Picture this. Incidents of external theft and vandalism at one of your sites have left you high and dry. You’re under pressure to reduce losses and improve physical security without significantly increasing operational costs. You worry about gaps in your current security system and realize that cameras and guards are no longer enough.
You can take steps to protect your business from financial loss, theft, fraud, or accidents by implementing an effective retail loss prevention strategy.
What Is Loss Prevention?
Loss prevention helps companies reduce avoidable losses and shrinkage. In the context of retail warehouses and distribution centers, loss prevention is about protecting inventory and other assets from theft or damage before they reach the store or customer.
The goals of loss prevention are to:
- Reduce inventory shrinkage.
- Protect company assets.
- Improve profitability.
- Maintain operational efficiency.
One of the biggest challenges that loss prevention aims to address is inventory shrinkage. Shrinkage is the difference between the inventory a company should have and what it actually has on hand. Shrinkage can occur at any point during the storage, handling, or transportation of goods. Every missing or damaged item is a cost to the business.
According to the National Retail Federation (NRF), cargo theft has become increasingly sophisticated, with an increase in strategic theft. For example, some thieves trick companies into handing over their freight, then sell the stolen goods on the resale market.
The True Cost of Inventory Shrinkage
The most obvious cost is the value of the stolen, damaged, or missing inventory. Because the lost inventory can no longer be sold, the company loses the cost of the goods and the profit it would have generated.
For example, if a warehouse loses $10,000 in inventory and operates on a 25% profit margin, it must generate $40,000 in new sales just to break even on that loss:
- Sales needed to recoup loss = loss amount / profit margin
- Sales needed to recoup loss = $10,000 / 0.25 = $40,000
When inventory goes missing, accountants must adjust the cost of goods sold (COGS) upward to reflect the loss. This can make profit margins appear thinner and distort financial statements. Higher COGS means less profit per sale, making it harder to reinvest in the business or stay competitive. Some businesses raise prices to offset shrinkage losses, which can drive away price-sensitive customers and reduce competitiveness.
Other effects of inventory shrinkage include:
- Stockouts and delays: Shrinkage can cause unexpected stockouts. This leads to delays in fulfilling orders, emergency reordering at higher costs, and supply chain disruptions.
- Customer trust: If shrinkage leads to unfulfilled orders or backorders, customers lose trust and may take their business elsewhere.
- Resource drain: The time and money spent investigating, reporting, and managing shrinkage are resources not spent on growth or innovation.
The true cost of inventory shrinkage goes far beyond the value of missing goods. Shrinkage has a ripple effect that impacts nearly every aspect of an organization’s health, operations, and reputation.
Industry-Specific Risks
While all industries are at risk of inventory shrinkage, loss prevention strategies are especially essential for businesses that store high-value assets in large, open areas, including:
- Trucking and distribution centers: Outdoor lots and distribution warehouses are targets for cargo theft and equipment loss.
- Auto auctions and dismantling: High-value vehicles and parts are attractive to thieves.
- Equipment rental companies: Expensive, portable equipment is vulnerable to theft and unauthorized use.
- Metal recyclers and scrap yards: Copper, aluminum, and other metals are frequently stolen for resale due to their value.
The Role of Perimeter Security Solutions in Loss Prevention
Securing a site’s perimeter is a critical part of any loss prevention security. A multi-layered approach to perimeter security should include:
- Deterrence of criminal activity: A robust perimeter security system starts with electric fencing, which acts as a powerful visual and physical deterrent. Would-be intruders are less likely to target a facility that is clearly protected at the perimeter.
- Delaying and detecting intruders: Perimeter security solutions often integrate surveillance cameras that provide real-time alerts and remote monitoring capabilities. This immediate detection capability allows for rapid response and minimizes the window of opportunity for theft or vandalism.
- Reducing losses and operational disruptions: Preventing unauthorized access to buildings that contain high-value inventory and equipment reduces incidents of theft, vandalism, and property damage.
- Boosting confidence and safety: A well-secured site increases confidence among employees, customers, and stakeholders. Knowing that the facility is protected can foster a safer working environment and reassure customers and partners that their goods are secure.
Prevent Shrinkage With Perimeter Security from AMAROK
Loss prevention is about safeguarding your assets and stopping external theft, vandalism, and unauthorized access for good. Proactive physical security measures are more effective than a reactive “wait and see” approach, preventing incidents from escalating into significant losses.
AMAROK provides industry-leading perimeter security solutions for high-risk industries, including trucking yards, auto auctions, equipment rental lots, and more. In fact, The Electric Guard Dog™ Fence prevents 99% of external theft after installation.
Contact us for a free threat assessment and see how we can support your loss prevention strategy.
