Vendor Fraud & Administraive Errors

Billion Dollar Mixed Bag — Traditionally, retailers struggle with understanding the total losses from vendor fraud and administrative error. Vendor Fraud is defined as intentional theft or inventory loss associated with vendors, often involving the accurate delivery and return of merchandise. Typical vendor fraud prevention methods are vendor truck and delivery audits and detailed receiving. Often administrative errors can also contribute to the variance between the inventory you own on your books and the actual physical inventory. Contributors to this category include Universal Product Code (UPC) ticketing errors, point of sale (POS) ringing errors, return processing errors and poorly trained staff. Audits are the most common method or preventing or detecting this form of loss.

Like all shrink categories, these two categories continue to grow every year, acting as the “catch all” for many retail businesses. According to the Global Retail Theft Barometer 2011, “Vendor shrinkage accounts for $6.6+ billion,” while “internal error including mispricing, invoicing errors and administrative failure cost $19.4 billion.” Understanding where and when shrink occurs helps empower retailers to accurately estimate and reconcile shrink resulting from internal theft or organized crime. Using the right integrated technology can increase visibility, allowing a retailer to understand inventory losses down to the sku level, not just the category. As this mixed bag of shrink continues to perplex retailers, security and intelligence solutions are crucial for reconciling and revealing the unknown.

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