Managing inventory comes with many challenges, including how to reduce inventory damage. Damage to inventory can occur at any point in your processes. Some products are damaged at the time of receiving, others are damaged during handling and storage and some are damaged during shipping. All damages can impact your bottom line, so it’s important to control for this risk.
In many cases, the risk of damage to inventory can be reduced and even eliminated. Here are 5 actionable ways to protect your inventory from damage.
1. Plan for Severe Weather
Your inventory faces dangers regularly, such as storm damage from hurricanes, storm surge, flooding and tornados. In 2019, the Congressional Budget Office estimated commercial business damage from hurricanes at $9 billion. Preparation is key:
- Verify your insurance coverage, knowing what is and is not covered. Purchase gap and excess coverages where needed.
- Create an emergency plan, considering facility and staff preparation, location vulnerabilities, evacuation before the storm and vehicle access after the storm.
- Gather supplies that will be needed, such as generators and fuel, sand bags, plywood panels and dry or wet floodproofing materials.
- Perform a cycle count to understand what inventory is on hand before a major weather event and store a copy of your inventory data safely offsite or securely online.
- Inform clients and suppliers of significant anticipated weather disruptions, with specific days you plan to be closed and when you anticipate reopening.
- Move inventory out of the path of the storm where possible, then secure your facilities and its contents. Board windows, lift products and critical systems off the ground and shut down electrical systems to prevent surges and fires.
2. Optimize Workflows
Not all damage is due to severe weather events. Your inventory is also at risk during normal operation, often due to inefficient workflows and processes. Make a habit of working to improve your process and optimize your workflows:
- Ensure employees don’t handle inventory more than necessary.
- Improve workflows to ensure incoming and outgoing product is not left unattended longer than needed.
- Reduce the amount of times inventory is rearranged.
The more touchpoints your inventory has, the more opportunity for products to become damaged. Work to minimize unnecessary risks in your workflows.
3. Improve Storage Protection
It is also common for products to receive damage while in storage. Careless handling or a brush with a forklift or trailer can lead to significant loss due to damage. But this is largely preventable with the right steps:
- Match the right storage solutions to the product.
- Avoid having inventory near high traffic areas.
- Install protectors or use natural barricades for additional protection.
4. Invest in Facilities Improvements
Improvements to your facilities can also reduce the risk of unnecessary product damage. The return on investment of smart improvements can far outweigh the initial costs, if it reduces damage to inventory during packaging, handling, storage and shipping and receiving. These investments typically offer a high ROI:
- Lighting upgrades that offer better illumination.
- Lot improvements such as better drainage, paved lots and wider aisles.
5. Encourage a Culture of Safety
Your workplace relies on your employees at every part of your process. Damage to your inventory can occur due to employees becoming careless as well as employees going beyond the limits of safe procedures. Building a culture of safety can not only help protect your workers, it can also reduce inventory damage:
- Post signage to remind employees of proper procedures and safety precautions.
- Require employees to work as a team for difficult or dangerous handling procedures.
- Ensure employees have the proper training for operating forklifts and pickers.
- Encourage safe job performance with incentives and rewards.
Commit to Reduce Inventory Damage
Every year, inventory damage leads to losses that are often preventable. High rates of product damage can impact your organization’s bottom line and make fulfillment of orders and service level agreements more difficult. Yet committing to taking these 5 actionable steps can reduce your losses and protect your inventory from the daily risks you face.
Explore more risk management tips from Lockton Affinity, the administrator of the TCF Inventory Finance Insurance Program.