In an initial trial of radio frequency identification (RFID) tags on garments in 2007, American Apparel found that inventory shrinkage, a reduction in inventory, was 20 percent, double the retail industry average. The inventory shrinkage was a result of ____

Question

a. Employee theft
b. being soft on shoplifting
c. lax internal controls over shipping and delivery
d. all of the above

Answer 1

D
However, while the American Apparel was cultivating a hip image in the world of retail, it was also developing a reputation for being soft on shoplifting. Former employees allege that managers were asked to turn a blind eye to shoplifting so the "right type of person" would be wearing American Apparel clothing. In addition, lax internal controls over shipping and delivery combined with young store employees allegedly hired more for their looks than for their management ability led to high levels of employee theft. In an initial trial of RFID tags on garments in 2007, American Apparel found that inventory "shrinkage" - a reduction in inventory due to human error, theft, or damage - was 20 percent, double the retail industry average. Employee theft was clearly a significant portion of this high level of shrinkage.