Main causes of warehouse theft and loss

According to the National Retail Federation, warehouse-related losses contributed to over $112 billion in industry shrinkage in 2022. This figure continues to rise year over year.

Warehouse loss can stem from a variety of sources, many of which are common across industries and facility types. From human error to intentional theft, these losses disrupt operations and impact a company’s bottom line.

The most frequent contributors include:

• Accidental damage: Many warehouses have fragile items in their inventory, making accidental damage a risk throughout various stages of operation, including shipping, receiving and processing.
• Employee theft: Inventory theft from employees remains one of the leading causes of warehouse loss. Internal theft is estimated to be 15 times more likely than losses caused by external parties.
• External theft: Shippers and external parties also commit inventory theft by gaining unauthorized access to stock, either in transit or within the warehouse.
• Administrative errors: Inventory loss can result from stock management or administrative errors, such as incorrect data entry, inaccurate counts and product mislabeling. Inefficiencies in the warehouse management process can also increase the number of administrative errors.
• Supplier fraud or errors: External suppliers often encounter inventory management issues of their own, which can result in incorrect quantities or the wrong products being shipped. In some cases, suppliers may also engage in fraud, such as intentionally shorting deliveries or providing lower-quality stock than agreed upon.
• Return fraud: Return fraud is a growing contributor to warehouse loss, involving internal or external parties who fabricate reasons to return shipped stock, often to trigger a markdown or render the item unsellable for personal gain.

Signs of warehouse loss or theft

Storage facility loss prevention remains a consistent challenge for warehouse administrators and supervisors. The increasingly complex logistics behind receiving, processing, storing and shipping stock can make transaction reporting and accounting difficult.

As a result, identifying warehouse theft can be challenging, particularly in large facilities. However, if you’re missing stock, there are several signs that could indicate issues, including:

• Discrepancies in inventory documents: Invoices on shipments go missing, appear to be doctored or aren’t the original documents.
• Suspicious employee behavior: Employees may exhibit unusual behavior patterns, such as not taking vacation days, reduced engagement with colleagues or lower sales performance during their shifts.
• Abnormal paperwork or transactions: Company sales data doesn’t balance with stock levels.
• Excessive waste: Inventory write-offs significantly increase, with higher breakages and compromised quality reported.
• Unexplained cost increases: Budget overruns may point to higher-than-expected loss levels or unaccounted inventory shrinkage.
• Increase in administrative errors: A rise in reporting or data entry mistakes within inventory systems may signal underlying issues such as theft, fraud or process breakdowns.
• Stock found outside storage areas: Items located outside designated storage or processing zones can be a red flag for theft or unauthorized movement.

12 effective warehouse loss prevention strategies

Developing and refining warehouse loss prevention strategies is one of the most important responsibilities for administrators and supervisors. Inventory loss can have a major impact on a company’s operations, making it essential to implement strong measures to protect stock.

Through a combined approach involving technology, strategic planning and employee engagement, warehouse loss and theft can be mitigated. Here are eleven tips that can help you shape an effective warehouse theft prevention strategy:

1. Conduct regular audits

Regularly scheduled audits of facilities and inventory help strengthen current warehouse security and inform future planning. Audits may include examining facilities for compromised areas that could be exploited by thieves and ensuring that the physical inventory matches the records in the management system.

Conducting regular audits could also help deter personnel from considering theft, as warehouse administrators are consistently up to date on inventory numbers. Daily spot checks in different warehouse areas can help increase facility security and protect business assets.

Implementing automated audit systems can help make physical checks faster and more accurate. Combined with targeted inventory audits as part of daily operations, they can significantly enhance oversight and loss prevention efforts.

2. Implement smart security technology

Warehouse managers, administrators and supervisors may struggle to maintain complete oversight of their facilities. Implementing smart security technology can help deliver a more comprehensive view of the area, especially those less frequented by staff.

Smart security technology consists of warehouse cameras and IoT sensors that help process consistent visual data throughout the warehouse, identifying any unusual behavior and potential threats to the operation. The unified, remotely accessible approach to warehouse security helps reduce the need for human oversight, offers more coverage and can protect facilities against intruders.

The technology provides a 24/7 visual overview of the warehouse operation accessible to all business decision-makers and administrators. Installing smart security technology and surveillance solutions in inventory storage areas can be a significant asset in warehouse loss prevention, increasing visibility and helping to reduce costs.

3. Create an inventory theft policy

Establishing and enforcing a clear theft policy can be an effective deterrent for personnel who might consider misappropriating company property. Ensure the policy is shared with all staff, clearly outline the consequences of violations and require employees to acknowledge in writing that they understand the expectations.

While theft policies are standard in most warehouse and logistics employment contracts, regularly reinforcing these guidelines can help maintain awareness and emphasize the organization’s zero-tolerance stance on theft and fraud.

Additionally, forming a relationship with local law enforcement can further strengthen the policy. Notifying staff that confirmed incidents of theft may be reported to authorities reinforces accountability and highlights the seriousness of the issue.

