Loss Prevention 2010, Lower Costs; Less Shrinkage; More Accuracy

As with IT, Supply Chain Infrastructure during the ‘good times’ Loss Prevention Departments have grown ‘fat’ and need some trimming.

In 2010 smart trimming of Loss Prevention Departments with the responsibility of day to day control of Loss Prevention activity put back under the wings of Area Managers and State Managers is the way forward.

Firstly we would like to make clear that the role of the Loss Prevention Executive in many Australian retailers’ is undervalued and seen as an expense, it is not.

The role of Loss Prevention Manager needs to be elevated to a position that reports directly to the CEO not filtered through Operations.

An effective Loss Prevention Manager can add tens of thousands of dollars, sometimes hundreds of thousands of dollars straight to the retailers’ bottom line.

The trick is to position Loss Prevention as profit defence fence at the top of the cliff not the staff firing ambulance at the bottom of the cliff.

Loss Prevention is all about creating cost effective non sales intrusive processes which keeps retail team members honest with a culture which values honest behaviour.

Having honesty value ethics comes from the top; honesty value ethics at the top protects the bottom line.

Our experience is that if the business culture is one that the principles have poor business standards; unreasonable behaviour when communicating with staff; unreasonable customer refund procedures; poor credit note procedures: misleading advertising practices; poor lay-by return policies; boast about unethical tax ‘wins’; boast about bad supplier payment practices then that retailers’ can expect high shrinkage from store team and DC staff members.

Loss Prevention ‘tools’ in 2010 allows retailers’ to leverage off smart technology to minimise Loss Prevention costs of administration but firstly we need to define the areas of potential loss.

We still see major retail chains undertaking partial or February and June physical stock takes when hand held bar-code or RFID bar-code cycle counts are cheaper with stock accuracy levels maintained throughout the selling year.

Partial or half yearly stock-takes are false economy; stock accuracy progressively fails to a point that the loss of sale opportunity on inaccurate ‘assumed it is there’ stock is a higher risk to the retailer than the actual stolen of mislaid product.

Having stores disrupted for physical stock takes with specialised stock take teams and overtime is a cost Australian Retailers’ cannot afford in 2010.

There are arguments around the percentages but based on years of practical shop floor experience with a track record of implementing processes which delivered shrinkage at less than 1% of sales we still hold to losses coming from three key areas;

• External one third
• Internal one third
• Administration Errors one third

In 2010 any retailer with a shrinkage figure above 1% can adopt simple practices to add losses above 1% straight to bottom line; sometimes $100,000’s and millions of dollars.

With retailers with smaller turnovers the savings are still relative when it comes to bottom line improvement.

Following are extracts from the RETAiL Alert Website on Loss Prevention for 2010.

During 2010 Item Level RFID ‘bar-codes’ plus EAS (Electronic Article Surveillance) loss prevention will start to replace conventional Australian, New Zealand bar-codes?  

There is a growing trend within Australian Retailing of retail theft, both internal and external.
 

Make 2010 and 2010 the year that you challenge and beat Retail Theft and Shrinkage with our help.
 

There are simple, cost effective processes that you can employ to reduce your shrinkage plus the emerging use of Item Level RFID 'bar-codes' including EAS (Electronic Article Surveillance) loss prevention ability.
 

It could be that your shrinkage is worse than you think due to way you are accounting for stock valuation.
 

It is common is cost of stock deflation times for all stock valuation techniques to be affected using the common first in first out (FIFO) method; weighted cost average method or retail inventory method.
 

As retailers start to experience inflation in cost of goods we expect concerns to be raised about the rising levels of shrinkage real or assumed.
 

RETAiL Alert recommends a review of current Shrinkage Protection Strategies; the growth in Retail Theft is challenging the viability of some Australian Retailers; RETAiL Alert has processes to reduce Retail Theft in 2008.
 

Extended trading hours, Specialty Retailer Staff Turnover and stress on Staffing Levels are causing a growth in Specialty Retailer Shrinkage Levels.
 

Specialty Retailer Shrinkage goes directly to bottom line with some specialty retailers showing actual or hidden Shrinkage or Losses above 3%
 

Correctly managed and controlled with simple control disciplines it is possible to reduce actual or hidden Shrinkage and Losses can be delivered at 1% or less dependant on the Specialty Retailers accounting and audit practices.
 

RETAiL Alert has a proven track record in reducing Specialty Retailers Shrinkage and Losses.
 

Retail Shrinkage and Loss Levels can be reduced and maintained by the implementation of simple Low Cost, Low Maintenance Loss Prevention techniques.
 

RETAiL Alert uses three proven and one new and cost effective key loss prevention tools and techniques:

1.  W.I.I.   -                      'Where is it' - Shop Floor Awareness Programme
2.  S.T.L. -                      'Stopping the Leaks' - A background transaction checking process which traps shrinkage issues at point of action.
3.  Progressive Action -  a programme of e-mail based driver reminders' which underpin the ongoing awareness of the 'Where is it' and 'Stopping the Leaks' programmes.
4.  Item Level RFID ‘bar-codes’ plus EAS (Electronic Article Surveillance) loss prevention
5.  The use of Security Tags, Security Pedestals, Video Surveillance linked to Audit Tapes all valid Loss Prevention cost effective ‘tools’ for the 2010 Loss Prevention Manager.
 

In today's high cost average sales growth environment disciplined control of Shrinkage and Losses is a not negotiable.
 

One new area of Shrinkage Control is through the selective engagement of Item Level RFID.

Progressive retailers are looking how they can combine the benefits of Item Level RFID and Shrinkage Control.

Overseas experience provides compelling commercial examples, including shrinkage control in retail entertainment.
see http://www.retailalert.com.au Item Level RFID for further information.
 

Find following an article on CD Shrinkage Control Supply Chain initiative;
 

RFID CD Tracking Shrinkage Control Supply Chain Project Deemed a Hit

All indications are that Phase 1 of the UK's CD.id project, in which music CDs were tracked through the supply chain was a success.

Oct. 24, 2002 - An estimated total of 1.9 billion pirated CDs and cassettes were sold worldwide in 2001, according to a report by the International Federation of the Phonographic Industry. The U.K.'s Home Office is trying to do something about the problem. As part of the government's Chipping of Goods initiative, some 7,000 CDs were tracked with RFID tags to see if the technology could reduce supply chain theft.

The live phase of the CD.id project concluded this week. The final results and recommendations will be released next spring. But all indications are that the project was a success.
 

Make 2010 and 2010 the years that you challenge and beat Retail Theft, Retail Shrinkage and Loss Prevention Costs delivering those losses straight to your bottom line.
 

For further details and copy of a detailed presentation on reducing your Shrinkage and Losses in a simple cost effective manner contact email Loss Prevention Strategies 2010.

Tony Standley

Principal
The RETAiL Alert Group (Australia)