Breakout 2.4


    Shrinkage: Building
Leadership and Taking Action



       ECR Conference, Berlin
      Wednesday 28th ...
Breakout Structure
Introduction to the ECR Europe Shrinkage Group
Scale of the Problem and the Size of the Prize
Identifyi...
Breakout Structure
Introduction to the ECR Europe Shrinkage Group
Scale of the Problem and the Size of the Prize
Identifyi...
Purpose of ECR Shrinkage Group

 Raise awareness of the problem of shrinkage
 Co-ordinate and sponsor cutting edge researc...
Deliverables
Measuring the Scale of the Problem – 2000 and 2004
Understanding Hot Stores – Managers OR Location?
Developin...
Breakout Structure
Introduction to the ECR Europe Shrinkage Group
Scale of the Problem and the Size of the Prize
Identifyi...
Defining Shrinkage
Original ECR Europe
      Definition Shrinkage

                Shrinkage




Process      Inter-    Internal   External
 ...
What Does Shrinkage Mean?
                Deliberate Under/Over Delivery
Inter-Company
                Invoice Errors
    ...
New Shrinkage Typology
                                                     TOTAL LOSS


                               Sh...
Scale of the Problem
International Comparisons
Year    Source                              Size
2002    National S’market Res. Group (US)   2.3...
The ECR 2004 Survey

Sector          % of    Value (€ billions)
                sales
Retail         1.84          18.5

M...
What does €24 billion buy?
     Annual GDP of Luxembourg
Shrinkage Retail Iceberg

               Lack of visibility
               Lack of awareness
                   When did i...
Causes of Retail Stock Loss
Study                           External   Internal   Process   Vendor

Otago Univ (New Zealan...
Retailer’s Missed Profit Opportunity

                          5%

                                                      ...
Breakout Structure
Introduction to the ECR Europe Shrinkage Group
Scale of the Problem and the Size of the Prize
Identifyi...
Background and Methodology

Anecdotal evidence
Usual suspects
Findings from various shrink surveys
Contacted 20 ‘world shr...
Ranking of US Retailers

Position     Name of Company

1            Target

2            Limited Brands

3            Best...
Senior Management Commitment
Senior Management Commitment

Reaching a ‘tipping point’
Convince them of the opportunity
  Show the impact on the consume...
Organisational Ownership

         Senior Management Commitment
Ensuring Organisational Ownership

 Become part of company culture
 Recognised as important
 Board level support
 Loss Pre...
Organisational Ownership   Embedding Loss Prevention

         Senior Management Commitment
Embedding Loss Prevention

Make part of routine store activities
Ensure other parts of the business buy
into the idea and ...
Strong LP Leadership

Organisational Ownership   Embedding Loss Prevention

         Senior Management Commitment
Strong LP Leadership

Provide the right outlook and attitude
Drive the problem in the business
  Personality
  Energy
  De...
Strong LP Leadership      Data Management

Organisational Ownership   Embedding Loss Prevention

         Senior Managemen...
Data Management

Remove guesswork
Develop analytical capability
Stay on top of the data
Make use of POS data – exception r...
The ‘Hot’ Concept

Unlock the value of the 'hot' concept

  Products

  Places                             Places

  Peopl...
Prioritise
                               People

 Strong LP Leadership      Data Management

Organisational Ownership   E...
Prioritise People

Organisational Level
 Reduce churn and turn of managers
 Listen to store staff
 Link personal benefit t...
Prioritise People

Loss Prevention Team
 Create a highly multi-functional team
 Reduce reliance on former police officers
...
Prioritise Innovation      Prioritise
        and Experimentation         People

 Strong LP Leadership           Data Man...
Prioritise Innovation and Experimentation


   Keep ahead of the game
   Initiate
     Pilot studies on new ideas
     Ben...
Talk Shrinkage


        Prioritise Innovation      Prioritise
        and Experimentation         People

 Strong LP Lead...
Talk Shrinkage

Disseminate the message up and down
the business
Get shrink on the agenda of other
functions
Make sure sto...
Innovative Example
Emphasise
          Talk Shrinkage        Procedural
                                 Control
        Prioritise Innovatio...
Emphasise Procedural Control

