Inventory Risk Management

Inventory control and management is a big problem for businesses today—as they have been throughout history. However, today, more than any other time before, you have tools that can assist you with some of your inventory risk management needs. Before you begin creating a policy regarding inventory control for your business, it’s a good idea to keep a few things in mind.


What are Business’ Biggest Inventory Risks?


Most businesses will face one or more of these common inventory management problems over the course of the business lifecycle. Some businesses constantly struggle with one or more of these common inventory issues, while others only occasionally need to address potential inventory control or management problems over the years. These are among the most common areas where inventory is lost for businesses today.


  • Damage
  • Employee Theft
  • Shoplifting
  • Misplaced/Clerical Errors
  • Expiration
  • Insufficient Demand


The good news for business owners is that many of these losses are entirely preventable. You simply have to be willing to take the necessary steps for your prevention efforts to pay off.


Shoplifting Prevention


Identify high-value items that are often targeted by shoplifters and take action to make them unattractive targets for thieves. For the most part, shoplifting is a crime of opportunity. Security tags, product placement near cash registers, an increased staff presence, visible surveillance cameras, and even security mirrors to help your staff monitor potential sticky fingers can all work together to make these items less attractive to people who would steal them.


Employee Theft


The actual numbers on theft in retail businesses indicates that employees are much more likely to steal from a business than its customers. According toStatistic Brain, 75 percent of employees have stolen from their employers at least one time and 33 percent of business bankruptcies are the result of employee theft. It’s a big problem for today’s businesses that can be mitigated by creating a system of checks and balances, installing security devices in areas where inventory is received and/or checked in, and having different employees responsible for ordering inventory, checking inventory in, and paying for the inventory. Finally, hold employees accountable for the money they come into contact with on a shift so that there is less temptation to steal.




Create policies that require the rotation of goods on the shelf. This will place the oldest items near the front to be sold first and the newest items, those with later expiration dates, in the back to be sold last. It will lower the likelihood of items expiring before they can be sold.


Excess Inventory


This is one area where computerized inventory control program can come in quite handy. They can help prevent you from mistakenly ordering 100 of something you normally only buy 10 of. They can also remind you to order items you normally go through at a rapid rate. The goal is to keep accurate records of how much of certain items you sell in a typical month, high months, and low months so that you can have the right amount of inventory (without excess) on hand as it’s needed.


Loss, Damage, and Theft Combined


Of course, no matter how careful you happen to be, stuff happens in the world of business. That’s why it’s so important to invest in a business insurance policy that covers much of the stuff that can happen to your inventory. It won’t prevent bad things from happening, but it can definitely help your business recover when and if it does.


You want to do everything in your power to limit the exposure of your business to various inventory risks. These steps can make an excellent first line of defense against some of the biggest risks your business will face.