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Berlin Shrinkage Seminar

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Berlin Shrinkage Seminar Powered By Docstoc
					Tackling Shrinkage to Improve
      Your Bottom Line
            Breakout Session
        Shrinkage Working Group
   ECR Europe Annual Congress, Brussels
               May 2004
          Welcome

           Colin Peacock
      The Gillette Company
Co-chair, Shrinkage Working Group
          Seminar Overview

• Purpose
  – Enthuse the ECR community about the ECR
    shrinkage reduction methodology
• Objectives
  – Illustrate retailer & supplier collaboration
  – Promote the ECR Approach
  – Provide new knowledge
                     Agenda

•   Introduction
•   B&Q & Plasplugs Case Study
•   ECR Shrinkage Survey
•   Sainsbury‟s & Menzies Case Study
•   Key Performance Indicator Research
•   Makro & Gillette Case Study
•   Wrap up
•   Q&A
Designing in Solutions
   Eddie Joyce, Plasplugs
     Gill Yardley, B&Q
B&Q


• Biggest home improvement retailer in the UK

• Employs over 36,000 people

• Turnover last year €5.7 billion

• Profit €546 million

• 1998 B&Q merged with Castorama to become
  largest DIY Retailer in Europe

• 1999 B&Q opened it‟s first store in Shanghai
Plasplugs

 Fixings             History:               Tiling
             Founded 1970 in the UK
                  Family owned
                                            Tools
                  Brand Values:
              Leadership, Quality &
                     Innovation
Sharpening         Employees:
                     Over 350
 Systems            world-wide
                                         Knives &
                    Turnover:
                                          Blades
              Circa €59 million pa for
                      the group
Old Packaging
B&Q – Reasons for Change


 • Sales good – yet room for category growth
 • Industry standard packaging - opportunity to improve
 • High shrinkage (10%+) due to damages and theft
 • Environmental compliance
 • Space efficiency – packaging space hungry
 • Requirement for suppliers to source tag
 • Opportunity to reduce Environmental tax levy
 • Customer wants to touch and feel the product
Plasplugs - Reason for Change


 •   Improve visual display
 •   Reduce returns
 •   Introduce hidden source tagging
 •   Reduce dependency on third parties
 •   Improve tactile nature of packaging
 •   Desire to strengthen market leadership
     – Innovation and differentiation
     – Add value to product
Old Packaging
The Process


 • Both companies around the table to agree
   requirements
 • Plasplugs CEO involved from conception to delivery
 • Support from B&Q Sustainability Team and
   Commercial team
 • Solution evolved over period of time
Evolution of Packaging
            Blister, Card & Adhesive
Evolution of Packaging
              Blister Entrapment
Evolution of Packaging
             Blister-less - Only Card
Evolution of Packaging
                Packaging Free
Plaspak Demonstration
Old V’s New
              Tile Edge Nibblers
Old V’s New
              Quik Tiler
Old V’s New
              Tile Files
Old V’s New
              Tile Scribe
Old V’s New
              Tile Rack
The Benefits of Collaboration


  •   50% reduction in shrinkage
  •   33% increase in sales (€1.6M retail)
  •   Space created raised sales further €1.5M
  •   Customer can touch and feel product
  •   Secondary use of packaging:
      – Customers perceive this as „added value‟
      – Reduction in environmental levy
Additional Benefits to Plasplugs

 • Design innovation has led to patented design
   solution
 • Return on investment within 18 months
 • Packaging deliveries now minimal
 • Plasplugs are at the cutting edge of innovative
   packaging solutions
B&Q Tiling Accessories Display
In Summary


 By innovation and collaboration benefits have
 been seen by both Plasplugs and B&Q.