4. Maximize visibility in the warehouse

The presence of warehouse administrators can be a strong deterrent to potential thieves. However, it’s not always feasible for managers or supervisors to be physically present on the floor at all times. Remotely accessible security cameras enable continuous observation, while smart security technology can alert staff to unusual or suspicious activity in real time.

Enhanced lighting systems, particularly in high-risk areas, can also improve visibility and reduce opportunities for theft or fraud. Bright, strategically placed lighting helps employees easily identify and report suspicious behavior or unauthorized access.

5. Organize regular security training sessions with staff

Security training sessions can also help staff understand the significance of warehouse loss prevention by equipping them with the knowledge and skills to handle situations involving potential warehouse theft or fraud. The sessions may cover how to identify and report suspicious behavior, as well as how to contribute to a physical security network that supports inventory protection efforts.

Regular security training sessions can also encourage a sense of value among warehouse personnel, showing that they are trusted members of the team and an integral part of the operation. Building a culture of responsibility can help reduce staff’s consideration of theft.

6. Follow a clear inventory management plan

Inventory management plans are important guidelines for warehouse operators, as they involve protecting the organization’s essential assets. These plans include keeping track of stock numbers, movements, quality reports and special notes regarding storage or other details.

An effective inventory management plan ensures all staff members know how to report inventory numbers and movements correctly. A clear, easy-to-follow plan can also help identify missing stock and deter potential theft.

A remotely accessible, intuitive inventory management system can enhance transparency and provide a stronger framework for stock control and loss prevention.

7. Understand your warehouse teams

Regular personal interaction with your warehouse staff can help foster a culture of accountability. It can also give managers and supervisors insight into why team members might consider stealing from the organization.

Warehouse managers and supervisors often juggle numerous tasks throughout the day. However, implementing smart security systems to streamline routine tasks for staff can help reduce manual workload and free up time to conduct short, regular meetings with warehouse teams.

By understanding employees’ personal and working circumstances, administrators can better identify potential factors contributing to warehouse theft or fraud, allowing them to develop a more effective and comprehensive loss prevention strategy.

8. Take prompt action to address theft and fraud violations

Swift action in response to theft or fraud can serve as a deterrent for potential violations from other staff members. If stock goes missing, managers and supervisors can leverage their smart security system to help identify the perpetrator.

By utilizing visual analysis, staff registers and inventory management reports, administrators can pinpoint the individual or group responsible for the missing stock. Once identified, the zero-tolerance policy on theft and fraud can be enforced according to company procedures.

Taking prompt action in line with company policy not only addresses the incident at hand but also helps prevent further theft by quickly identifying the suspect.

9. Conduct background checks on new hires

Conducting background checks on new employees helps reduce the risk of inventory loss by verifying their employment history and identifying any relevant issues that may impact trustworthiness. With the candidate’s consent, managers and supervisors can use professional agencies to check references, past employment and other factors that could indicate potential risks.

If any concerning information arises, it’s important to carefully evaluate whether the candidate is a good fit for the organization and the role. Ensuring that employees align with company values and expectations plays a key role in fostering a secure and trustworthy workplace.

10. Limit access to inventory

Restricting access to stock throughout the warehouse is an effective loss prevention strategy. Implementing storage areas protected with access control systems that require keycard or biometric identification can safeguard assets and designate high-security zones.

Limiting access also helps deter external theft, as unauthorized individuals may attempt to steal during shipping or receiving. Only trusted personnel with a verified record should be granted access to inventory storage areas.

11. Set up an anonymous tip hotline

Implementing an anonymous tip hotline alongside regular security training can strengthen warehouse loss prevention efforts. It gives employees a safe, confidential way to report suspicious activity without fear of retaliation.

Management can then use their security systems to verify credible tips and respond more quickly if a claim is confirmed.

12. Leverage data analytics to identify risk patterns

Using data analytics tools integrated with warehouse security systems allows managers to detect trends and anomalies that may indicate theft or operational weaknesses. By analyzing access logs, inventory discrepancies and video analytics data, administrators can proactively identify high-risk zones, times or behaviors.

This insight enables more targeted prevention strategies, helps optimize workflows and supports data-driven decision-making for long-term loss prevention.

Key takeaways for preventing loss in a warehouse

Warehouse administrators, managers and supervisors face ongoing challenges in minimizing theft and fraud. However, combining proactive strategies with modern technology can significantly reduce inventory loss. Key tactics for effective warehouse loss prevention include a combination of strategic measures. These range from implementing robust security systems and conducting regular audits to ensure compliance to increasing overall warehouse visibility.

To stay ahead, decision-makers should keep up with industry trends, such as intelligent video analytics software, mobile workforce tools and innovations in inventory management. Insights from competitor data or internal reports can further inform effective loss prevention strategies. While every warehouse is unique, these core practices can support a more secure, efficient operation across diverse facility types.