2. Briefing
• The Awful Truth
• The HPC Programme
• Collaborative Approach
• Recruitment /Standards
• Understanding why employees steal
• Understanding shrinkage and the effects
• Identifying your hot products
• HPC Function
• Shrinkage results
• Benefits
• Closing
3. The Awful Truth
• Pick n Pay is a general merchandise retailer
with over 775 outlets in sub Sahara Africa.
• In 2003, shrinkage was above 2% in the
Gauteng region and Store Managers began
to defensively merchandise hot product on
shelf or behind service counters.
• Shrinkage results on Mach3 blades
exceeded R800,000 (6 months).
• Pick n Pay required a solution that would
reduce loss and improve availability.
4. The HPC Programme
• In August 2003, it was agreed that a
collaborative approach was needed between
manufactures and retailers.
• The 80/20 principle was used to identify hot
products and hot stores (data mining)
• The solution was developed around improving
the handling process of hot products from
receiving to the shelf (non-malicious
shrinkage).
• The understanding was that by reducing
shrinkage we would improve product
availability and increase sales.
5. Collaborative Approach
• Pick n Pay approached certain manufactures to
participate in this trail.
• The benefit for the manufacturers was to improve on
shelf availability and reduce OOS.
• It was agreed that the retailer would pay 50% of the
cost and the manufactures would equally split 50% of
the cost
• HPC cost per store = €850.00
• Retail cost per store = €425,00
• x 10 Manufactures cost per store = €42.00
6. Understanding why people steal…
• An overwhelming 79% of workers admit they have or would
consider stealing from their employers (Kessler & Associates)
• The real reason people steal is opportunity. When companies make it
easy through lack of control, an atmosphere of theft is created.
• Employees steal to the extent management permits it. There's no
shortcut to prevent it, you have to remove the opportunity, create
awareness and achieve their support.
• The human mind is ingenious as ever when it comes to acquiring
illegitimate goods
•
7. 10-10-80 Rule
The good news is that
Employee Theft there is much a business
can do to sway this 80%
to their side.
10%
We spend 90%
10%
of our security
budget chasing Take away the opportunity -
the bad guys raise the risk
80%
You & Me Baddies Good Guys
8. Understand Shrinkage
Non Malicious Malicious
System set up errors • General Public Theft
Picking errors • Grazing
Delivery error (short or over) • Personal Use
POS Scanning errors • Theft for Resale
Pricing errors
Start first by addressing the non
• Colleague Theft
Product damage of loss
malicious causes • POS Fraud
Product out of date
• Grazing
• Refunds
Markdown
• Collusion
Transfer to other site error • Contractor Theft
Counting error • Supplier Fraud
Information misalignment
10. What We Do Know…
Shrinkage transcends departmental and company boundaries
It’s not just shoplifting
It’s not all stores
Its not all products
- 80/20 principle applies (not all products cause shrink i.e. 20% of
products cause 80% shrink).
CRAVED
(Concealable, Removable, Available, Valuable, Enjoyable and Disposable)
11. Identifying Your Hot Products
Shrinkage Overview Western Cape
EDIBLE GROCERIES G12 (1.5%)
LIQUOR G14 (1.4%)
NON EDIBLE GROCERIES G13 (0.4%)
TOILETRIES G15 (2.0%)
HARDWARE H20 (2.1%)
14. Retailers Opportunity
5%
Average
Average Retailer Margin
4% Retailer
1.84% Shrink
Margin
3%
2% Average
Retailer 4.83%
Profit 2.99%
1% Margin
0%
Current Potential
15. Solution HPC
Checks • Double Checks delivery
Delivery • Improves data accuracy
• Moves goods out of vulnerable area
Fast Tracks
• Reduces opportunities for
theft/damages
• Reduce access to hot products
Secure Storage
• One key holder / accountability
• Replenish at rate of sale
Shelf
Replenishment • Planograms maintained
• Reduce SOOS
Daily Counts • Identifies theft during & after-hours
• Improves staff awareness
Evaluation • Measures and adapts
16. Checking Delivery
• Must be present for all hot product
deliveries
• The HPC must be called to receiving as soon
as the delivery truck arrives
• Must be present when the delivery is off-
loaded from the truck
• Ensure that delivered goods are off-loaded
to your satisfaction (invoice sequence)
• Use the copy of the delivery invoice to
independently check the quantities and
ensure that the goods are accurately
received
• Check the delivery with the Receiving
Manager (not after)
17. When Checking the Invoice
• Ensure the delivery address is correct with the correct store code
• Invoice must be checked top to bottom or vice versa
• When checking each line, check that product description, unit of
sale, quantity and packaging are correct
• Ensure that delivered quantities match what is recorded on the invoice
• All hot product boxes must be opened and packs individually counted
• Accuracy is more important than speed – do not be intimidated or rushed
whilst counting
• Check for dummy packing
• Check for damages or tampered boxes
• Check for short deliveries
18. Fast Tracking
• The receiving area is busy with staff and product movement
• The receiving area is usually congested with stock
• It’s a vulnerable area
• Its not a good place to leave hot products
• The HPC must immediately move all Hot Products away from the receiving
area to the Hot Product Locker
• No other staff member or merchandiser should be allowed to handle hot
products.
19. Secure Storage
• All hot products must be secured in a separate locker facility within the
store
• Ensure that the locker door is secured and that the key cannot be
duplicated
• The HPC is the primary key holder – the Store Manager or other designated
manager may handle the locker key
• Spare locker keys must be sealed (float bag) and secured in the cash office
safe
• Staff members or designated merchandisers are only allowed access to the
locker under supervision from the HPC
• Locker keys must be signed in/out the store OB book under supervision
from the Store / Assistant Manager
• Check your locker daily for any possible holes in the fencing or open ceiling
boards.
20. Shelf Replenishment
• Too little stock on display leads to
out-of-stocks and frustrates
shoppers resulting in lost sales.
• Too many products on display
attract thieves and results in stock
loss.
• Replenish at rate of sale – little but
often as follows:
21. Daily Stock Counts
• What is measured is managed
• Helps you to identify shrinkage, sales and
OOS issues
• Improves staff awareness
• Allows you to measure and adapt
• Use the stock count system to do daily
counts on all hot products both at opening
and closing times.
• Count products on the sales floor (front)
and in the locker (back)
• Obtain daily sales data for each hot product
• Measure and adapt
22. Measure & Adapt
• Identify shoplifting activity
• Identify theft from display / locker afterhours
• Identify poor shelf availability
• Identify out-of-stocks
• Report all shrinkage issues to the relevant Store Manager
• Send OOS Alerts to the relevant manufacturers
• Send planogram alerts to the relevant manufactures
31. Benefits
WIN
WIN
• Lower Costs
Retailer • Lower Out Of Stocks
• Higher Brand Loyalty • More Open Merchandising
• Better planning & execution • Lower Costs • Greater Choice
• Increased Sales • Higher Store Loyalty / • Consumer Satisfaction
• Increased Profits Penetration • More convenience
• Efficient Replenishment
• Increased Sales
• Increased Profits
Manufacturer Consumer
WIN
• Manufactures can increase sales by 78% if products are moved from defensive to open sale
• Retail profits could be 30% higher if shrinkage is reduced by 50%
32. “If it works in South Africa it will work anywhere”
Thank You