Removes opportunity
Masks malicious activity
Delivers …
  Cost effective wins
  Quick wins
 ...
Process Compliance & Shrinkage
100%          96%

 90%
 80%                             73%
 70%
                         ...
Create Store
                   Management
                   Responsibility

                                Emphasise
  ...
Create Store Management Responsibility


  Provide the tools and the data
  Give them training and stability
  Incentivise...
Create Store
                   Management
                   Responsibility

                                Emphasise
  ...
Conclusions

Importance of senior management
commitment
All building blocks need to be in place if
store staff are to deli...
Benchmarking Your Business

Score yourself against the Loss Prevention
Pyramid!
Feedback composite score at the end of
ses...
Benchmarking Scoring System
 9 = The company is completely aligned on this issue
 5 = Some progress has been made in this ...
Benchmarking Scoring System
 9 = The company is completely aligned on this issue
 5 = Some progress has been made in this ...
Benchmarking Scoring System
 9 = The company is completely aligned on this issue
 5 = Some progress has been made in this ...
Benchmarking Scoring System
 9 = The company is completely aligned on this issue
 5 = Some progress has been made in this ...
Benchmarking Scoring System
 9 = The company is completely aligned on this issue
 5 = Some progress has been made in this ...
Benchmarking Scoring System
 9 = The company is completely aligned on this issue
 5 = Some progress has been made in this ...
Benchmarking Scoring System
 9 = The company is completely aligned on this issue
 5 = Some progress has been made in this ...
Benchmarking Scoring System
 9 = The company is completely aligned on this issue
 5 = Some progress has been made in this ...
Benchmarking Scoring System
 9 = The company is completely aligned on this issue
 5 = Some progress has been made in this ...
Benchmarking Scoring System
 9 = The company is completely aligned on this issue
 5 = Some progress has been made in this ...
Benchmarking Scoring System
 9 = The company is completely aligned on this issue
 5 = Some progress has been made in this ...
Benchmark Results: Example

Scoring System

    High Priority (1-3.3)
                                        Create Store...
Benchmark Results: Russian
                 Retailers
Scoring System

    High Priority (1-3.3)
                          ...
Breakout Structure
Introduction to the ECR Europe Shrinkage Group
Scale of the Problem and the Size of the Prize
Identifyi...
Collaboration context
            Manufacturer                                               Retailer


                 S...
The Cycle of Collaboration

                 Relevance


Consequences   Collaboration   Transparency


                  A...
Case Studies
Case      Initiative       Focal firm       Partners

 1     Pay on scan          Retailer 1    Five supplier...
Enablers and inhibitors of
                  collaboration
   Factor                   Enabler                            ...
Link to Shelf Out of Stocks

                                     Shelf Out of
                                       Stoc...
Empty Shelves
Approaches to collaboration
    Stage                                         Steps
Relevance      - Quantify impact of sh...
Case Study
B&Q and PJH Group
B&Q and PJH
Collaborating to Reduce Shrinkage
About B&Q and Kingfisher

• Kingfisher is the Number 1 Home Improvement retailer
in Europe & 3rd Largest in the World - 70...
Introducing PJH Group
• UK Number 1 Distributor supplying Kitchens, Bathrooms
  and Appliances
• Sales Channels include B&...
PJH are B&Q’s biggest Supplier of…
 • Bathroom Suites
 • Individual Bathroom
   components
 • Showers
 • ..and soon bathro...
2004 - PJH is B&Q’s Highest Shrinkage Vendor




Shrinkage =                   Profit =
5.70% Sales                   Flus...
Starting the Journey to Lower Shrinkage
  • Commitment by senior management in both
    organisations from the outset. “It...
The Shrinkage Pipeline – deal with root cause


                 Maximum
                Profitability
                   ...
Aligning our Approach


•   Education Programme for Store Staff

•   Showroom Roadshow Events

•   Consultants – external ...
50:50

Interactive Staff       15   £1 Million
                        14   £500,000
   Education:           13
          ...
15   £1 Million
                          14   £500,000
                          13   £250,000
                          ...
Roadshow Training Events…..
Sharing Data Across Both Organisations
Spare Parts Available for Stores
Anti-Shrink Packaging
Results so Far….
Store Compliance Improving
A Full Range On Sale to Customers
Sales are increasing….



