My job as vice president of sales and marketing is to preserve Niles brand integrity. One way that I accomplish this is by identifying unauthorized Internet resellers and shutting down their source of supply. So, when I saw one of Niles newest products listed with a buy it now icon on a dot-com site, I made the purchase. A few days later, when the product arrived, we were able to trace the original sale back to a large and loyal dealer.

Realizing this was a highly unusual situation, we contacted the dealer, who in turn counted his inventory and recorded several items missing, including the same item I purchased. Clearly our dealer had a thief in his ranks. While our operations department dealt with the victimized dealer and local police agencies, I wondered if some of you may be having the same problem and dont even know it. So here are a few bits of advice to help you prevent shrinkage, or loss of inventory in your business and preserve your profits.

Be Aware That Shrinkage Exists
In practice, shrinkage comes from several areas in business: employee theft, outside theft, administrative errors, and vendor fraud. In this case it was employee theft that would have likely gone without notice and cost the dealer thousands more in profit dollars.

Count Your Inventory
Set up a process to account for your inventory. Typically this is a combination of cycle counts and physical inventories conducted on a regular basis. If our dealer had this process in place, he may have noticed the shrinkage himself.

Lock Up Your Inventory
Protect your products, and make those who have it responsible for it. Set up a secure area and a process where inventory is signed in and out by more than one person. That way you have two levels of authority, each responsible for what is in the warehouse and/or in their possession, including the contents on their trucks.

Screen your People
Establish credit checks, character references, criminal background checks, and drug screening as a standard policy for hiring. And be sure to apply this policy across the board, from executives to part-time workers, and everyone in between. Dont discriminate and dont leave anyone out.

Let Everyone Know That You are Watching
Publish a zero-tolerance policy regarding employee theft and have every employee sign that they have read and understand it. This way you set expectancy with your administration and staff.

Follow Through
None of this matters if you dont have the courage to terminate and/or prosecute offenders. Youve got to be serious, because protecting your assets means protecting your company and that provides jobs for you and your employees.