Do you have the controls to reduce shrinkage in your store? (Part 2)

Goodness me it seems that this has been a very long and arduous year! Anyway this is our last blog for 2010 and completes the previous one! Feedback welcome.

So, how do you improve stock control in your store?
The amount of shrinkage in your store will be in direct proportion to the controls you have in place. The more controls, checks and balances you have over your stock – the lower your shrinkage will be.
There are many areas of our business in which we can “lose” stock. These include:

  1. Ordering
  2. Receiving
  3. Return of goods
  4. Pricing
  5. Price changes
  6. Displays
  7. Food preparation
  8. In-store use
  9. Point of sale

In our last blog we covered points 1-5, now we review points 6-9 and state some of the concerns for these points – and then offer one or two suggestions on how to deal with it.

As with all the points listed above once again in this area there are so many ways we lose stock in our displays. I will only raise one or two for now.
Firstly there is the old adage of FIFO – first in first out. We have to bring “older” stock to the front of the display before we merchandise the new stock. Ever watched a house wife shopping for milk in the local supermarket? Guess which milk she puts in her trolley – the milk right at the back of the fridge. She knows that the freshest milk is to be found at the back of the fridge.
How do we lose money if we do not implement this rule? Out of sell by date – if it is out of date we have to write it off which is a loss. On some perishable items we are able to claim back from our supplier. But with sweets and chocolates for example – you have to write it off. It is a direct loss to the business. And don’t tell me your staff rotate stock – do a check yourself.
Take any of the count lines.
Start at the front – are the sell by dates earlier than the ones at the bottom or back of the pile?
It is time consuming for your shelf packer to pick up the existing stock and then merchandise the new stock underneath on the shelves. If there are no checks – your staff will take short cuts.

Another area for concern on the displays is our price labels. I have no idea why a Kwik Spar with many more line items than us – can get this right on their shelves – and we can’t? I am doing some store visits tomorrow in the Sandton area with new dealers – and this is one of the checks that they will be asked to do.

  • How many products had no price labels?
  • How many had incorrect price labels?
  • Do this check yourself in your own store today!

This costs your business each and every day.
Firstly where there are no price labels, customers will be less likely to buy the product. They do not want to buy something that has no price attached to it. So it’s a lost sale.
If the price is incorrect when the customer gets to the till point – they pay the price that has been displayed. You lose again – your margin has just been eroded.
It gets even more scary if the product and price have not been entered on the system! The cashier will make a decision on what to charge based on other like products – which may be way out of line!
Our displays are our business in many more ways that one! – We need to get each detail of this piece right in order to ensure we do not lose any monies or sales from this vital point.

Food Preparation:
Not all of us prepare food on our premises but those of us that do will know just how hard it is to keep track of our food items. At best most of us prepare pies. So I will stick to this simple example for the most part.
The challenge here is firstly to accept that there is going to be some wastage when preparing food. How much are you prepared to lose daily? And then keep track of this as wastage! You are still losing money – but you have it under control.
Measure what is going in (how many pies are baked) and then cross check with what goes out…..How many are sold! At best – there should be no shortages at all!
Take stock per shift and cross correlate these with sales per shift. Work out what is OK to be lost to wastage and work within that rule for you. I buy in and prepare 20 pies per shift – then you need to ensure that you sell 20 pies per shift!
It gets harder when we prepare from raw product. How many slices do you get out of an average tomato? At the end of the day how many products did you sell with tomato’s – and how many are left whole in the store at the end of the day? The rest is wastage at best – but if the staff are nibbling – it is shrinkage. Both are a loss to the business.
From bitter experience – bacon is a big one for losses! Check it out on a per shift basis.

In-store use

Most of you will take one look at this heading and say – yes I know we use products off the shelves for our own in-store use. But it is small and does not warrant too much energy on our part checking it.
The fact remains – you bought 10 bundles of 2 ply toilet paper each containing 48 rolls. You receive this as stock onto your system.
You need to take it into stock on two fronts.

  1. In-store usage
  2. For resale to the customer
  3. Allocate this based on actual sales and usage – which you can only get if you account for it appropriately.

Now you run out of toilet paper in the public toilets. If you take one from the shelf – do you ring it through on the point of sale as a sale item? If not – it leads to shrinkage.
There is a great concern if you are taking stock items off the shelf for store use and NOT ringing these up as a sales item. Your staff see that – and know that if they take one or two rolls home – nobody would be any the wiser.
Another example: If you sell fresh fruit for example in your store. You need to replenish your fruit salad offering – so your staff take another 2 banana’s, 2-3 apples etc – all for use to replenish that fruit salad for resale to your customers. It is not rung up as a sale – nor is it transferred to the food offering for resale!
You are under on the resale – and over on the fresh food offering. But having no controls in place allows your staff to move stock at will – and then the accounting thereof gets out of control – and it all leads to further losses! On the system anyway…

Point of Sale (Till Point)

Books have been written on just this area of our business and – yet it remains a porous area of our trading environment.
Not all of our losses in this area can be attributed to theft and fraud (a subject that we have a few articles on up on our website, such as “Point of Sale Fraud”, “Inventory Record Frauds” etc;  see )

Most are just plain carelessness.
Scenario one: a customer comes to the till point puts his goods on the counter and takes a sip of Coke while doing so. The cashier rings up the goods on the counter and omits to ask to scan in the Coke. The result: One Coke lost.
Scenario two: a customer comes to the counter, places their goods on the counter and these get rung up. The cashier does not see that their child is busy eating a chocolate – their head height is too low for the cashier to see this.
Another scenario: Our cashiers are often responsible in the mornings for the returns of newspapers and milk. It is often their busiest part of the morning rush hour – so the rep does the count of what is being returned – and she just signs it on your behalf. Customer comes first – and they must not be kept waiting after all. There was no check done at all – and in particular newspapers and returns remain a key concern as invariably sales to purchases never match!

Simple scenarios but all too common. In each case – the amount lost is not big monies. But if you add them up across all these areas in their totality over a month – you have a shrinkage problem.
My suggestion is to keep your eyes peeled and demonstrate to your cashiers what to be on the look out for each and every day. Easier said than done, I know!

Almost 2011! To those of you that are travelling over this festive season – my wish for you and your family is that are you arrive home safely having had a wonderful break. To those of you trading in perhaps your busiest period of the year – I hope the tills keep ringing merrily along out there! Happy trading..

Speak to you in 2011
Jocelyn Daly

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