                        se
                 nc r ea
            sI
       S ale
                ...
…and Shrinkage is Reducing


           Sh
             ri n
 5.70%              ka
                       g   eR
        ...
Any Questions?
Breakout Structure
Introduction to the ECR Europe Shrinkage Group
Scale of the Problem and the Size of the Prize
Identifyi...
Interactive session

Each table divides into two groups
Each group reviews one case study (A or B)
Use the collaboration c...
Collaboration Cycle template
               Relevance




Consequences               Transparency




                Acti...
Relevance            Transparency                 Actions           Consequences

         - Clear link between   - Detail...
Collaboration Cycle template
               Relevance




Consequences               Transparency




                Acti...
Case A
                Relevance




Consequences                Transparency




                 Actions
Case B
                 Relevance




Consequences                 Transparency




                  Actions
Breakout Structure
Introduction to the ECR Europe Shrinkage Group
Scale of the Problem and the Size of the Prize
Identifyi...
Wrap Up

Thank you
Invitation to join the ECR Europe
Shrinkage Working Group
ECR Europe Forum '08. Shrinkage
ECR Europe Forum '08. Shrinkage
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ECR Europe Forum '08. Shrinkage

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shrinkage: building leadership and taking
action Better leadership in the commercial
and operations teams of retailers
and suppliers reduces shrinkage and
delivers improved sales and shopper
satisfaction. Using case studies and
interactive exercises, this session
reveals the leadership capabilities
required to build and align crossfunctional
teams and focus action.
This will enable attendees to re-apply
practical ideas to deliver significant
and sustainable benefits.
Speakers: John Fonteijn, Royal
Ahold; Colin Peacock, P&G; others
to be confirmed.
Facilitated by Leicester University
and University of Oxford.

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ECR Europe Forum '08. Shrinkage

