Inventory shrinkage challenges every industry. Losses from shrinkage have a dramatic effect on the financial health of every business and steps must be taken to identify and stop losses like this. There is a significant benefit to deploying Clarion Compliance’s real-time monitoring solution to identify shrinkage. Shrinkage case study

In January of 2022, a licensed cannabis dispensary in California reached out to Clarion Compliance to discuss concerns regarding inventory shrinkage. In our initial discussions with the ownership, we found that their inventory records were not reconciling, and they did not know whether the issue was:

  • Miscounting
  • Theft by an employee for personal use
  • Theft by customer
  • Theft by an employee to be sold in the illicit market

Clarion Compliance utilized a read-only solution that we deployed remotely with no assistance from the client or time involvement on their part. We utilized our real-time monitoring solution, and we monitored the account for 60 days and discovered anomalies in the data that were elevated to red flag status. After 90 days, we had made the following determinations from the physical evidence:

  • Certain employees were removing products from inventory and altering the records in a particular fashion
  • There were two types of products that were particularly appealing and had a shrinkage percentage much higher than random shrinkage events
  • The volume of product taken and the time frame for that product indicated the theft was for illicit sales activity rather than attributed to personal use
  • Total inventory losses were approximately $9,000 per month at the wholesale level.
     The total time spent by Clarion personnel to address these issues was 3 hours per month for 3 months

The total cost for the initial consultation and the three months of monitoring was $2,575.00, and the ongoing monitoring fee is $75.00 per month. The time commitment by the dispensary owners was kept very low to avoid disruption, with one hour up front and two additional hours at the conclusion of the assignment. The ongoing monitoring requires no time commitment and no outlay beyond the $75.00 per month fee, provided no issues are uncovered. Leadership did contract with Clarion Compliance outside of this assignment to help mature their inventory control system and assurance practices.

Overall, we found that an outlay of $2,575.00 to uncover inventory losses of $108,000 was a wise commitment of resources on the part of the dispensary ownership.