Solving Inventory Shrinkage in Supply Chain, Logistics and Distribution

A Solution by Fleming Group

“Inventory shrinkage – the loss of goods post-manufacture but pre-sale to customers – poses significant risks to the bottom lines of logistics firms and firms housing elaborate supply-chains. To meaningfully address the challenge, shrinkage needs to be prevented,  not responded to after-the-fact.

Industry Challenges – Inventory Shrinkage and Reckless Forklift Usage

Back in 2007, inventory shrinkage slashed almost 2% of American and British retailers’ total revenue. That was close to pre-tax profit. Much of that shrinkage (36%) is caused by staff-related theft, a 2016 survey of the National Retail Foundation found. Shrinkage is also a persistent problem for cold stores. But for cold stores in South Africa, it is syndicate theft that we are dealing with. The negligent handling of equipment, especially forklifts, leads to further shrinkage and damage to property, plant, and equipment. Unmonitored and undetected, it is not discouraged.

Adding complexity are the results of a 2011 study, showing factors like trust and company loyalty not to be at play in theft. Rather, structural incentives facing low-wage employees make at least some theft near-inevitable. Similar incentives may be at play when it comes to reckless equipment usage. Removing those incentives is achievable with immediate detection and effective counteraction. Legacy security systems cannot do this. We have a solution that can.

Solution Part 1: Immediate Detection

If employees know that management will identify theft the moment it occurs, they will be greatly deterred. Our solution empowers management to do just this.

First, we install an intuitive tracking system, using Internet-of-Things based technology to continually trace a limitless number of assets. This tech tracks items within a range of 200m. It is superior to and more cost-effective than RFID technology.

Second, we build a smart surveillance system by integrating an AI-based Video Management System with a robust, tamper-proof CCTV network. It does not just record theft incidents. Grown smart through machine learning, it immediately recognises the suspicious behaviour that leads to such incidents. Perimeter approaches, loitering, line-crossing, object disappearances and camera tampering are just a few examples.

Finally, we integrate the surveillance and tracking systems into a Physical Security Information Management System. With integration, much is possible. For example, the surveillance network can spotlight the unauthorised movement of assets. So, if an asset moves when it is not supposed to, it will instantly show up on the central security interface.

Solution Part 2: Automated Counteraction

The integrated solution goes further. Automated, uniquely designed responses can be defined for all kinds of events. System-wide responses to security breaches, unauthorised asset movement and suspicious behavior are designed around the facility’s particular needs. The security intelligence system can also integrate with the warehouse management system. This way, undue movement of assets can be recognised, and an automated response triggered.

Intelligent tracking solutions, in combination with gyroscopic devices, can also track and record the way forklifts are used. With this intelligence, equipment users could be scored according to their responsible use of the facility’s equipment. Reckless usage could be detected early, before it results in undetected rack damage.


Costs are saved and efficiency increased through reduced stock issues and a reduced need for security personnel. Risk is reduced through continuous visibility of stock, automated security responses to predefined events, shortened security response times and deterrence of future security breaches. Finally, staff turnover itself is reduced.

If you’d like to chat more about this solution, or about how Fleming Group can design one that works for your facility, get in touch at Or, visit our website at