  1. 1. Breakout 2.4 Shrinkage: Building Leadership and Taking Action ECR Conference, Berlin Wednesday 28th May 2008
  2. 2. Breakout Structure Introduction to the ECR Europe Shrinkage Group Scale of the Problem and the Size of the Prize Identifying Leadership in Loss Prevention Creating Collaborative Partnerships to Reduce Shrinkage Interactive Session on Collaboration Benchmark Feedback and Wrap Up
  3. 3. Breakout Structure Introduction to the ECR Europe Shrinkage Group Scale of the Problem and the Size of the Prize Identifying Leadership in Loss Prevention Creating Collaborative Partnerships to Reduce Shrinkage Interactive Session on Collaboration Benchmark Feedback and Wrap Up
  4. 4. Purpose of ECR Shrinkage Group Raise awareness of the problem of shrinkage Co-ordinate and sponsor cutting edge research Encourage companies to address the problem Promote a more systematic and systemic approach to dealing with the problem (the ECR Shrinkage Road Map)
  5. 5. Deliverables Measuring the Scale of the Problem – 2000 and 2004 Understanding Hot Stores – Managers OR Location? Developing the ECR Approach – The Road Map Scoping the Potential of RFID Measuring Shrinkage – Developing a KPI Targeting Hot Stores – Using Store Checklists Redefining Shrinkage – Developing the Right Priorities Exploring Staff Offending – Where and How Creating a Rapid Improvement Road Map for Hot Stores The Use of Technology – Understanding its Role and ROI Working Together – Developing Retailer/Manufacturer Collaboration
  6. 6. Breakout Structure Introduction to the ECR Europe Shrinkage Group Scale of the Problem and the Size of the Prize Identifying Leadership in Loss Prevention Creating Collaborative Partnerships to Reduce Shrinkage Interactive Session on Collaboration Benchmark Feedback and Wrap Up
  7. 7. Defining Shrinkage
  8. 8. Original ECR Europe Definition Shrinkage Shrinkage Process Inter- Internal External company failures fraud theft theft
  9. 9. What Does Shrinkage Mean? Deliberate Under/Over Delivery Inter-Company Invoice Errors Fraud Quality and Weight of Items Inventory Errors Promotion Errors Process Pricing Errors Stock Going Out of Date Failures Damage to Stock Product Delivery/Scanning Errors Theft of Stock and Cash Internal ‘Grazing’ Theft Collusion Shoplifting Till Snatches External Returning Stolen Goods Burglary Theft ‘Grazing’
  10. 10. New Shrinkage Typology TOTAL LOSS Shrinkage Cash Loss Process Product Value Unknown Loss Internal Theft Variance Loss Variance In Auditing Damage Reductions External Theft At Checkout Spoilage Pricing Error Product Missed Unknown Cash Internal Theft Movement Claims Loss Data Errors External Theft
  11. 11. Scale of the Problem
  12. 12. International Comparisons Year Source Size 2002 National S’market Res. Group (US) 2.32 2004 ECR Europe 1.84 2003 Retail Council of Canada 1.75 2006 Food Marketing Institute (US) 1.69 2006 NRSS (US) 1.57 2002 ECR Australia 1.52 2003 Otago University (New Zealand) 1.50 2007 Global Theft Barometer 1.36 2003 Eurohandelinstituts (Germany) 1.23
  13. 13. The ECR 2004 Survey Sector % of Value (€ billions) sales Retail 1.84 18.5 Manufacturer 0.57 5.7 Total 2.41 24.2
  14. 14. What does €24 billion buy? Annual GDP of Luxembourg
  15. 15. Shrinkage Retail Iceberg Lack of visibility Lack of awareness When did it happen? 49% Where did it happen? How did it happen? Who was responsible? Lack of accountability 51% Prioritisation of the most visible/acceptable
  16. 16. Causes of Retail Stock Loss Study External Internal Process Vendor Otago Univ (New Zealand) 68 12 20 3 European Theft Barometer 49 31 14 6 ECR Europe 38 28 27 7 Retail Council of Canada 35 40 18 7 Food Marketing Institute (US) 35 38 18 8 ECR Australia 35 25 29 11 NRSS (US) 33 47 15 5 National S’market (US) 20 57 ? ?
  17. 17. Retailer’s Missed Profit Opportunity 5% Average th Average Retailer Margin 4% row Retailer in G Shrink M arg 1.84% Margin 62% 3% 4.83% 2% Average Retailer Profit 2.99% 1% Margin 0% Current Potential
  18. 18. Breakout Structure Introduction to the ECR Europe Shrinkage Group Scale of the Problem and the Size of the Prize Identifying Leadership in Loss Prevention Creating Collaborative Partnerships to Reduce Shrinkage Interactive Session on Collaboration Benchmark Feedback and Wrap Up
  19. 19. Background and Methodology Anecdotal evidence Usual suspects Findings from various shrink surveys Contacted 20 ‘world shrinkage experts’ Ask to select their top 5 US retailers Compiled a composite list
  20. 20. Ranking of US Retailers Position Name of Company 1 Target 2 Limited Brands 3 BestBuy 4 The Gap 5 CVS
  21. 21. Senior Management Commitment
  22. 22. Senior Management Commitment Reaching a ‘tipping point’ Convince them of the opportunity Show the impact on the consumer Show the impact on profitability Show the impact on shareholder value What senior management can provide Generate urgency Financial support Ensure compliance
