Evans, Beck

Loss Prevention,
Auditing & Safety Conference 2009
Title Sponsor:

Collaborative Approaches
to Successful Shrinkage
Management
Shawn Evans, Shrink & On-Shelf Availability Leader , Procter & Gamble Co.
Adrian Beck, Reader in Criminology, University of Leicester, UK

Session Content
• Getting to Grips with Shrinkage
• Understanding the Root Causes
• Identifying Root Causes
• Keys Steps to Collaboration
• Case Studies in Collaboration

Getting to Grips With Shrinkage
• Slippery Term
• What is the Scale of the Problem
• Understanding the Causes

Defining Shrinkage
Shrinkage
intended sales income that was not and cannot be realised
Malicious
Non Malicious
External
Theft
Internal
Theft
Inter-comp
Fraud
Spoilage
Pricing
Errors
Damage
Delivery
Errors
Data
Errors
Scanning
Errors

Cost of Shrinkage
Year
Source Size (%)
2003 National Supermarket Research Group (US) 2.32
2005 ABRAS Supermarket Shrinkage Survey (Brazil) 2.05
2004 ECR Europe Shrinkage Survey (18 European countries) 1.84
2003 Retail Council of Canada 1.75
2007 Food Marketing Institute (US) 1.52
2002 ECR Australia 1.52
2003 New Zealand Survey of Retail Theft and Security 1.50
2008 National Retail Security Survey (US) 1.44
2008 Global Retail Theft Barometer (36 countries) 1.34
2003 Eurohandelinstituts (Germany) 1.23
Average 1.65

Cost of Shrinkage
• Annual global losses
• $232 billion
• Cost of managing shrinkage
• $46.4 billion
• Ignores consequential losses
• Additional transport, out of stocks, defensive
merchandising etc

What does $278 billion buy?
New Zealand
Kuwait
Luxembourg
Iceland

Perceived Causes of Shrink
Study
Non
Malicious
Malicious
Process
Inter-company
fraud
Internal
External
National Retail Security Survey (US) 15 4 44 34
Global Retail Theft Barometer 16 6 36 41
Food Marketing Institute (US) 21 9 39 32
ABRAS Supermarket Shrinkage Survey (Brazil) 65 8 16 12
ECR Europe Shrinkage Survey 27 7 28 38
Retail Council of Canada 18 7 40 35
New Zealand Survey of Retail Theft & Security 20 3 12 68
National Supermarket Research Group (US) ­ ­ 57 20
ECR Australia 29 11 25 35
Average 26 8 33 35

True Cause of Shrinkage
Shrinkage
intended sales income that was not and cannot be realised
Malicious
Non Malicious
External
Theft
Internal
Theft
Inter-comp
Fraud
Spoilage
Pricing
Errors
Damage
Delivery
Errors
Data
Errors
Scanning
Errors
Operational Failures

Operational Failures
• any fault in the design, implementation, operation,
monitoring and control, and review of processes and
procedures used within the retail environment.
• Can be identified by root cause analysis
• Any point in the supply chain

Examples of Operational Failures
• The Lost Key
• Problem: Stock is left outside the secure cage
• Why? Because the key holder is on holiday and did not give the key to another member of staff
• Why? Because they assumed there was another key
• Why? Because this is what existing store procedures stated, but unfortunately this was not now being followed
• Why? Because the store manager had not reviewed operating procedures for over 12 months
• Why? Because the store manager was under considerable pressure to focus on sales
• The Speedy Forklift
• Problem: High levels of damaged stock in DC
• Why? Because forklift truck drivers are regularly crashing into pallets of stock
• Why? Because they are driving too fast
• Why? Because their pay is determined by the number of pallets moved in a day
• Why? Because this was seen as a good way to improve productivity

Examples of Operational Failures
• Less Till Checking
• Problem: Cash theft has risen at the till
• Why? Because more staff are stealing from the till
• Why? Because they think it is easy to get away with it
• Why? Because the till is no longer checked after each shift only at the end of the day
• Why? Because store operations reduced the number of till supervisors working in the store
• Why? Because it enabled them to save money on salaries
• Poor Packaging
• Problem: A product is always out of stock on the shelf
• Why? Because it is in the store room
• Why? Because replenishment team cannot find it
• Why? Because all packs seem to look the same
• Why? Because there is no differentiation except by barcode
• Why? Because the Packs were designed to suit DC operation

Opportunity and Operational Failure
• Opportunity makes the thief
• Situations and opportunities
• Risk, effort and reward
• Understand root causes rather than symptoms

Identifying Operational Failures
• The Shrinkage Road Map
Root cause analysis
Failure, Mode and Effect Analysis
Process mapping
5 Whys
Detailed data analysis

Shrinkage Road Map Principles
• Be systemic
• Be systematic
• Focus on the vital few: The hot concept
• Get accurate and timely data
• Adopt a collaborative approach….

P&G – why do we care about shrink
• Shopper is boss: Shrink impacts the shopper
• We can bring solutions
• Insights – Shopper & Thieves
• At source solutions
• Expertise and best practice
• Get it right: $$$$ profit opportunity for P&G and
our customers

200+ Collaboration Projects Completed

The “Remove Opportunity” Approach
Shrinkage
Process
failures
Intercompany
fraud
Internal
theft
External
theft
Conventional approach
ECR approach

Collaboration Process

Retailer Case Study – Collaboration Team
Retailer
• Buying
• Store Operations
• Loss Prevention
• D.C. Operations
• Systems (I.T.)
• Process Solution Manager
Procter & Gamble
• Sales Executive
• Category Management
• Store Operations Manager
• Customer Logistics Manager
• Shrink & On-Shelf Availability
Leader

Collaboration Project Goals
• Sell More Lose Less
• Increase sales
• Reduce shrink
• Improve instocks
• Optimize store labor / efficiency
• Understand process “Realities” D.C. / Stores
• Develop collaborative holistic shrink reduction solutions

Sell More Lose Less Collaboration Agenda
Two and a half day Road Map Session
• D.C. Tour – followed Fusion receiving through shipping
• Store visits – high / low shrink store comparison
• Process map end to end process steps
• Identify process failures
• Root cause analysis
• Develop solutions
• Create solutions / market test action plan
• Present findings to sr. management steering team

Analyzing The Process

Sell More Lose Less Identified Solutions
Process & Procedures
• Secured Supply Chain
• Regular Counting “Hot Products”
• Store Receiving - Inventory Counting
Equipment & Systems
• Store Item Level Hot Product Report
• Secure Storage Rooms / Zip Tied
Totes
People
• Store Shrink Champion
• Training & Awareness Program
• Hot Store & Product Focus
• Aggressive Hospitality
Product
• Product Protections – Keeper Cases
/ EAS Tagging
• Assortment / Stocking
• Layout & Section Design

Collaboration Project Test Results
• Sales increase 1% (Self Selection Fixture vs. Keepers)
vs. control store
• Shrink reduced 100% vs. control stores
• Instocks improved 49% vs. control stores
• Consumer focus group results provided positive
shopper experience feedback

P&G Shrink Collaboration Approach
• Stop blaming: • the shopper • each other • ORC /Winona Ryder
• Collaborate and engage all stakeholders:
• Create an ‘end-to-end’ solution across buying; logistics;
store ops; loss prevention; manufacturers
• Engage, not just tell
• Focus effort on:
• Hot products
• Hot Stores
• Work the processes:
• Products; Information; Money
• Identify and remove opportunity for loss and error
• Evaluate & learn

THANK YOU!
QUESTIONS?
Evans.sr.1@PG.com
bna@le.ac.uk