Controlling shrinkage demands an open mind - loss prevention at discount stores - column

Discount Store News, March 12, 1990 by Jack Hayes

Controlling Shrinkage Demands an Open Mind

Last September, I participated as a speaker at the Loss Prevention, Auditing & Shortage Control Conference sponsored by the International Mass Retail Association.

The session was entitled "The Great Debate." Each of the three speakers was to "champion" a shrinkage factor and our job was to convince the audience that that specific cause is the overwhelming reason for inventory shrinkage. The topic I was assigned to "champion" was employee/vendor theft. The other two speakers represented shoplifting and paperwork/system problems.

As the "great debate" got underway, the moderator informed the audience that each of the speakers did not necessarily believe that the specific factor they were presenting was the primary cause of inventory shrinkage within retail organizations. The attendees certainly heard many interesting comments and statistics that helped to support each speaker's cause.

Avoid Generalities

While each of the speakers presented many most convincing reasons why their topic should be accepted as the primary cause of inventory shrinkage in retailing today, probably the most appropriate message delivered by the panel was that a company cannot rely on generalized perceptions as to where its inventory shrinkage is occurring, or use outlandish or preconceived formulas to help identify the primary cause of theft within their stores.

Our shrinkage control studies show time and again that most retailers assume that one particular factor is primarily responsible for their loss problems. More often than not, those same companies have learned the hard way that there is no simple method for identifying and correcting the causes of their inventory losses.

Furthermore, there appears to be no meaningful consistency in just what is causing shrinkage. We usually find the causes differ from company to company and often involve factors directly inherent to the specific company operations. We also have found that for those companies which accepted someone's general theory to explain the shrinkage, or chose to address their problems based upon another's experiences, the outcome usually resulted in few positive shrinkage improvements. Shrinkage remained high even though the company may have purchased expensive anti-theft equipment or made costly additions to its loss prevention/security department's payroll.

As you search for the solution to your inventory shrinkage control problems, keep these words of advice in mind: * A company's shrinkage is seldom attributable to only one specific cause or source. During the past year, we've identified serious paperwork/systems problems in some stores. In others, we've found significant shoplifting, employee, and/or vendor theft vulnerabilities. On occasion we've identified a combination of contributing factors. * While general surveys may be useful in identifying areas which should be given special attention and evaluation, these surveys should not be used to specifically plan your company's loss prevention program. To successfully control inventory loss, each company should study their specific operational procedures and related problems and identify for themselves the primary sources of inventory shrinkage. Once the primary contributing factor or factors are identified, focus on it, and locate and correct all major sources responsible for causing the most significant loss. * Don't rely on general perceptions or unfounded formulas that are supposed to help identify the primary source or sources of a company's shrinkage problem.

Jack Hayes is a leading security expert for Ernst & Young. Questions may be addressed to him care of the National Retail Group, Ernst & Young, 405 Prevention Way, Stamfordville, N.Y. 12581.