RETAIL ENVIRONMENT
Counting the cost of not counting stock
The Coronavirus pandemic has caused an existential crisis, unleashing a number of factors that will culminate and collide in the 4th quarter of 2020 to create a “perfect storm” where retailers are potentially not able to count their stock before their all-important year end.
Retailers are obliged to count inventory and publish their stock levels at regular intervals for accounting compliance purposes and in order to signal their profit and loss to the board of directors and shareholders.
Notwithstanding these reporting requirements, a recent study conducted by the ECR Retail Loss Group relating to Inventory Record Accuracy found that 60 per cent of retailers’ records were inaccurate.
When corrected, a causal relationship was found with an increase in sales of between 4-8 per cent in the period immediately following an accurate count. As such, inventory counting is increasingly part of the sales strategy and is now performed prior to peak trading periods rather than a “one-off” activity conducted for financial reporting compliance.
The COVID crisis resulted in mass closure of stores and inventory being moved back to DCs for security purposes or to fulfil the increased online and omni-channel sales. Re-opened stores needed to be merchandised with new seasonal stock and these unusual movements resulted in potential inventory distortion and loss, an issue compounded by the fact that counts planned during this period were either cancelled or shifted into Q4.
As a result, retailers are now desperate to reset their stock files ahead of the financial year-end and peak thus creating a demand for inventory counts that available third-party stock taking companies are unlikely to be able to meet.
“Retailers can be caught flat-footed by this if they are finding this out at the last minute.” said David Erasmus, the sales and marketing director of global stock taking experts Datascan.
“COVID has forced most retailers to review and adapt their operational practices to comply with regional social distancing guidelines to ensure the safety of staff and customers. It has also highlighted the need for omni-channel compatibility, but you can’t achieve this without having full visibility of your inventory,” he added.
“Post-COVID, we have seen a significant increase in the number of retailers contacting us in desperation after their 3rd party service providers have notified them that they will either be unable to conduct the count or will need to reschedule this to next year.
“We also have many retailers that are opting to take back control of their inventory counting process by bringing this back ‘in-house’. The reasons cited include safety, increased flexibility, the need to cut cost and greater focus on inventory record accuracy to support their omni-channel capability.”
Datascan’s state-of-the-art android self-scanners offer retailers the opportunity to utilise their employees to conduct counts whilst the data is updated in real-time to a secure cloud-based application. With powerful data management and dashboard capabilities, Datascan allows retailers to identify anomalies and resolve discrepancies in real-time thereby resulting in a significant increase in efficiency and accuracy.
Its solution depends upon the circular economy and the ready availability of more than 125,000 hand-held devices which are perpetually in motion to optimise counts, compared to third-party stock takers who only have access to less than one third of this number of scanners.
“Your staff understand the layout of the store and the nuances of the business so are more likely to increase inventory accuracy rather than a third party who would come in, count and then walk away, offering little in the way of context or insight.”
“In these situations, our clients are seeing between a 30 and 50 per cent improvement in efficiency gains.”
Other advantages include rapid turnaround as the deep-cleaned scanners are delivered to the customer on the day prior to the count and re-packaged and returned for sanitising and re-deployment the day after.
In the absence of a stock count, LP is unable to determine the level of loss that has occurred during this crisis, leaving them in the dark as to the potential cause, whether this is external, internal or a consequence of administrative errors caused by the unusual movement of stock.
“Not being able to carry out the counts will be bad news for the retailers, but great news for internal thieves who know that if they steal something today, it won’t be noticed until next year, if at all.”
Here, the only winners are those engaged in theft as they know their dishonesty is less likely to surface in this post-COVID dystopic world, leaving the already hard-stretched retail industry tens of millions of pounds out of pocket.
