectors, risk management strategies often centre on one dominant concern: security.
From organised retail crime to cargo theft, these high-profile threats have long shaped how businesses allocate resources. However, focusing exclusively on criminal activity risks obscuring an equally damaging, but less visible threat which is inventory inaccuracy.
While losses from theft and fraud are headline-worthy, the persistent erosion caused by inaccurate inventory can have just as significant an impact on margins, fulfilment, and customer satisfaction.
The Crime-Centric Risk Model
The bias toward crime in risk management is not without cause. Theft and fraud cost the retail industry billions each year. These events are tangible, measurable, and crucially they are insurable. Investments in surveillance and access control offer clear, defensible return on investment.
But this crime-focused lens creates a reactive model of risk, one that overlooks process-driven losses.
Inventory Inaccuracy: The Overlooked Risk
Inventory inaccuracy, while often relegated to back-office concerns, poses a systemic threat to both operational performance and customer experience. Unlike theft, inaccurate inventory affects the entire supply chain, from demand planning to shelf availability.
Key risks include:
1.Stockouts and Overstocks - Misaligned data results in lost sales or excess inventory, both of which reduce
profitability and frustrate customers.
2.Misrouted and Mispacked Orders - In logistics, incorrect inventory figures lead to mispicks, delivery errors,
and increased returns. Costs that add up quickly.
3.Fulfilment Failures - In an Omni channel environment, inaccurate store-level inventory can undermine same-
day delivery promises.
4.Forecasting Distortion - Flawed inventory data feeds into demand planning systems, causing ripple effects
across the supply chain, from purchasing to labour scheduling.
According to the Retail Industry Leaders Association, global inventory inaccuracy leads to losses exceeding £1 trillion annually, a staggering figure on par with, if not greater than, crime-related shrink.
A More Balanced Approach to Risk
Retail and logistics operations must evolve beyond a crime-prevention model and adopt a broader, more integrated view of risk, one that includes process vulnerabilities, especially those related to stock receiving and picking.
Elevate Inventory Accuracy to a Core Risk Metric - Inventory accuracy should be treated as a strategic risk, not just an operational detail.
Outsource Inventory Management - Many retailers and logistics providers now outsource aspects of their inventory management to companies that offer focused expertise, advanced tools, and dedicated teams.
Tighten Internal Process Controls - Outsourcing doesn't remove the need for internal accountability. Streamlining receiving, returns, and picking protocols is essential.
Conclusion
By combining internal process improvements with outsourcing and smart technology investments, businesses can tackle inventory inaccuracy with the same intensity typically reserved for theft prevention. The result is a stronger operation, higher profitability, and a more resilient supply chain.
Retail and logistics businesses operate in an increasingly complex, customer-driven world. While theft and crime remain serious threats, loss prevention strategies must evolve to reflect the full spectrum of operational risk. That includes confronting the silent, systemic losses caused by inaccurate inventory data.
For further information about RGIS's supply chain management solutions, click here.