 Key Benefits
 •   Reduced shrinkage and stock loss
 •   Enhanced presentation of the product
 •   Better control of costs
 •   Maximised space and profit per square metre
2nd ECR Shrinkage Survey

         Adrian Beck
     University of Leicester
Background and Methodology

• Last survey in 2000
• Need for a new benchmark
• Definition of shrinkage
  – External Theft
  – Internal Theft
  – Process Failures
  – Inter-Company Fraud
• Stock loss calculated at retail prices
Background and Methodology

• 26 countries surveyed (21 last survey)
• 250 retail companies and 44
  manufacturers/suppliers contacted
• Total FMCG sector valued at €1,004 billion
• Sample represents 13.7% of retail
  companies with a combined turnover of
  €137.2 billion
Topics Covered in the Survey

•   Counting the cost
•   Location of the problem
•   Extent of co-operation
•   Measures used to tackle shrinkage
         Counting the Cost


Sector         % of    Value (€ billions)
               sales
Retail         1.84          18.5
Manufacturer   0.57           5.7
Total          2.41          24.2
         Counting the Cost

• Total loss equates to:
  – €66 million per day
  – €46,000 per minute (€4.1 million for this seminar!)
The Retailing Shrinkage Iceberg

                      Unknown Loss
                       €9.5 billion
           49%

                       Significant
           51%         increase in
                       known loss
 Location of the Problem




    24%                 5%                 71%
Manufacturer           Retail             Retail
 Distribution       Distribution          Stores

                                                             TOTAL
€5.7 Billion    +   €1.2 Billion   +   €17.3 Billion   =   €24.2 Billion
 Causes of Retail Stock Loss
           Inter-
         Company
                            Process
          Fraud
                            Failures
             7%
                              27%




                     Internal Theft
External Theft
                          28%
     38%
        Retail Company Co-operation
Security/Loss Prevention
            Store Mangt
      Board of Directors
                Auditing
    Supply Chain Mangt
               Logistics
                Finance
     Human Resources
                 IT Dept
                 Buying
             Legal Dept
    Planning and Design
              Marketing

                       0%   10%   20%    30%      40%   50%   60%   70%   80%    90%      100%
                                                        Per cent
                                  High Involved    Regularly Involved   Hardly Involved
        Spending on Stock Loss
Measures                                                  Value          Per cent
Contract security staff                                  € 950 million   33
In-house security staff/loss prevention/audit team       € 419 million   14
Electronic tagging systems                               € 370 million   13
Closed circuit television                                € 298 million   10
Intruder alarm systems                                   € 182 million    6
Cash protection equipment: safes, caches                 € 170 million    6
External security measures: shutters, bollards, fences   € 164 million    6
Staff training on stock loss                             € 151 million    5
External audit companies                                  € 44 million    2
Specialist display equipment                              € 29 million    1
Other                                                    € 133 million    5
Total                                                    € 2.9 billion    0.29
Causes and Spending on Shrinkage
    60                               Spending
          60
                                     Cause
    50

    40
               38
    30
                     27   28
                                     26
    20

    10
                                 9                    7
                                                  4
     0
         External   Internal   Process       Inter Company
      Other Survey Highlights

• Companies that:
  – have a corporate policy
  – prioritise stock loss
  – provide bonuses for good stock loss results
  – have good intra-company co-operation
  – carry out shrink reduction projects…
 … have lower levels of shrinkage
For a copy of the final report
          contact:
    Adrian Beck: bna@le.ac.uk
               WELCOME


     The UK Magazine Market
         An Insight Into Shrink

David Morton                    Chris Price
                25th May 2004
              EXECUTIVE SUMMARY
                Aims & Structure
A story about addressing SHRINK In the UK Magazines sector
   Sector complexity .. Process Issues
   How working together with wholesalers achieved results
   How Sainsbury’s managed to reduce shrinkage by 25%
   Explain how shrink on News & Magazines
    is a broader Industry issue
   Industry-wide approach .. Results .. €3m+
   Approaches, Learning's & Blue Book
             The UK Magazine Sector
    The Magazine sector is worth €2.5 Billion Euros per year
Publishers       Wholesalers         Retailers       Consumers
                     MD                LARGE
                     WHS
                                        Medium
                       DN
                                         Small
                       Ind
   10 Main           3 major          55,000
  Publishers
                 5 Independent •Small number of big players
 3,000 Titles
160 Categories
                  100+ Depots •Big number of small players
Menzies Distribution - The Facts
International services group .. time critical logistics: T/O
                           €1.8bn
  Newspaper & Magazine distribution (UK) .. 4,000 employees
                 1500 van routes ..
                       Every morning
                       To 22,000 retail outlets ..
                       From 30 depots
                       520,000 lines / 24 hours
                       Unsolds scanned every day.

