1. Tackling Shrinkage to Improve Your Bottom Line ECR Europe Annual Congress, Brussels May 2004

2. Welcome Colin Peacock The Gillette Company Co-chair, Shrinkage Working Group John Fonteijn Royal Ahold Co-chair, Shrinkage Working Group

3. The ECR Europe Shrinkage Project

4. Supply Chain and Logistics Expertise Academics Excellence in Crime and Security Management

5. Three Key Messages 1. Shrink = Profit Opportunity 2. Collaboration is critical 3. The ECR approach is working

6. €24 billion per year Message #1 Shrinkage = Profit Opportunity €461 million per week Lower Shrink €65 million per day €2.7million per hour

7. Message #1 Shrinkage = Profit Opportunity Lower Shrink 0 1% 2% 3% 4% 1.8% Shrink Profit 3% % of Sales

8. Message #1 Shrinkage = Profit Opportunity Lower Shrink 0 1% 2% 3% 4% Profit Shrink 0.9% 30% Uplift Savings 3.9% % of Sales

9. Message #1 Shrinkage = Profit Opportunity Lower Shrink Lower Costs

10. Message #1 Shrinkage = Profit Opportunity Lower Shrink Lower Costs Increased Sales 10%+ Sales Increase

11. Message #1 Shrinkage = Profit Opportunity Lower Shrink Lower Costs Increased Sales open sale = 80%+ sales increase

12. SHRINK: Fighting Back Anders Moberg President & CEO Royal Ahold

13. Shrink is a: Strategic issue State of mind Joint fight

14. The Three Causes Process failure Fraud Theft

15. ECR Shrink Reduction Road Map 1. Develop project plan 2. Map key processes 3. Analyse risk 4. Risk-reduction solutions 5. Implementation plans 6. Evaluation procedures

16. Fighting Shrink Programs and targets Build shrink into the corporate culture Tone at the top Working together in the supply chain

17. Working Together Align measurements Increase transparency Share information

18. Ahold and Shrink Approach Work with suppliers / academics / government Problem solving Treat like our overall business; –Strategy –Accountability & Internal Controls

19. SHRINK: Fighting Back Thank you

20. Three Key Messages 1. Shrink = Profit Opportunity 2. Collaboration is Critical 3. The ECR approach is working

21. Message #2 Collaboration is Critical Internal and External

22. Message #2 Collaboration is Critical Internal and External Prevention orientated

23. Message #2 Collaboration is Critical Internal and External Prevention orientated Focused - 80/20 People Places ProductsProcesses

24. Role of the Executive Team Nikolaus Ritter Managing Director Makro Belgium

25. Programme Why Executive involvement in shrinkage issues ? Examples from Makro Cash&Carry Belgium Lessons learned

26. Three Good Reasons For Executive Involvement in Shrinkage

27. Executive involvement ? SHRINK is a RISK Risk Management = Executive Responsibility

28. Executive involvement ? SHRINK influences PROFIT Profit = Executive Responsibility

29. Executive involvement ? SHRINK impacts OPERATIONS Operations = Executive Responsibility

30. Executive involvement ? SHRINKAGE= EXECUTIVE RESPONSIBILITY

31. Examples of the Makro Way…

32. Examples at Makro Belgium Basic approach: –cross-functional –result-driven –structured approach

33. Examples at Makro Belgium Cross-functional Example 1: Loss Prevention Committee -Chaired by Managing Director -Members: Buying Director Food, Buying Director Non- food, Director of Operations, Financial Director, Head of Internal Audit, Loss Prevention Manager

34. Examples at Makro Belgium Result driven Example: Annual Shrinkage report -Annual focussed report on operational Shrinkage, comparing long-term and short- term evolution -Drill down to product level SHRINKAGE (% of TO at COST) 1998 2004 -36% -0,5

35. Examples at Makro Belgium Structured approach Executive Training National Road Map Shrink Training 0. Wake Up 2. Map & Measure 4. Develop Solutions 5. Implement 6. Evaluate 1. Plan 3. Analyse

36. Lessons Learned

37. Key lessons Executive involvement Need for a “captain” Internal collaboration is fundamental Collaboration with suppliers is essential Operations Buying Supplier

38. Thank you

39. Three Key Messages 1. Shrink = Profit Opportunity 2. Collaboration is Critical 3. The ECR approach is working

40. Research Conclusions Existing Approaches not working Underlying cause is poor management Good management is the solution

41. Message #3 The ECR approach is working Data led 0 4 8 12 16 20 24 28 32 36 00.511.522.533.544.555.566.577.588.59 Losses across store universe Average % of Stores

42. Message #3 The ECR approach is working Data led Structured 0. Wake Up 2. Map & Measure 4. Develop Solutions 5. Implement 6. Evaluate 1. Plan 3. Analyse The ECR Shrinkage Road Map

43. Message #3 The ECR approach is working Data led Structured Removes process failures

44. Success Achieved 46% total shrinkage reduction PortugalFeira Nova 74% loss reduction 288% sales increase HungaryTesco 40% loss reduction 12% sales increase UKSainsbury’s 7% loss reduction UKWickes Factory and DC operations tightened up ItalyCoop 43% loss reduction PolandAhold 78% loss reduction 55% sales increase PortugalUlmer 29% loss reduction Portugal Sonae ResultsCountrySupplierRetailer Danone Gillette Industry GET P&G Sokolow Gillette Colgate Category Yoghurt Shaving Spirits Electrical Deodorants Sausages Shaving Oral Care

45. Video: What happened next?

46. Three Key Messages 1. Shrink = Profit Opportunity 2. Collaboration is critical 3. The ECR approach is working

47. Your Call to Action Q: How big is your shrink opportunity? Q: Will increased collaboration help? A: Use the ECR Approach –Buy the ECR Blue Book from www.ecrnet.org

48. Better Still....... Invest 90 minutes with us –Join us at our Shrink Breakout Session –Tonight at 5.30pm –In the Green Room

49. Thank You