Each year, companies lose millions by not controlling shrinkage, Especially out-of-stock key items, operational weaknesses, and theft. Every company, regardless of industry or size, has some sort of shrinkage. Recently, I spoke with Strategic CFO and Compliance Executive, David Robson who said that one company he worked for approached four times average for his industry; “The executive management continued to believe, the statistics resulted from financial reporting errors rather than operational deficiencies.”
David devised a conclusive test to clearly define the root cause of the problem. To prove his point, he selected ten locations with the highest reported shrink and out-of-stocks and split the group into two comparable sections. “In collaboration with on-site operators, I made sure we conducted physical inventories and measured supply and shrink 
levels daily.” Part of his plan was to put together a seven-step process improvement program and installed the remedies in five of the ten test locations leaving the others to perform as usual.
The seven steps to the test were to, “(1) Adjust operational staffing hours to allow for timely replenishment of merchandise on the showroom floor from inventory backstock, (2) ensure at least one store manager or assistant manager was present on the showroom floor at all times when the store was open for business as a theft deterrent, (3) improve store lines of site so store employees could see product and shoppers across the entire showroom floor as a theft deterrent, (4) ensure product merchandise had affixed security tags and security exit alarms were operational, (5) avoid displaying high value product near store exits, (6) ensure dressing rooms were locked requiring customers to seek out store employees for access, and (7) ensure security cameras were visible and operational.”
After 60 days of intense observation, “The results, gathered and analyzed using identical methods, proved that the losses resulted from operational weaknesses. With his executive suite’s concurrence, his seven upgrades were ushered into all company warehouses and stores. The altered methods lowered inventory shrink 12% and out-of-stocks 9% with minimal investment required in loss prevention tools and staffing resources. One unforeseen and welcome result was that corporate sales also improved.”
Watch full video interview below
David can be reached via LinkedIn or his Career WebFolio.
Fred Coon, CEO
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