Therefore, it comes as no surprise that The Carphone Warehouse has implemented a few simple steps to keep shrinkage at a minimum: involve employees, no excuses, follow-up, pay incentives, and improved stock monitoring.
A report in Mobiletoday.co.uk from just over a year ago showed the company had saved an estimated 6 million GBP ($12 million U.S.) over the past five years in reduced stock losses. Shrinkage had dropped to only 0.25 per cent of the cost of sales, versus 1.75 per cent five years earlier.
1. Involve employees
This is the key to the loss prevention strategy at The Carphone Warehouse, especially against internal staff theft. “An ethos and culture that seeks to reward, empower and listen to employees will always provide the best framework for less shrinkage,” said Richard Grant, group head of loss and fraud prevention, to Mobiletoday.co.uk.
Employees who are genuinely proud to work for their employer are less likely to tolerate dishonest peers, he added. At The Carphone Warehouse, up to 30 per cent of fraud cases have been reported to the company by fellow employees via an “anonymous whistleblower facility.”
2. No excuses
Grant says The Carphone Warehouse has attempted to “design out” common excuses used by employees after being caught stealing such as a lack of training. For example, attendance by employees at loss prevention courses is recorded to assure everybody understands the policy. Management is also trained to understand the financial impact of shrinkage and margin erosion, which includes stock shrinkage, credit card fraud and ID theft.
3. Follow-up
The company’s “loss prevention team” visits each store every quarter to ensure each location stays on top of company theft and fraud issues. To do this, the team issues an assessment score and an action plan for employees to follow.
Related to each store’s assessment score, are Key Performance Indicators (KPIs) related to their ability to prevent losses – KPIs ultimately affect the pay of each employee at that location.
4. Pay incentives
“There are financial incentives for performance and (penalties) for margin erosion,” said Grant. “All the company’s payment schemes include these.”
Because loss prevention helps to increase the company’s gross margin, it’s tied to employees’ take-home pay. “Less losses equal higher financial rewards for everyone. More losses equal complete loss of bonus, in comes cases, regardless of sales performance.”
5. Improved stock monitoring
“Stock taking was a real issue so we looked at the way our inventory systems work,” said Grant. “We previously used wired scanners and with accessories (in different shaped packages) it was difficult (to scan) so we’ve moved to a wireless system.”
iQmetrix’s RetailiQ software offers wireless retailers cutting-edge inventory control tools. The point-of-sale system is integrated with a real-time inventory control suite that tracks each item at all times and allows users to watch for suspicious transactions or inventory movement. The system thus holds employees accountable for the product they move and helps users to further minimize shrinkage.
** CORRECTION: The original version of this article contained an error. RetailiQ doesn't actually "red flag" suspicious activity related to inventory. However, the real-time functionality and reporting features of the software enable our users to detect unusual transactions in a temely fashion and act accordingly. This means a "red flag" goes up in users' heads, not literally in the system.
We apologize for any confusion the original article may have caused.
- allanp@iqmetrix.com
*To read more about Reducing Shrinkage and Inventory Management, check out the following issues of iQmetrix News & Views:
Protect Your Bottom Line: Minimize Employee Theft
Reducing Price Markdowns
Minimizing Losses for a Better ROI: It's all about product information
Taking the Guessing Out of Inventory Management