Interpreted Analytics for Shrink Operations

Forget the Retail Ice Age news headlines. Brick and Mortar is not dead. Top Operators use Interpreted Data to deliver profit improvement answers to Store Operations and Asset Protection Teams. Interpreted Data gives Store Managers, Supervisors and AP Professionals clear direction to support best practice execution which grows sales, reduces shrink loss, mitigates out of stock item conditions, and improves cash flow.

Here are 6 Keys to Running a Low Shrink Growth Store: When it comes to running a Profitable Store, Store Teams must understand these 6 Keys to Managing Inventory in the Profit Optimization Supply Chain. These Keys form the foundation for achieving P&L goals.

  1. Operations Excellence is Circular: Stores Order, Receive, Stock, Handle, Produce, Display, and hopefully sell what they ordered and received daily. This circular process is a constant at the core of running a profitable store. The Store Manager and their team have two fundamental jobs – customer service excellence to grow sales, and shrink prevention for profit optimization.
  1. Supporting Positive Sales: Much is written about Sales solving Shrink Loss, but in this market of strained sales, shrink prevention remains a challenge we must overcome. Here are some helpful tips:

Inventory TURNS is Key! Buyers need to buy for TURNS and stores need to order for TURNS. Inventory needs to be managed because a failure to TURN hurts sales and weakens gross margins. In over 80% of companies, Managers and Department Leads have very little consciousness of the vital role of inventory TURNS in everything they do. Effectively managed inventory TURNS create cash flow, grow profit, improve labor efficiency, reduce shrink loss and promote positive morale.

– SKU Optimization/Rationalization

This subtle, but important issue helps promote sales and storewide shrink reduction. SKU Rationalization goes 2-ways. First, don’t carry items that aren’t selling. Second, be sure every store’s Top 1000 Selling Items are always in stock. FMI and GMA report out of stock items cost stores 1.8%-3.0% in annual sales, customer disappointment and elevated shrink levels

  1. Focus on Preventing Shrink: It has often been said, “Shrink Happens,” or “Shrink is a Cost of Doing Business.” Shrink does happen, but excessive shrink is “caused.” Controlling Shrink is everybody’s business. Every Department Manager, every Store Manager, every Product Specialist and every Buyer.

It always amazes me how easy it is to reduce store shrink 10, 15, even 20% when we make it a Team Effort.

  1. Store Teams must be trained and held accountable to implement proven best practices and be empowered by smart technology to Compete, Beat, and Win.  (a.) As Local Grocers expand Fresh Departments to ward-off sales erosion, shrink has a natural tendency to increase. Managers must be trained to be a Profit Realization Expert, proactively managing shrink loss in real dollars to take appropriate actions and correct excessive shrink loss.  (b.) The National Supermarket Shrink Survey reports when retailers measure shrink loss as the difference between gross margin projected versus realized, they mask shrink loss. This opens Pandora’s Box of bad behaviors. Reactionary Instincts dictate a price hike to get your gross despite shrink loss. Operational pricing audits have shown retailers build 8% shrink loss into their Fresh pricing, causing an undesirable competitive pricing condition. Second, 48% of Fresh Departments cut variety – ignoring what they could sell – while others avoid shrink by planning Produce to run out of stock. This hurts Sales and increases Shrink.  (c.) We need a reasonable amount of shrink to promote and grow sales, but Excessive Shrink is bad. Remember, to control shrink to acceptable levels, you must measure it. If you can see it, you can control it. Once you know what it is, why it is, and learn how to prevent it, you can win the War on Shrink.
  1. Training: We have trained over 10,000 Managers and Supervisors to use smart technology and reduce loss in over 900 Companies. When Training is perceived as an expense, it becomes one of the first areas we cut. Companies grow when they view expert Training as a vital business optimization investment. When Store Teams are well trained and leadership supports a People-First Culture, the team unlocks new sales, improves cash flow, lowers shrink, and reduces out of stocks. Store Teams are essential to providing a positive in-store shopping experience.
  1. Technology: Our industry has no shortage of data, but it is under-utilized. Interpretive Analytics provide Store Managers and Supervisors with clear visibility into the meaning of data and provide actionable guidance on how to resolve operational shortfalls. Don’t get me wrong, I Love Data, but I love the effective use of data.

That’s why we created ProfitTrax BI with daily, plain English Action Alerts and embedded Best Practice reminders to interpret store data and direct how to grow sales, reduce shrink loss, mitigate out of stock conditions, assure proper inventory of on-hand top selling items, and enable Store Manager effectiveness to drive profit.

Store Teams will grow your business if you give them smart technology, expert training, clear goals, and accountability. Smart Technology1 can provide Store Teams with plain English Action Alerts to grow sales and reduce shrink loss up to 15% in just 90 days.  $

(Editor’s Note: This article was written by Larry Miller, CEO at Smart Retail Solutions. If you would like to learn more please visit their website at: or call them at: 602-448-8500)


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