JIT .. Cross Dock .. Consolidation .. & .. Reverse
Logistics
     Sainsbury’s – The Facts
   Sainsbury’s stores sell over
     1200 magazine titles
   A UK Market share of 5.5%
   Top 100 titles count for
     74% of turnover
   Losses running at over
    6% of sales

   WE HAD A PROBLEM!
      Sainsbury’s - First Steps -
                Alone
  Initial internal review :

       Complex area .. Not main focus of Supermarkets

       Inconsistent Store Procedures

       High level of ‘Rejected Returns Credits’ (Sale   or
  Return)

       Wholesale supplier input .. End to End process


You will see . . How ECR provided the “introduction” agency
You will hear. .How Sainsbury’s were not alone
                      The Sector
       The Publisher & The Product
The Publisher
    Determines look, feel, & quantity ‘created’
       Places (Pushes) into the market .. advertisers, not
   just sales
       Sale
TheProduct Or Return „ reverse logistics
    Each issue uniquely „created‟ ..new barcode
    Magazines are not like tins of beans.

The ‘Creative’ mix means risk of:
    Poor attention to practical detail „
        Product Challenges



 £2                          £1.75
€2.90                        €2.55
                Product Challenges
Disney and Me                  PC Gamer Presents
          Sector Tensions & Shrink

                     Market Tensions !!!
Shrink hit the Industry agenda late 2002 „ and went TOP!
    Retailers clear… “It‟s Publishers‟ and Wholesalers‟ fault”.
    Publishers clear…. “No it isn‟t”
    Wholesalers …. The meat in the sandwich!

Industry-wide collaborative project group formed
    Establish .. Define .. Recommend .. But an uneasy
   background!
                End-To-End
    Industry-Wide Shrink Initiative
 A Meeting of Minds? „„. More a Clashing of
                    Heads!
 Deal in Facts „. Not Noise!
 Definition „ Principles „ and Method
    ECR Blue Book „ Recipe !
Our Principles
  All committed .. Solve .. Don’t just shift the
 problem!
     Overall structure .. prioritise
            Industry Shrink Group
                   Modus Operandi
Adopt a process
                                                  0.Wake Up
                                                         Up
       Research
        Map key processes,                        1. Plan
     together                                                  2. Map &
                                                               2. Map &
                                    6. Evaluate
                                       Evaluate
        Establish interdependences                            Measure
                                                               Measure

