(Editor’s Note: In a previous article, Mark discussed creating a store-specific Plan-of-Action. In this issue, he addresses specific items relating to the three major shrinkage causing factors.)
External Theft/Shoplifting
Physical Aspects:
Store design and layout can greatly affect a store’s vulnerability to shoplifting. Height and location of fixtures; placement of cashier stations; blind spots on salesfloor, etc. all impact sales floor visibility. Remember, shoplifters want and need privacy – so take it away from them! Cameras, mirrors, relocating fixtures can help reduce blind spots. Also, the use of door chimes to signal associates when a customer enters/exits the stores can be of benefit in some low staffed stores.
Protecting high value/highly pilferable product which thieves target can help reduce losses. The placement of these items on the sales floor (in highly visible areas (ie. across from cash wrap) and the protection of them (in locked showcase, tagged with RFID/EAS) will help in high shoplifter risk stores.
Human Element:
Customer service is rated by many to be the best deterrent to shoplifting. As stated earlier, shoplifters want and need privacy so take it away from them with good consistent customer service.
A dishonest cleaner/vendor when given the opportunity to exit the premise carrying any type of container capable of concealing merchandise, can commit significant theft if left unchecked. Be sure to monitor cleaners/vendors inside store and at egress.
The receiving/shipping process is an area where significant dollar losses have occurred in non-alert stores. Losses most frequently occur as result of intentional concealed shortages; a careless employee signing for product/cartons not actually received; product setting near dock area/back door and being loaded by a dishonest driver when supervision is not present; and allowing a vendor rep to process RTV merchandise without a management person verification count.
What actions/solutions can your store implement to reduce its vulnerability to external theft/shoplifting?
Internal Theft
When evaluating the effectiveness of your internal controls, it is most important that only the position (not the individual) and its related risks be analyzed.
Point of Sale: If associates are not closely monitored and their transactions regularly “spot-audited” by management, a dishonest associate/cashier will quickly take advantage of the situation. They may under-ring items (price overrides), “pass-out” merchandise, or create fraudulent refunds or voids and pocket the money.
Door Controls/Bag Checks: Are exterior doors properly secured/ alarmed to prevent an associate form passing product to the outside to a friend or for later retrieval? Are bag checks consistently completed whenever an associate exits the store?
Store to Store Transfers: If these type transfers are not closely monitored to ensure the accuracy of both incoming and outgoing product, your vulnerability to theft is greatly increased. The person who prepares the transfer should never be the same person who carries or ships the product. Two associates should always verify the outgoing and incoming product to ensure accuracy.
Offsite/Outside Storage: Storage of merchandise in an outside container/trailer or in an offsite storage unit is always high risk from an internal theft viewpoint. Theft vulnerability is increased when a single associate has the ability to move product between the store and the storage unit. Key control and second person verification of product being moved is of utmost importance.
Pre-employment Screening: The first step to reduce internal theft starts at the point-of-hire – do not hire the “bad apple”. Is there anything additional you can do to ensure you are hiring honest and quality associates?
Self-Audits: Spot-checks and audits are a great way help control internal losses and identify honest mistakes. Therefore, conduct frequent spot-checks and self-audits to ensure associates are doing what they are required to do.
Collusive Thefts: Closely monitoring activities between multiple individuals (associates & vendor/ service reps; cashiers & customers), can greatly assist in preventing loss in the event of dishonesty.
What actions/solutions can your store implement to reduce its vulnerability to internal theft/losses?
Operational Issues
Inventory shrinkage can quickly occur within the “operational” area (paperwork, administrative errors, etc.) when control documents or data are inaccurate or lost; someone fails to monitor a crucial report; or even when an individual counting inventory fails to count/scan correctly, or simply mis-keys a critical number. The amount of paper/operational shrink can vary greatly between companies, and/or stores within a company depending on the focus/attention given this shrink contributing area.
Price Changes:
Most price changes are automatically captured by the system and manual counts are no longer required. However, the accuracy of your on-hand system can cause inaccuracies in permanent price change dollars. On-hand counts should be regularly spot-audited and large discrepancies investigated/corrected. In-store price changes are regularly captured via the POS system, so ensure all cashiers know how to properly ring in-store POS markdowns and mark-out-of-stock items.
Receiving: The accuracy of inbounds shipments (both DC and direct from vendor) is crucial to maintaining an accurate inventory. All direct store deliveries should be detail checked-in by store personnel (never let the service vendors conduct the count!) and spot-checked by management to ensure accuracy. Depending on your company, you may or may not be required to detail check-in receipts from your DC. However, it is a good practice to spot-check your receipts, especially high dollar items, to ensure you are not short shipped.
Outbound/Shipping: As with the receiving process, the accuracy of outbound product (RTV, damage/ defective, transfers, etc.) to both the DC and direct to vendor/supplier should be detail counted by store personnel and spot-checked by management to ensure accuracy.
Physical Inventory: Shrinkage can quickly occur during the physical inventory taking process if all merchandise is not properly counted (salesfloor, stockrooms, off-site units, outside containers, etc.). In addition, mis-scanning or mis-counts of merchandise (going too fast, not paying attention, etc.) can result in shrink/loss.
There are many other ‘operational/ paper/system’ issues which can also cause shrinkage at store level such as out-of-period transactions/bookings; in-transit accounts not properly reconciled; inaccurate cut-offs; duplicate payments or bookings; etc. However, when completing your Plan-of-Action just focus on those areas you can control at store level.
What actions/solutions can your store implement to reduce its vulnerability to operational/paper/system losses? $
