2. 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

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

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

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

6. 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
Retail Council of Canada
1.75
2007
Food Marketing Institute (US)
1.52
2002
ECR Australia
New Zealand Survey of Retail Theft and Security
1.50
2008
National Retail Security Survey (US)
1.44
Global Retail Theft Barometer (36 countries)
1.34
Eurohandelinstituts (Germany)
1.23
Average
1.65 6

7. 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

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

9. 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 12
ECR Europe Shrinkage Survey 27 7 28 38
Retail Council of Canada 18 40 35
New Zealand Survey of Retail Theft & Security 20 3 68
National Supermarket Research Group (US) 57
ECR Australia 29 11 25
Average 26 33 9

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

11. 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

12. 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

13. 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

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

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

16. 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….

17. 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

18. 200+ Collaboration Projects Completed

19. The “Remove Opportunity” Approach
Shrinkage
Process
failures
Inter-
company
fraud
Internal
theft
External
theft
Finally they could have been stolen by a professional thief looking to resell the units or they could have been taken by an opportunist thief who would have taken maybe one unit for personal use.
Olga Korbett and Wynoma Ryder are just two of the latest celebrities to enter the shoplifters hall of fame.
Conventional approach
ECR approach

20. Collaboration Process

21. Retailer Case Study – Collaboration Team
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

22. 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

23. 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

24. Analyzing The Process

25. 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

26. 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

27. 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

28. THANK YOU!
QUESTIONS?