  23. 23. Organisational Ownership Senior Management Commitment
  24. 24. Ensuring Organisational Ownership Become part of company culture Recognised as important Board level support Loss Prevention as ‘Agents of Change’ Encouraging a multi function approach
  25. 25. Organisational Ownership Embedding Loss Prevention Senior Management Commitment
  26. 26. Embedding Loss Prevention Make part of routine store activities Ensure other parts of the business buy into the idea and have it on their agenda Develop shrinkage as part of overall accountability
  27. 27. Strong LP Leadership Organisational Ownership Embedding Loss Prevention Senior Management Commitment
  28. 28. Strong LP Leadership Provide the right outlook and attitude Drive the problem in the business Personality Energy Determination Team building Relationship with the Board
  29. 29. Strong LP Leadership Data Management Organisational Ownership Embedding Loss Prevention Senior Management Commitment
  30. 30. Data Management Remove guesswork Develop analytical capability Stay on top of the data Make use of POS data – exception reporting Use data to monitor compliance Create focus – the ‘hot’ concept
  31. 31. The ‘Hot’ Concept Unlock the value of the 'hot' concept Products Places Places People Processes People Products Processes
  32. 32. Prioritise People Strong LP Leadership Data Management Organisational Ownership Embedding Loss Prevention Senior Management Commitment
  33. 33. Prioritise People Organisational Level Reduce churn and turn of managers Listen to store staff Link personal benefit to shrink figure Pre-employment screening Education and training of store staff
  34. 34. Prioritise People Loss Prevention Team Create a highly multi-functional team Reduce reliance on former police officers Prioritise training LP staff Develop analytical capability
  35. 35. Prioritise Innovation Prioritise and Experimentation People Strong LP Leadership Data Management Organisational Ownership Embedding Loss Prevention Senior Management Commitment
  36. 36. Prioritise Innovation and Experimentation Keep ahead of the game Initiate Pilot studies on new ideas Benchmarking against industry surveys Experiment….. New solutions New store layouts ECR survey showed that retailers who innovated and experimented most had 20% lower shrinkage
  37. 37. Talk Shrinkage Prioritise Innovation Prioritise and Experimentation People Strong LP Leadership Data Management Organisational Ownership Embedding Loss Prevention Senior Management Commitment
  38. 38. Talk Shrinkage Disseminate the message up and down the business Get shrink on the agenda of other functions Make sure store teams are informed – no excuses Think creatively about updating the message
  39. 39. Innovative Example
  40. 40. Emphasise Talk Shrinkage Procedural Control Prioritise Innovation Prioritise and Experimentation People Strong LP Leadership Data Management Organisational Ownership Embedding Loss Prevention Senior Management Commitment
  41. 41. Emphasise Procedural Control Removes opportunity Masks malicious activity Delivers … Cost effective wins Quick wins Sustainable solutions
  42. 42. Process Compliance & Shrinkage 100% 96% 90% 80% 73% 70% 56% 60% 50% Compliance 40% Shrink 30% 20% 13% 4.7% 4.5% 8.0% 10% 1.5% 0% Store 1 Store 2 Store 3 Store 4 Source: Ahold Hypermarkets: Czech: 2004
  43. 43. Create Store Management Responsibility Emphasise Talk Shrinkage Procedural Control Prioritise Innovation Prioritise and Experimentation People Strong LP Leadership Data Management Organisational Ownership Embedding Loss Prevention Senior Management Commitment
  44. 44. Create Store Management Responsibility Provide the tools and the data Give them training and stability Incentivise Listen to them Make them accountable
  45. 45. Create Store Management Responsibility Emphasise Talk Shrinkage Procedural Control Prioritise Innovation Prioritise and Experimentation People Strong LP Leadership Data Management Organisational Ownership Embedding Loss Prevention Senior Management Commitment
  46. 46. Conclusions Importance of senior management commitment All building blocks need to be in place if store staff are to deliver Provides a benchmarking Create Store opportunity … Management Responsibility Emphasise Talk Shrinkage Procedural Control Prioritise Innovation Prioritise and Experimentation People Strong LP Leadership Data Management Organisational Ownership Embedding Loss Prevention Senior Management Commitment
  47. 47. Benchmarking Your Business Score yourself against the Loss Prevention Pyramid! Feedback composite score at the end of session