        Highlight pressure points
                                   5.Implement
                                   5. Implement                3. Analyse
        Measure .. Identify costs
                                                  4.Develop
                                                  4. Develop
        Identify solutions ..                    Solutions
Good Prioritise sorts)
      News (of
       We were not alone .. Shrink affects all supply chains
                                                                                                             End-To-End Roadmap
                                                                                                                            Fishing for Detail
Build a structure to identify,
log & relate ‘points of failure’
                                                                                        Wholesaler                                                     SHRINK - CAUSE & EFFECT                                                                                                                                                                                                                                             SHRINK - CAUSE & EFFECT
                                                                                          supply                                                     SUPPLY ISSUES (LIVE PRODUCT)                                                                                                                                                                                                                                           RETURNS ISSUES (OFF
                                                                                         process                                                                                                                                                                                                                                                                                                                               )
                                                                                                                                                                                                                                                                                                                    Wholesaler                                                Systems/
                                                       inadequate van
                                                                                                                                                                                                                                                                                                                     returns                                                 Information                                  unidentified
                                                            lighting           poorly labelled                                                                                                                                                                                                                                                                                                         varying time
                                                     poor                                                                                                                                                                                                                                                                                                                                                                 parcel keyed
           Product                               accountability                                                                                                                                                                                                                                                      process                                                                             windows
                                                                                                                                                                                                                                                                                                                                                                                                                          after cut off
                                                                                                                                                                                                                                                                                                                                           retail poorly
        characteristics                             W/S                                                                                                                                                                                                     Product                                                                            label                                                local weeklies
                                                                                                                                                                                                                                                                                                                                                                                                                      wholesale too
                                                                                                                                                                           Systems/                                                                                                                                                                                                                   set-up as
                                                 misdelivery         confusion over                                                                                                                                                                      characteristics                                        affects 'at risk'                                                                     dailies for
                                                                                                                                                                                                                                                                                                                                                                                                                       slow to scan
                          bar code
                                                                       related box                     W/S miscount                publisher                              Information                                                                                                                            time in shop
                                                                                                                                                                                                                                                                                                                                                   Bundles lost in
                                                                                                                                                                                                                                                                                                                                                                                                         recall
                                                                                                                                                                                                                                                                                                                                                                                                                 too late query
                                      price                            (forecourt,                                                  bundle                                                                                                                                                                                                            transit                                                             resolution           muliti supplier
                                                                                                              W/S misplace                                                                                                                    identifies                                    Full bundle
                                              wrong info on            shop save)                                  pick            mispack                                                                                                   wrong issue                                  short(assumed                                                              W/S not recall
                           printing error                                                                                                                                                                                                                     not read                                          Frequency of                    left wrong                                                                                W/S not supply   covermount
                                                  file                                                                            over/under                                                                                                                                                 quantity at                                                                  title                                   time window
                                                                                                                                                                                                                                                                                                                  collection                       place                                                                                                   missing from
                                                                                                                                              W/S mispicks                                                                                 Bar code                                       retail-individual            affects W/S                                                                                   too tight                               partwork
                                                                                                                                               over/under          incorrect info.                 first time title                                          identifies                    copy scan at               process time
                                      Cover price/file                                                                               picks wrong                                                                        new title/one     regional/format wrong title(co-                                                                                    Not collected          W/S
           other live                                                                                                                                             from publisher                   has appeared                                                                                  W/S                                                                                                                                                          Validation
misleading product                      mismatch                           single delivery                  W/S mis label                title                                                                             shot               variants                                                                        loose product                                                                   too many
                                                                                                                                                                                                                                                             wrapped                                                                                  not left out               system error                                                               rejects credit
   title supplement                                                          (not SBR)                        full/odds         poor                                                                                                                                                                                               poorly                                                                      returned            firm sale
                                                               Too much                    local v H/O                                                   Incorrect price                                                                                   supplement)
                                                                                                               bundle       accountability                                                     late info. from          h/o information                                                                                         packaged                                                publisher
                                                                product                   range disjoint                                                       file     H/O                                                                                                                        makes               Bundle                                                                                                               partworks
   Title                                                                                                                                                                                          publisher               update late                                                                                                                                                                                      product status
                                                                supplied                                                                                            information                                                                                                                   returning        unidentified at      no label              operator error
description/   poor cover                                                                                                                                                                                                                                                                                                                                                                                                     change
                                                                                                                                                                      updates                                                                                  Stickers                            difficult            scan
   cover       positioning                                                                                                                                                                                                                                                                                                                                                            manuall count
                                  non-standard                                        unauthorised                                                                                                                     Unrecognised
                                                                                                                                                                                                                                                                          singles/small
 mismatch                          shape/size                                         titles /excess                                                                                                 title v cover
                                                                                                                                                                                                                       product on file                                                                  Non standard                                                      Mis-scan Stickers                                                                RETURNS
                                                                                                                                                                                                                                                                                                         shape/size                                                      over/under
                                                                                      copy supplied                                                                                                                                                                                                                                                                                                                                                         ISSUES
 price variants                                           Display/
 with same bar                                           handling                                                                                                                                                                                                                                                                                                                   completion            not received by
                                                                                                                                                                                                                                                                                                                                                                                                                                                           OFF-SALE
      code                                               problems
                                                                                                                                                                                                                         SUPPLY                       at W/S pre-
                                                                                                                                                                                                                                                                                                                         poorly attached                                              errors                stockroom
                                                                                                                                                                                                                                                                                                                                                                                                                                       internal
                                                                                                                                                                                                                                                                                                                                                                                                                                                           PRODUCT
