Importance Of Inventory Control-How Out Of control Are Profits Without Inventory Control?

 Out of control spending may be okay for the federal government (Let’s be frank 20+ trillion of debt seems pretty out of control to most of us) but as a store owner or manager out of control expenses will bury your company. I am sure that you are looking carefully at where you spend your cash, reviewing controllable reports and monthly expenses. What you may not be considering is how operating a store without inventory controls in place can be negatively impacting the profits of your store. 

     When I talk about inventory controls I am not simply referring to activities on inventory night, I am talking about everything the store does all year to control merchandise. For example, the store I work for receives their pallets of freight several times a week. Included in these pallets are sealed plastic shipping boxes that hold individual pieces of merchandise. Some of these boxes have different colored seals and colored seals are indicators that the merchandise inside is high value/high theft goods requiring strict controls. The merchandise in these boxes requires security devices or immediate lock-up. When I was a Loss Prevention Manager for another company we had a lock-up cage we staged at the trailer receiving door. As specific high-risk merchandise came off of the trailer that product immediately went into the cage. That merchandise had to get to its department following a very specific path and if I observed any deviation from that path I was investigating the issue. The store where my daughter works requires all jewelry shipments be taken immediately to the jewelry counter, counted against the invoice and stocked. Jewelry is not allowed to sit out until it is convenient to secure it. Having a detailed plan for identifying high-risk products, verifying counts against invoices right away and immediately securing it are smart steps in preventing inventory shortage from getting out of control. 

     Electronic article surveillance (EAS) systems are another key piece of a sound inventory control strategy. When I mentioned securing products above it does not necessarily mean that merchandise has to go into a lock-up case. Most merchandise can be protected against theft with EAS labels, hard tags, wraps and other protective devices (for example Sensormatic has a product called Flexible Safers that can hold items and still give EAS protection). There are some things that a display case is appropriate to display merchandise in such as high-end jewelry. By the same token, there are EAS products suitable for costume and less valuable jewelry. Inventory control of such pieces of merchandise means tagging these items by a team of trusted employees before they are on the sales floor and accessible by other employees or shoppers. An EAS system also includes the installation of towers at all points of entrance and exit. A common error on the part of many retailers is the failure to place towers near vendor doors and employee-only entry doors. Failing to protect these doorways is a misstep in recognizing the reality of employee theft and the impact it has on store profitability. 

     Inventory control also takes place in in-store training programs. Teaching employees how the customer service they provide helps prevent shoplifting plays a part in inventory control. Training front end supervisors and cashiers how to properly handle EAS alarm activations determines how much merchandise you may or may not recover from potential thieves. Even the proper training of specialists who show merchandise from lock-up showcases impacts the potential for a crook to steal. How many pieces of jewelry should be out of a case to show a customer at any time? One, two, or three items? You have to teach your team what you expect and how someone may try to trick them while they are showing merchandise. 

     Inventory control is a year-round effort. It encompasses more than locking up merchandise or preparing for an annual inventory. Inventory control requires an in-depth look at where losses can take place, how they occur and who may be causing the losses. Once you do that you can implement solutions to the problem by creating a comprehensive shortage prevention strategy. Do that and you keep from losing control over your store profit line.  

Advantages of AM over RF EAS Systems

Have you ever found yourself in a situation where you have to make a decision on a purchase and you have to determine what is going to be best for your situation? I know that car shopping is one of those purchases where I have to take multiple factors into consideration and it isn’t always just about cost. I have to be able to accommodate at least 5 adults and perhaps even 6 if my mother-in-law is included in a ride. I need to get decent gas mileage because I never know who may have to use it and all of our work so I don’t want to fill it every day. I need dependability, I’ve had too many vehicle break-downs and I don’t want a breakdown on my wife if I can help it. Before I make a purchase I search customer reviews of vehicles and automotive expert ratings on websites such as Edmunds or Kelly Blue Book. The vehicle has to meet my requirements or I have to pass on it regardless of how good the deal may appear to be. The same thing can be true for a retailer when determining the best Electronic Article Surveillance (EAS) System and tags to use to combat theft related shortage.

     There are two choices that a store owner will have when deciding on an EAS system, a radio frequency (rf) system or an acousto-magnetic (am) system. But how do you choose? What are the advantages of one over the other?

RF Tags:

  • RF tags (labels) are easier to deactivate at the point of sale. These tags can be passed over a deactivation pad and the tags will not cause an alarm when the merchandise is carried out the doors.
  • RF label deactivation pads are less expensive to operate since the pad only “activates” when a label passes over it. The AM deactivation pad continually runs and uses more power (Wikipedia)
  • RF labels tend to be a bit less expensive to purchase than AM tags.
  • RF labels have made improvements over the years. Small, clear labels have been developed that can be placed on smaller packages without concealing as much important information. Wikipedia does state that small RF tags do cause problems with consistency in deactivation. This can be a cause for false alarms that can hinder the effectiveness of EAS systems.

AM Tags:

  • The highest detection rate in the industry.
  • The standard AM label has a smaller footprint than the standard RF label.
  • Based on their design AM tags have less interference from outside the detection band frequency they operate on.
  • These tags and labels have a greater detection range than RF labels.
  • Where RF labels may be affected by foils, metals, and liquids, AM labels are less susceptible to making them more effective against booster devices. (“Genuine Sensormatic Labels”, Tyco White Paper)
  • Where a metal shopping cart may interfere with the detection performance of an RF label the same shopping carts have no effect on AM tags and labels.

As you can see for yourself there are advantages to both types of systems and tags. The question is going to be which is the best fit for you?  We have worked with both systems and are a nationwide sensormatic dealer and we have worked with both types of technology extensively.

     From a Loss Prevention perspective, the biggest concerns involve professional shoplifters who use devices to try to circumvent a store EAS system and false alarms. Knowing that foiled lined bags and clothing can disrupt RF systems and having apprehended shoplifters using these devices I would tend to favor the AM tags. False alarms can be annoying to customers and have a negative impact on shopper attitudes and RF systems do tend to have a higher rate of false alarm problems. Whether a store manager chooses the RF system or the AM system the most important part is to make sure a system is purchased. It is a proven method of theft deterrence and shortage reduction.