  48. 48. Benchmarking Scoring System 9 = The company is completely aligned on this issue 5 = Some progress has been made in this area but much more needs to be done 1 = Completely non existent within our organisation
  49. 49. Benchmarking Scoring System 9 = The company is completely aligned on this issue 5 = Some progress has been made in this area but much more needs to be done 1 = Completely non existent within our organisation Success Factor 1 There is senior management commitment to prioritise shrinkage, oversee an action plan, allocate resources and monitor results.
  50. 50. Benchmarking Scoring System 9 = The company is completely aligned on this issue 5 = Some progress has been made in this area but much more needs to be done 1 = Completely non existent within our organisation Success Factor 1 There is senior management commitment to prioritise shrinkage, oversee an action plan, allocate resources and monitor results. 2 All parts of the business recognise the value of prioritising shrinkage.
  51. 51. Benchmarking Scoring System 9 = The company is completely aligned on this issue 5 = Some progress has been made in this area but much more needs to be done 1 = Completely non existent within our organisation Success Factor 1 There is senior management commitment to prioritise shrinkage, oversee an action plan, allocate resources and monitor results. 2 All parts of the business recognise the value of prioritising shrinkage. 3 All parts of the business are taking action to address the problem of shrinkage.
  52. 52. Benchmarking Scoring System 9 = The company is completely aligned on this issue 5 = Some progress has been made in this area but much more needs to be done 1 = Completely non existent within our organisation Success Factor 1 There is senior management commitment to prioritise shrinkage, oversee an action plan, allocate resources and monitor results. 2 All parts of the business recognise the value of prioritising shrinkage. 3 All parts of the business are taking action to address the problem of shrinkage. 4 There is clear and strong leadership in place to effectively manage shrinkage.
  53. 53. Benchmarking Scoring System 9 = The company is completely aligned on this issue 5 = Some progress has been made in this area but much more needs to be done 1 = Completely non existent within our organisation Success Factor 1 There is senior management commitment to prioritise shrinkage, oversee an action plan, allocate resources and monitor results. 2 All parts of the business recognise the value of prioritising shrinkage. 3 All parts of the business are taking action to address the problem of shrinkage. 4 There is clear and strong leadership in place to effectively manage shrinkage. 5 The company has available actionable, reliable and timely data on shrinkage.
  54. 54. Benchmarking Scoring System 9 = The company is completely aligned on this issue 5 = Some progress has been made in this area but much more needs to be done 1 = Completely non existent within our organisation Success Factor 1 There is senior management commitment to prioritise shrinkage, oversee an action plan, allocate resources and monitor results. 2 All parts of the business recognise the value of prioritising shrinkage. 3 All parts of the business are taking action to address the problem of shrinkage. 4 There is clear and strong leadership in place to effectively manage shrinkage. 5 The company has available actionable, reliable and timely data on shrinkage. 6 The company is willing to innovate and experiment to deal with the problem of shrinkage.
  55. 55. Benchmarking Scoring System 9 = The company is completely aligned on this issue 5 = Some progress has been made in this area but much more needs to be done 1 = Completely non existent within our organisation Success Factor 1 There is senior management commitment to prioritise shrinkage, oversee an action plan, allocate resources and monitor results. 2 All parts of the business recognise the value of prioritising shrinkage. 3 All parts of the business are taking action to address the problem of shrinkage. 4 There is clear and strong leadership in place to effectively manage shrinkage. 5 The company has available actionable, reliable and timely data on shrinkage. 6 The company is willing to innovate and experiment to deal with the problem of shrinkage. 7 The company has developed a strong multi functional and diverse team to deal with shrinkage.