                                                                                                                                                                                                                                                        process           in transit                                                                                                                                                transfer from
                                                                                                                                                                                                                         ISSUES                                                                                                                       staff                                                                         another store
                                                                                                                                                                                                                                                                                                                                                                             Returns note    not actioned by                                         sub retail account
                                                                                                                                                                                                                           LIVE                Theft from                                                        No cover                           awareness
                                                                                                                                                                                                                                                                                                                                                                                               stockroom                                     booked out
                                     staff                                                                                                        staff      lack of audit      poor stock                                                      made up                                                           mount                                                                                                            forecourt wrong a/c     home delivery/
                                                                          Lack of audit                poor product            product not                                                                              PRODUCT                                                      from                                                               Opt not to
  insecure back cover mount                                 lack of                                                                            awareness/                     control system                                                                  at back door                                                                                                                                                          account                  shop save
                                                                                                       covermount/              returned                                                                                                     returns parcel                       stockroom                             poor handling/                   return                                                   weekend
     door area    removal             stockroom          procedure or                                                                           process                                                                                                                                                                                                                                                holiday
                                                                                                        packaging                                                                                                                                                                                                         packaging
  In store                                                   facts                                                                                                                                     Not booked-in/                                                                                                                                                                                                                                              Returns not
                                                                                                                                       Booked-in                             staff training,                                                                                                                                                                           returns note
                                                                                                                                                      shop save/                                         checked                                                                                              Cover damage                                            completed by       Staff coverage                       not dispached          booked out sent back
                                                             with consumer                Rejected                                   against wrong                             discipline,                                                                                                                                                                                                                  sickness
    abuse honesty               staff                                                                                                                  forecourt                                                                                         between driver/                                      - no bar code                                           more than one                                                        lost in   wrong W/S properly
                                                             'sweethearting'       delivery(unacceptable                               shop a/c                                 holiday /                                                                                                                                                                                                    poor staff
                                                                                                        poor transit                                                                                       procedures                                     another outlet                                                                                                                                                                store, back
        box                display                                                       condition)                                                                            sickness                                                                                                                  Fraudulent                                                    person or at
                                                                                                        packaging                  Scanning                                                                                                                                                                                                                                                 awareness                                       door
                 consumers                                                   Collusion                                                                                                                           difficulty in                                                                              claim                                                     different times
                                                                                                                                  inaccuracy                                               W/S                                            Collusion                                                                                                                                                                                                       stores not
                                                         at back door                                                                                                                                             checking                                                                                                                                                                                                            1st f/s issue
                                                                           collusion                                                                      use of dump          lack of documentation
                                                                                                                                                                                                                  supplies                               from        at back door                                               Damage                     Returns notes
                                                                                                                                                                                                                                                                                                                                                                               miscounted
                                                                                                                                                                                                                                                                                                                                                                                                    poor title/issue
                                                                                                                                                                                                                                                                                                                                                                                                                                         partwork
                                                                                                                                                                                                                                                                                                                                                                                                                                                        return known
                                                                                                                                                                                                                                                                                                                                                                                                                                                                              crowded
                                                                        between driver                                           missed product               key            informed                                                                                                                                                                       incorrectly                                    I.D                                         late/f/s product
                                                                                                                                                                                                                                                      stockroom                                       Lack of audit                                                                                                           discounting/                                     display
                                                                            another                                                                                          continuity                              in full or part                                                                                                                        completed                                                                        procedures
                                                                                                                                               inherent error                                                                                                                                                                                                                                                                 give away to
                                                                        customer/outlet                                                                                                                                                                                                                                                                                                       Lack of audit                               and awareness        off site/remote
          Fraudulent                                                                                                                                rate                         Staff coverage
        claim of short/                                                                                                                staff                                                                                                                                   Theft                                                                                                                                              clear                          stockroom
                                                                                                                                                                                                                                                                                                                                                                                      poorly secured
         non delivery                                                printer/                                                        awareness                                                                                                                                                                                                                       to wrong W/S                           too late                                                    Staff not
                                                   In transit
                                                                    publisher/                             Damage                                                              home delivery/
                                                                                                                                                                                                         Special                                                                                                                                                                                                   stockroom promotional customer                        return
                                                  W/S to retail                                                                      Booked-in                                                          accounts                                                                                                                                                                                                                              misplaced on
                                                                  carrier to W/S                                                                      dual W/S                  shop saves                                                                                                                                                                              Vouchers not                                                point                               product /
                                                                                                                                   against wrong                 staff                                                                                                                                                                                                                                              staff canteen                display
                                                                                                                                                       supply awareness                                                                                                                                                                                                  sent back          from wrong                                                    poor initial return late
               poor security                                                                                                          suppier
                                                                                                                                                                                                                                                                                                                                                                          properly            account                    staff dump                        shelf fill/
                                                                                 Individual                                                                    process
     Robbery                                                                                                                                                                                                                                                                                                                                                                                                                                            replenishment
                                               in depot                        physical theft                                                                                  Claim for short
                                                           parcel theft by                                                                                                                                                                                                                                                                                                                                  In store                   Multi-locations
           planned or                         W/S or          another                                                                                   In store                 supply not                                                                                                                                                                                                                                                      product fall
                                             publisher                                                                                                                          made/made                                                                                                                                                                                                                   process                            behind display
           opportunist                                                                                                                                  process                     late
                                Theft




