Effective inventory control doesn’t happen automatically. In fact, controlling inventory is somewhat of a misnomer that might be better termed: managing inventory—because of how difficult indeed it is to control.
The landscape is littered with the remains of fired managers, dismissed district managers and repositioned regional managers. After years of struggle, I have learned valuable lessons, and played a part in creating company strategies to “tame the bear.”
I cannot stress strongly enough how critically important it is to make managing inventory a top priority. That priority starts with having a great outside inventory management team (unless you’re a chain with hundreds of stores and perform the function in-house).
I went through a number of big name appraisal firms, complete with spectacular letterheads and glossy mission statements before I found a small, but highly competent company, near Atlanta. After developing a solid inventory management program, we developed some guiding principles, including:
• Conduct monthly inventories of all retail outlets (at the very least until you have a consistent, acceptable loss figure). Also, a large loss one month and a large inventory gain recorded the next isn’t consistency.
• Make sure your store is ready to be inventoried. All invoices, including those that have been checked in before the inventory commences must be retailed. Return items are to be taken into consideration, stales and damaged items must be written off and the store—including coolers—must be in tip-top shape so the inventory crew can easily count merchandise.
• Understand that you will have to be dedicated to getting invoices in, on a very timely basis so the inventory crew has something to measure against.
• Tie manager and employee bonuses to an acceptable loss figure: perhaps 1%.
• Require that all vendors adhere to the delivery hours that are acceptable to you. Also, ensure cashiers are aware of how critical proper “check in” procedures are to the success of the company.
• Mandate that no “free vendor samples” are allowed at the store because that’s often a ploy to gain the closeness and confidence of someone an unscrupulous vendor will cheat.
• Designate an area of the store for inventory check-in that is not close to that vendor’s product. I once observed from my office a vendor bringing in several hand trucks of beer and dropping them at the site of a large floor display and actually taking 10 cases of beer off the display and adding them to the items he had just brought in. The vendor’s boss made him park the truck and fired him on the spot.
• Never allow vendors to count the items they are delivering, no matter how much of a hurry everyone is in. It helps avoid this kind of hypothetical when he is counting: “three,” “six,” “nine,” “12,” “18”—perhaps skipping over that number “15”—and gaining three cases for his own private use.
• If you are having difficulty controlling tobacco inventory remember, the cost of the product makes it an enticing theft item; the small size of a carton of cigarettes makes it relatively easy to steal.
Accordingly, don’t hesitate to inventory the product at each shift close and have the incoming shift do the same and require that the two shifts reconcile any count differences before they continue. This simple procedure will likely bring the category into balance quickly.
• Lastly, make sure that cash register tapes are scanned daily for too many “no sales” and “penny rings” as, these can be telltale signs of cashiers “playing” in the register. For example, a 25-cent ring when you don’t sell anything for 25 cents should raise a red flag. Review security videos often and turn to that camera just as often to find out just what that 25-cent ring was for.
Jim Callahan has more than 40 years of experience as a convenience store and petroleum marketer. His Convenience Store Solutions blog appears regularly on CSDecisions.com. He can be reached at (678) 485-4773 or via e-mail at [email protected].