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Inventory Shrinkage is the difference between your inventory on hand and what it should be according to sales records and purchase orders. This difference can be substantial - between 2% to 5% annually, according to retail industry studies. A good Point of Sale (POS) solution can help cut this figure in half, by addressing two of the major contributors - internal theft and "messed up paperwork". Earlier articles dealt with internal theft issues, and offered suggestions on how to use both positive and negative reinforcements (the "carrot and the stick" approach) to change the underlying reasons why staff would take "five fingered discounts". This article will deal with how a good integrated POS system (like Windward System Five, but there are certainly others that do as well, so do your homework) can help reduce Inventory Shrinkage through the elimination of "messed up paperwork". But instead of just focusing on the tracking of inventory, I'd like to also talk about how a POS system can optimize your inventory - get the biggest retail bang for your inventory buck! A fully integrated POS system (we like to call them intelligent point of sale software solutions) can help you reduce inventory shrinkage and optimize value: • Reconcile Billings to Purchase Orders quickly and accurately, so you're not overpaying, or in some cases even paying twice! • Use barcodes to eliminate confusion. Stock that is properly barcoded and labeled can't be "accidentally" sold as something else. Make sure your POS system can generate and print unique barcodes, or allow you to use manufacturers barcodes, if you wish • Use data collectors to scan inventory and keep counts accurate. New wireless models make frequent "mini-inventory counts" a breeze • Make sure your POS can print Receiving Reports that can be matched to packing slips. Making it easy for your Receiver to note short shipments or other discrepancies will ensure the accuracy of new inventory • Keep track of your back orders and special orders. Your POS should be able to always keep you up-to-date on the status of backorders and special orders - by supplier and by individual inventory item • Also keep track of RMA's. Make sure you're getting proper credit from your suppliers - it can quickly add up to be a substantial amount • Handle superseding parts properly. Inventory can be incorrectly written off as obsolete unless your POS can easily prompt you with correct information and alternatives • Optimize your inventory value by keeping track of aged inventory and allowing for FIFO (first in, first out) when selling stock • Use alternate supplier tracking to ensure you get the best price for your orders • Take advantage of "Pay Early" discounts by having your POS prompt you with "pay by" dates and amounts to be saved • Buy what you need, not what you think you need. Let you POS prompt you on what to order based on past sales history, established "high-lows", and seasonal adjustments, not on "gut-instinct" (but make sure you can enter "gut-instinct" purchases if you want) • Negotiate better discounts from suppliers by also tracking sales volumes from your end, and not just trusting their records Obviously, being able to put 2% of your annual inventory costs back in your pocket allows you to maximize your business investment and better grow your company. It can even pay for your Point of Sale software system, allowing for even greater savings from improved efficiencies and increase customer satisfaction.
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