                  LIVE SUPPLY ISSUES                                                                                                                                                                                                                                      RETURNS ISSUES
                                                Prioritising
                            Hot Spots & Quick Wins
Severity x Probability = Focus Factor                                 Focus x Addressability = Quick Win Factor
  Score     Severity of Failure (S)    Probability of Occurance (P)            Score         Time / Effort to Address (A)
    5     Major Loss Impact           Daily / Inevitable                         5     Can do easiliy & cheaply / Weeks
    4     Some Loss Impact            Weekly / Repetitive                        4     Needs some effort but little cost / Quarter
    3     Individual Item Loss        Every few weeks / Occasional               3     Minor systems & protocol effort
    2     Possible / Uncertain Loss   Every few months / Rare                    2     Requires development over months
    1     Little Impact               Rare & Irregular                           1     Major systems & Commercial issues




                                                                                   Objective Priorities
                                                                                                         Hot Spots
                                                                                                         Quick Wins
                               Industry
             From Analysis to Actions
Objective build up as a team .. Scoring .. Reviewing ..
Etc
      Mutual, logical view                ..       As part of Big Picture
Leads To 4 Key Action Areas

  Credit Claims              Product
     Period               Identification             Small steering group
                   Key
                                                 Manage specific work parcel
                  Areas                          Firm, objective co-
    In-store                Supply              ordination
   processes              Management
                                                 Rigorous & robust
       Key Achievements to Date

  Credit Claims: New ‘synchronised’ period
    Benefit   ~ €3m p.a. to Retail from July 2003 .. -23%
    Audited „ Hard wired „ Sustainable Step Change
                                                 Publisher Notification Form
                                                 Date                     04-Mar-04

Product Identification: Error Reporting          Publisher
                                                 Title on Calendar
                                                 Title apparent on
                                                                     Seymour
                                                                     Disney & Me special
                                                                     Finding Nemo
                                                 magazine


  Measure .. report .. inform .. educate
                                                 Issue                  Finding Nemo
                                                 On Sale -                27-Feb-04
                                                 Recall                   09-Apr-04
                                                 Price                      £1.99
                                                 Barcode              977146959500002


 Web based „National Title File‟
 www.nationaltitlefile.co.uk
          Key Achievements To Date
Supply Management: Sales Based Replenishment
      Modelling & pilots .. lead to Best Practice Guide
      Menzies Test .. 6 depots, 218 customers, 100 titles
      Benefit .. Sales +2.6 %, Returns -51%


In Store Process: Best Practice
     Simple guide produced to benefit all retailers
     “3 Areas where Shrink eats away your profits”
     “If you do nothing else .. Do This”
     “Golden Copies!”
             ECR .. Leads to
    Joint Sainsbury’s-Menzies Action
Sainsbury's & Menzies Shared common Roadmap approach
    Address holistically .. Big Picture .. Not Knee Jerks
    Resource jointly .. Sainsburys team + Shrink Doctor
    Leverage from Industry work

    A clear joint Brief
    Aim for understanding and sustainable actions
    Target ‘Hot’ stores
     Map .. Benchmark .. Quick Wins
              Sainsbury’s Issue
                Identification
      Mapping, Analysis & Risk Assessment points to

Key Issues                                          Theft \    Colleague
                                                   Security     Issues
                                  Poor Data
                                 Management
       Procedure & Training                                            Stock
                                                                       Holding
                                         Returns                      Stocktake

       Processes                        Process
                                                              Dual Supply




       Management Information
          Actions & Achievements
Procedure & Training
      Introduced a supplier funded Colleague handbook
      Built Wholesale relationship & Raised our Internal profile

Process
   „Invoice Matching’ .. More robust store charging system
     Simple & more robust stocktaking process

Information
      Produce timely Management information throughout estate
      Wholesale data feed of “rejected” returns
Shrinkage down 25% .. Sales up 10% .. At Pilot stores
                     Key Learnings
 Sainsbury’s-Menzies Collaboration
 Got stuck in .. Dug out the facts .. Learned from the front line

