By Joe Szvetitz
Senior management of this multi-store operation was making business decisions, mostly purchases based on information that they believed was accurate. Having been associated with retail loss prevention for about 40 years has given me a good vantage point to see what actually causes loss or shortage/shrink in a retail location and, honestly, it is not hard to recognize. We all know that the three major contributors to loss are: 1) Employee theft (43.7%); 2) Shoplifting (32.6%); and 3) Paperwork errors (12.9%).
(Stats are according to the 2010 National Retail Security Survey.)
For the past six years, our company Risk Management Services Loss Prevention, LLC, has worked specifically in the hardware, lumber and home improvement sector working with retailers, dealers and members of all the different flags carried in the industry, and we have uncovered a common thread to the causes of shrink: failure to inspect what they expect.
Business decision-makers need to rely on others, associates, department managers, buyers, POS reports, etc., to give them solid and truthful information about their operation so they can intelligently spend money on merchandise purchases, staffing and other areas that cost money in an attempt to increase sales activity and, ultimately, their bottom line. It’s called “cost of business.”
The problem develops when the information they get is bad, inaccurate and wrong. As mentioned in the beginning, this particular business kept making significant purchases of a particular high-demand and expensive item that all of the data indicated needed to be made in order to remain competitive and in stock. Unfortunately, local management was faking the numbers just to look good on paper and to not fall out of favor with ownership. The decision-maker was at a distance in the home office and, not wanting to be out of stock, kept on spending significant dollars to make sure the store would not run out.
Understand that in order to run a business, it is absolutely necessary to rely on information generated from your systems and the people you pay to manage them. However, instead of blind faith, we believe that there should be a “trust but verify” attitude in place. Simply put, inspect what you expect.
Example: Have you ever left the store and your employees think you have gone for the day only to return unexpectedly? I bet there were some surprises. Well inspecting what you expect is doing just that. It is taking a few seconds to proof the information.
Some suggestions for decision-makers are:
• Perform unannounced cash counts at your POS stations.
• Randomly do a count of popular merchandise and circle back to quantities on hand, sold and ordered.
• Do an actual audit of who has what level of access to your POS system. This catches many people by surprise because they actually find out that a part-time sales associate actually has management level authorization.
• Routinely change POS access codes.
Joe Szvetitz is managing partner at Risk Management Services Loss Prevention.