Originally published October 21, 2020. Last updated January 23, 2025.

Managing inventory comes with many challenges, an important one being how to reduce inventory damage. Damage to inventory can occur at any point in your processes. Some products are damaged at the time of receiving, some are damaged during handling or storage and others are damaged during shipping. All incidents of damage can impact your bottom line, so it’s important to control for this risk.

In many cases, the risk of damage to inventory can be reduced or even eliminated. Here are five actionable ways to protect your inventory from damage.

1. Plan for Severe Weather

Inventory regularly faces dangers from the elements, such as damage from hurricanes, flooding, water intrusion, tornados and hail. The Congressional Budget Office states commercial business damage from hurricanes and other severe weather totals $9 billion annually. Preparation for these weather risk events is key:

  • Verify your insurance coverage, knowing what is and is not covered. Make sure to read and understand your policy. Purchase gap and excess coverages where needed.
  • Create an emergency plan, considering facility and staff preparation, location vulnerabilities, evacuation before the storm and vehicle access after the storm.
  • Gather supplies that will be needed, such as generators and fuel, sandbags, plywood panels and dry or wet floodproofing materials.
  • Perform a cycle count to understand what inventory is on hand before a major weather event and store a copy of your inventory data safely offsite or securely online.
  • Inform clients and suppliers of significant anticipated weather disruptions, with specific days you plan to be closed and when you anticipate reopening.
  • Move inventory out of the path of the storm where possible, then secure your facilities and its contents. Board windows, lift products and critical systems off the ground and shut down electrical systems to prevent surges and fires.

2. Optimize Workflows

Not all damage is due to severe weather events. Inventory is also at risk during normal operations, often due to inefficient workflows and processes. Make a habit of working to improve your processes and optimize your workflows:

  • Ensure employees don’t handle inventory more than is necessary.
  • Improve workflows to ensure incoming and outgoing product is not left unattended longer than needed.
  • Make changes to reduce the number of times inventory is moved or rearranged.

The more touchpoints your inventory has, the more opportunity for products to become damaged. Work to minimize these unnecessary risks in your workflows.

3. Improve Storage Protection

It’s also common for products to become damaged while in storage. Careless handling or a brush with a forklift or trailer can lead to significant loss due to damage. But this is largely preventable with the right steps:

  • Match the right storage solutions to a particular product.
  • Avoid placing inventory near high traffic areas.
  • Install protectors or use natural barricades for additional protection.

4. Invest in Facilities Improvements

Facility improvements can also reduce the risk of unnecessary product damage. The return on investment of smart improvements can far outweigh the initial costs when it reduces damage to inventory during packaging, handling, storage and shipping and receiving. These investments typically offer a high ROI:

  • Lighting upgrades that offer better illumination.
  • Lot improvements such as better drainage, paved lots and wider aisles.

5. Encourage a Culture of Safety

Your workplace relies on your employees at every part of your process. Damage to your inventory can occur due to employees becoming careless as well as employees going beyond the limits of safe procedures. Building a culture of safety can not only help protect your workers, it can also reduce inventory damage:

  • Develop a proactive risk management program risk management program ahead of potential risks.
  • Post signage to remind employees of proper procedures and safety precautions.
  • Require employees to work as a team for difficult or dangerous handling procedures.
  • Ensure employees have the proper training for operating forklifts and pickers.
  • Encourage safe job performance with incentives and rewards.

Commit to Reduce Inventory Damage

Every year, inventory damage leads to losses that are often preventable. High rates of product damage can impact your organization’s bottom line and make fulfillment of orders and service level agreements more difficult. Commit to taking these 5 actionable steps at your business to help reduce your losses and protect your inventory from the daily risks you face.

Explore more risk management tips from Lockton Affinity, the administrator of the Triad Financial Services Inventory Insurance Program.