TAKING stock of stock taking has become a critical tool in fighting shrink which is why retailers are outsourcing their stock taking in record numbers as a direct response to the credit crunch.

These are the findings of stocktaking specialist Orridge which has reported record growth in the last year, the biggest in its 162 year history - and it should know as it is in the business of counting!

Last year the company, which includes many of the UK's and Europe's leading retailers on its books, is on target for a 20 per cent growth on 2006/7.

During that period the company, based in Harlow, Essex, counted 693 million items of stock. During the current trading year that figure will be around 750 million.

According to director Peter Davies, the record growth is in part linked to the credit crunch as retailers need to have an independent accurate picture of stock loss.

"We see the growth in items counted as a form of economic barometer as more
companies want as close to 100 per cent accuracy and a truly independent audit
when times get tougher."

"During better times when sales are going well some retailers take their eye off their losses, but with a downturn in the economy loss prevention directors are looking to get a better handle on their levels of shrink, with a view to arresting the loss."

Stock taking in this context can mean the literal lifting of merchandise by thieves and
internal fraudsters and, according to the Global Retail Theft Barometer, shrink cost the UK retail industry £3 billion last year. Across the globe the figure was $98 billion with the overall growth being in internal fraud.

"This is a huge issue and one that retailers are increasingly concerned about. The traditional way of counting is to use existing staff at the store to do it or get other regional stores to stock take each other. However this does not allow for independent and careful counting as it is a timely chore added onto the other duties. This can skew the results as can any staff collusion in store or indeed inter-store if another team enter a quid pro quo to present the figures in a certain light. There has to be trust with staff, but outsourcing is a guaranteed way of at least 98 per cent accuracy.

Davies says this accuracy is critical as trading results are based upon their twice-yearly findings.

"If the stock take is out, how can you rely upon the trading figures given to the City and shareholders?"

The credit crunch has also brought into focus the cost effectiveness of outsourcing stocktaking.

"It is cheaper to have a specialised company come into the business and carry out the stocktake than take up staff time and wages to do it. It allows them to do their core business - selling and customer service - and for us to do ours," says Davies.

Davies is evangelical about counting and frequently addresses retail loss prevention conferences on the subject, often joined by willing retailers who have seen the ‘light'.

One such case study is New Look, the UK's third largest womenswear retailer which has almost 900 stores.

Head of finance Keith Gosling who has joined Davies on the platform says: "New Look needed a specialist stocktaking approach that would guarantee a consistent assessment because in today's economic climate it's even more important that we manage stock tightly. We achieve this in part by regular, accurate counting of store stocks. Outsourcing plays a key role in our strategy without the cost and labour intensity that typifies an in-house process."

Davies concludes: "Retailers need to understand what they are losing and where they are losing it in store or in the supply chain. They cannot address hemorrhaging loss if
they cannot accurately measure what, where, when and why it is taking place."