Hidden in the Losses: Unsaleable, Damaged Goods

Is your inventory shrinking right before your eyes? You’re not alone. According to the National Retail Federation’s Security Survey of 63 retailers, conducted in the spring of 2018, the U.S. retail economy took a $46.8 billion hit in 2017, with individual retailers losing an average of 1.33 percent of their sales to inventory shrinkage from all sources.

While the bulk of these losses were attributed to theft, either from shoplifting (35.7 percent) or employee pilferage (33.2 percent), there is one category of inventory shrinkage that was attributed to “unknown causes,” to the tune of $3.1 billion in 2017.

Retailers are, obviously, addressing the loss prevention challenges posed by both external and internal theft. Biometrics, fingerprinting, and improved merchandise security tagging, coupled with POS monitoring, are just some of the innovations being incorporated into security plans to catch thieves before they make off with the merchandise, as prevention is considered far more effective than apprehension and criminal prosecution after the theft has already occurred.

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Preventing Merchandise Damage

Still, the inventory shrinkage from unknown causes is troubling, and costly. What if you could identify just one of those causes and impose some level of control over that type of loss, as well? Let’s look at one component of these unquantified inventory losses: damaged goods that cannot be sold. How do these goods get damaged in the first place? Are there opportunities to prevent damage to your merchandise, keeping it in inventory and available for sale? Absolutely.

Safe Handling and Storage

The first opportunity to prevent losses from damaged merchandise occurs when it arrives at your warehouse or storage facility and goes through your receiving process. A warehouse is a dangerous place, presenting many potential situations for merchandise damage. Follow the guidelines in OSHA Publication 2236 Materials Handling and Storage (2002 Revised) to ensure you’re operating safely. Safe warehousing practices reduce the likelihood of damage to your merchandise and injury of your workers.

Take a look at the facility itself. Do you have a well-lit, clutter-free, and logically organized storage space? If your workers cannot see well, your storage aisles are cluttered, and your storage plan is haphazard, you are essentially asking your workers to navigate an obstacle course through a maze, while blindfolded. Accidents that result in damaged merchandise are bound to happen!

Transporting loaded pallets or boxes off a tractor trailer and getting them into their storage location can result in accidents, where pallets slip, boxes fall, and merchandise gets damaged. Your storage plan should be organized to minimize the need to move boxes and pallets any more than absolutely necessary. Every time you handle or move your merchandise, you risk damaging it. Make sure that all of your forklift drivers and operators of other storage and retrieval equipment are trained, qualified, and licensed to operate their equipment, as required.

Regularly inspect the pallets you are using to ensure they’re not damaged. Secure your loaded pallets with banding or wrapping to stabilize the contents. Make sure that your pallets are properly stacked and balanced, in accordance with OSHA’s 29 CFR 1910.176: Handling materials – general (6 May 2019), so that they don’t topple over, damaging your merchandise and putting your workers at risk of injury.

Painting a line on your warehouse walls to indicate maximum pallet stacking height is an easy-to-implement visual aid to help workers observe safe stacking practices. If you’re using shelving to store boxes, make certain that the shelves are clearly labeled with weight limits and educate your workers about the danger of exceeding those limits—in regard to both their personal safety and the potential for inventory loss due to damaged merchandise.

Removing Merchandise From Packaging

One source of damaged goods that might not come to mind immediately occurs during the opening of packaging prior to stocking shelves. The good news is that this particular source of merchandise damage is almost entirely under your control.

The problem arises from the fact that, while 98 percent of the corrugated material used to create boxes is either single-walled or double-walled (which means that it ranges from about one-quarter to one-half of an inch in thickness) the average box cutter has a blade that is roughly one inch long. It stands to reason that opening your average corrugated cardboard box with the typical box cutter or utility knife with a one-inch blade exposure puts the contents of your boxes at risk of being damaged during opening. When researching the safest tools to use for this task, look for box cutters and utility knives with safety blades, as they will protect both your merchandise and your workers.

Getting the master and inner boxes open is just the beginning of the box cutter vs. merchandise battle. After removing those layers, you may now be faced with extracting your merchandise from its internal packaging, such as a blister pack, clamshell, or plastic bag.

As reported in Rocket Industrial: Wrap Rage: Symptoms, Causes and Treatment (August 5, 2019), this battle with packaging materials sends roughly 6,000 people in the U.S. to the hospital, annually, for the treatment of cuts, sprains, and strains. There is a definition of “wrap rage” in Wikipedia. It’s the frustration—often escalating to the point of anger—that you feel when battling this internal packaging. It’s notoriously difficult to open without damaging the merchandise with whatever tool you choose to use. Workers will cope with this all while trying to avoid personal injury from their chosen tool, or from the packaging itself.

A traditional box cutter or utility knife is not the best tool for clamshell or plastic wrap. A micro-bladed tool is sharp enough to cut through the stubborn packaging material while minimizing danger to your skin. With a bit of research, you can find the perfect tools to safely open whatever internal packaging you encounter, without damaging the merchandise or hurting yourself in the process.

By implementing safer storage practices and educating your workers about the critical role they play in avoiding this hidden cause of inventory shrinkage, you can reduce the amount of money you lose from unsaleable goods. Likewise, by using safer box cutters, utility knives, and micro-bladed tools with appropriate blade exposure to open both external and internal packing materials, you will avoid merchandise damage and loss of inventory. Although the dollar value of these damaged goods losses is not as significant as those from external and internal theft, every dollar you save here is one more dollar of saleable goods that have a positive impact on your bottom line.

 

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