 Whole new meaning to the word “observe” .. Objective appraisal

 Did it for real bottom up, In detail .. Identified the basics

 Knee Jerks – Only deliver short term results

 Sustainability .. Comes from End to End process understanding

 Retailers / Wholesalers encouraged to do more

                 There are NO short cuts!
                Key Learnings
         Industry Collaboration
Industry-wide Collaboration can be done .. But it’s a
Journey!
    Requires clear systematic focus .. And the right people
    Blue Book .. supported move from Subjectivity to
  Objectivity
    You CAN move from ‘Them & Us’ to „ ‘US!’
    Technical analysis .. & .. ‘People’ issues
    Its about Solving! .. Not shifting!
    Within the Big Picture .. for Sustainability

The journey continues .. We are still walking & talking
  together
In Conclusion
Measuring Stock Loss:
  Developing a KPI
       Dr Paul Chapman
Cranfield School of Management
          Issues to Consider

•   A clear definition of “Stock Loss”
•   The scope of the issue
•   Method of calculation
•   Methods of valuation
•   Focused management action
A Clear Definition of “Stock Loss”?

• Internal theft + external theft + process
  failure (including waste) + inter-company
  fraud
• All inputs that cannot be accounted for
          The Scope of the Issue

• Holistic, supply chain view:
  – raw material to shopper, e.g. the cow to the fridge, including
    returns
• Being practical:
  – Limit the start of the supply chain to either:
      • Declared production in the factory
      • Product in manufacturer‟s DC
  – Limit end point in the supply chain to either:
      • The shelf
      • The checkout
            Method of Calculation

• Total Stock loss = Known loss + unknown loss
  – Discrepancy between book stock and physical stock
  – Net inventory + net movements
  – (opening stock – closing stock) + ((purchases + incoming
    transfers) – (sales + outgoing transfers))
• Where known loss:
  = Known theft processed + Known errors processed
  (including: write offs; damage; donations; mark downs; cost of sales
     adjustments; out-of-date; tasting)
                                                  Percent
                   U
                                                                                100




                                         0
                                             25
                                                    50
                                                            75
                       nk
                          n   ow
                                n
                          Kn
                               ow
                  O                  n
Pr                 ut
  ic                      of
     e                       D
         M                       at
            ar
               k                    e
                  ed
                          D
                              ow
                                   ns
                      D
                          am
                               ag
                                     e
                  D
                                                                                 Store issues




                      on
                         a    tio
         O                       ns
          th
            er
                      Pr
       Lo                  oc
         ss                     es
             es                      s
Lo                 at
  ss                      RD
       es                       C
                                    s
                                                                                                Categories Included




             in
                  Tr
                     a   ns
       Lo                     po
         ss                      r  t
              es
                      by
                           3P
                                Ls
                                                                 Supply chain
          Methods of Valuation
• Loss as a percentage of sales

       Total stock loss
                              X 100%
            Sales
• Value of loss calculated at either:
   – Sales value
      • Gross including VAT
      • Net excluding VAT
   – Purchase price
   – Transfer price
                      Method Used


           45
           40
           35
           30
Per cent




           25
           20
           15
           10
            5
            0
                Retail Sales   Cost Price   Cost Price +   Other
                   Value
              To Conclude:
         Deliver Focussed Action
• Use your data
  – Top level KPI reveals total opportunity
  – Cascade measure to expose under performance
• Know how to take action
  – The ECR Roadmap
• Dedicate the capacity to implement
• Drive progress against targets
Makro & Gillette: on track with
the ECR Shrinkage Roadmap
      Werner Cooreman, Makro
       Dieter Mertens, Gillette
              Programme

•   Profiles
•   Collaborative objectives
•   Phase 1: defensive
•   Phase 2: innovative
•   Phase 3: the ECR shrinkage roadmap
•   Take away
                       Profiles:
              the retailer - the supplier




  > 1,2 billion €
  > 70.000 SKU
  > 3.600 employees
> 1 million customers
    Collaborative objectives

         Evolution of Objectives through phases of
                  improving collaboration



 Less                Less Shrink +              better
Shrink                more sales             performance

 mid                     mid
2002                    2003                     2004
           Phase 1: defensive

