Effect of Inventory Management Technology on Employee Theft

We recently read a report from Software Advice, a company that researches and reviews inventory management software, who conducted a survey of nearly 400 employees to better understand how these systems can catch thieves that target any point in the supply chain. The results of the report were very interesting:

  • The report found that 22% of employees at companies without inventory management software openly admitted to stealing products (see chart below). This should be unnerving for manufactures and distributors, as well as retailers, since the inventory shrinkage that stems from this theft will affect profit margins for companies at any point in the supply chain. Software
  • The report also found that 24% of all companies with large quantity of goods in stock still do not use inventory management software, despite the fact that inventory theft by employees accounts for 44% of all inventory shrinkage.

  • Fifteen percent of employees whose stores use inventory management software admit to stealing from their store, versus 22 percent of employees whose stores use other methods.
  • Only 37 percent of small “mom and pop” stores are using inventory management software, versus 53 percent of local and regional retail chains and 85 percent of national retail chains surveyed.
  • Only a portion of “mom and pop” stores and regional chains are leveraging inventory management software (37% and 53% respectively), according to the report. Based on this fact it is apparent many businesses are leaving themselves exposed to the threat of employee theft – a problem that costs businesses in the United States more than $15 billion annually.
  • Using inventory management software is beneficial, as it allows companies to keep track of their inventory and avoid the time consuming process of manual data entry. While these systems won’t necessarily stop employee theft entirely, they give companies a resource to conduct accurate and consistent cycle counts to notice when there is an anomaly that could be attributed to theft.

The inventory management researcher at Software Advice, Forrest Burnson, who conducted the study, said this issue of employee theft needs immediate attention:

“Whether you’re a small, medium or large business – it is very important to protect your inventory. Since at least 60% of respondents to our survey admitted that employee theft was a problem of some degree, no matter the company size, business owners need to be swift and direct in addressing this matter. Using software is a great way to better secure your business and ensure your profit margins do not decrease.”

To read the full report, click here.

If you have comments or would like to obtain access to any of the charts above, please contact forrest@softwareadvice.com.