• PHASE 1:
  – Makro Call
  – Shoplifting
  – Safercases


Results
  Shrink: - 80% (approx.)
          Phase 2: Innovative

• PHASE 2:
  – Gillette Call
  – Shoplifting + Back office
  – Clamshell C&C pack

Results
 Shrink: stable at 0.2%
 Sales: + 131% (pilot test)
 Phase 3:Using the Roadmap

• PHASE 3:
  – Full Collaboration
  – Holistic approach
  – Store supply chain solution

Results
 Shrink: - 20% (Q1); ongoing...
 Sales : + 18% (Q1); ongoing...
Phase 3:Using the Roadmap

                        0. Wake Up



                          1. Plan


    6. Evaluate                            2. Map &
                                            Measure



   5. Implement                            3. Analyse


                    4. Develop Solutions



           Illustration Road Map by video
Phase 3:Using the Roadmap
Plan

   SHRINKAGE                       SALES




                 Mach3 family
       - 10 %                      + 20%


  October 2003                  October 2004
Map & Measure
 -2000,00

                                                                       Focus on Mach3 Family
                                                                         (12 pack & 4 pack)
 -1500,00




 -1000,00




  -500,00



                                                                         1
     0,00

   GILLETTE CONTOUR PLUS10 MESJES   GILLETTE GII 10 MESJES          GILLETTE GIIPLUS10 MESJES           GILLETTE MACH 3 12MESJES
   GILLETTE MACH 3 4MESJES          GILLETTE MACH 3 APPARAAT        GILLETTE MACH 3 APPARAAT COOLBLUE   GILLETTE SENSOR 10 MESJES
   GILLETTE SENSOR EXCEL APPARAAT   GILLETTE SUP.SILVER 10 MESJES
Analysis
Process Map
               MAKRO - GILLETTE
                                             1. Camion komt
               PILOT FMEA FOOD
                                               toe aan de V
                   DEURNE

              PROCES FLOW CHART

                1. ONTVANGST                   2. Chauffeur
                                             biedt pakbon in
                                              2 ex aan loket
                                                   aan




                                                   3.
                                             Ordercontrole
                                             in BORISdoor
                                               bediende




                                               4. Levering
                                                krijgt GO
                                                nummer            Process Map
                                               5. Chauffeur
                           Exemplaar met
                                              krijgt pakbon
                            sticker voor
                                               met sticker
                          leverancier gaat
                                              voor 'Makro'
                               in bakje
                                                   terug




                                              6. Chauffeur
                                             ontlaadt pallet
                                              (geen zegel)




                                              7. Chauffeur
                                             biedt pallet aan
                                              bij ontvanger     8A. Controleert
                                                                 het document


                                                                   8B.Telt het
                          Indien levering                            aantal
                           klopt, worden      8. Ontvanger      eenheden/colli
                               de doc            voert 1e       vermeld op bon
                          gewisseld door      Controle uit
                             ontvanger

                                                                8C.Vergelijkt dit
                                                                  aantal met
                                               9. Chauffeur         paklijst
                                             voert door naar
                                              transitruimte




                                                NAAR 2e
                                               CONTROLE
Root causes analysis
Failure Mode & Effect Analysis
Possible Solutions




           Gillette 10 step process
 Implementation
1.secure storage   3.fast tracking to secure area


                        



4.check delivery   5.visible location


                         
  Implementation
6.Anti-theft fixtures   7.frequent replenishment


                            



8.regular counting      9.staff awareness


                            
Evaluation

 • Overall preliminary results:
      Shrink (3 phases): - 85%
      Sales (3 phases): + 18%

 • Positive acceptance on the workfloor
 • Roll out solutions (10 Steps) in other stores
 • Final evaluation due October 2004
               Take away

• Use of the roadmap requires commitment
• Loss prevention is about simple issues:
  stock control, identifying opportunities,…but
  with great impact
• Collaboration works
Thank you for your attention !
          Wrap up

           John Fonteijn
            Royal Ahold
Co-chair, Shrinkage Working Group
           An Invitation ...

• Join our working group

• Use the Road Map

• Share your results
       ECR Shrinkage Award

• To the person / organisation that has made
  the most significant contribution to shrinkage
  reduction in 2004 – 5.
• Judging criteria:
  – Approach
  – Results
  – Dissemination
  – Sustainability
Thank you

  Q&A

				
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