  56. 56. Benchmarking Scoring System 9 = The company is completely aligned on this issue 5 = Some progress has been made in this area but much more needs to be done 1 = Completely non existent within our organisation Success Factor 1 There is senior management commitment to prioritise shrinkage, oversee an action plan, allocate resources and monitor results. 2 All parts of the business recognise the value of prioritising shrinkage. 3 All parts of the business are taking action to address the problem of shrinkage. 4 There is clear and strong leadership in place to effectively manage shrinkage. 5 The company has available actionable, reliable and timely data on shrinkage. 6 The company is willing to innovate and experiment to deal with the problem of shrinkage. 7 The company has developed a strong multi functional and diverse team to deal with shrinkage. 8 The issue of shrinkage is clearly and regularly communicated across the organisation.
  57. 57. Benchmarking Scoring System 9 = The company is completely aligned on this issue 5 = Some progress has been made in this area but much more needs to be done 1 = Completely non existent within our organisation Success Factor 1 There is senior management commitment to prioritise shrinkage, oversee an action plan, allocate resources and monitor results. 2 All parts of the business recognise the value of prioritising shrinkage. 3 All parts of the business are taking action to address the problem of shrinkage. 4 There is clear and strong leadership in place to effectively manage shrinkage. 5 The company has available actionable, reliable and timely data on shrinkage. 6 The company is willing to innovate and experiment to deal with the problem of shrinkage. 7 The company has developed a strong multi functional and diverse team to deal with shrinkage. 8 The issue of shrinkage is clearly and regularly communicated across the organisation. 9 All parts of the company recognise the link between poor process adherence and shrinkage.
  58. 58. Benchmarking Scoring System 9 = The company is completely aligned on this issue 5 = Some progress has been made in this area but much more needs to be done 1 = Completely non existent within our organisation Success Factor 1 There is senior management commitment to prioritise shrinkage, oversee an action plan, allocate resources and monitor results. 2 All parts of the business recognise the value of prioritising shrinkage. 3 All parts of the business are taking action to address the problem of shrinkage. 4 There is clear and strong leadership in place to effectively manage shrinkage. 5 The company has available actionable, reliable and timely data on shrinkage. 6 The company is willing to innovate and experiment to deal with the problem of shrinkage. 7 The company has developed a strong multi functional and diverse team to deal with shrinkage. 8 The issue of shrinkage is clearly and regularly communicated across the organisation. 9 All parts of the company recognise the link between poor process adherence and shrinkage. 10 Store managers and associates are given the necessary data, tools and training to enable them to deal with shrinkage effectively.
  59. 59. Benchmark Results: Example Scoring System High Priority (1-3.3) Create Store Room for Management Improvement (3.4-6.6) Responsibility Good alignment (6.7-10) Emphasise Talk Shrinkage Procedural Control Prioritise Innovation Prioritise and Experimentation People Strong LP Leadership Data Management Organisational Ownership Embedding Loss Prevention Senior Management Commitment
  60. 60. Benchmark Results: Russian Retailers Scoring System High Priority (1-3.3) Create Store Room for Management Improvement (3.4-6.6) Responsibility Good alignment (6.7-10) Emphasise Talk Shrinkage Procedural Control Prioritise Innovation Prioritise and Experimentation People Strong LP Leadership Data Management Organisational Ownership Embedding Loss Prevention Senior Management Commitment
  61. 61. Breakout Structure Introduction to the ECR Europe Shrinkage Group Scale of the Problem and the Size of the Prize Identifying Leadership in Loss Prevention Creating Collaborative Partnerships to Reduce Shrinkage Interactive Session on Collaboration Benchmark Feedback and Wrap Up
  62. 62. Collaboration context Manufacturer Retailer Strategic Strategic intent alignment intent Strategy Organisational Strategy Organisational implementation culture implementation culture
  63. 63. The Cycle of Collaboration Relevance Consequences Collaboration Transparency Actions
  64. 64. Case Studies Case Initiative Focal firm Partners 1 Pay on scan Retailer 1 Five suppliers 2 Supplier Retailer 2 Two suppliers engagement 3 Product launch Supplier 1 Four divisions of Retailer 3
  65. 65. Enablers and inhibitors of collaboration Factor Enabler Inhibitor Relevance - Executive commitment - Competing priorities - Clear link between shrinkage - Viewing shrinkage as ‘lose less, and sales: lose less, sell more sell less’ Transparency - Shrinkage and sales data, by line - Lack of timely data - Easy access to data - Reluctance to share information - Relevant reporting across - Poor communication functions Actions - Identify points of leverage - Unstructured approach - Design in solutions - Engage cross functional team Consequences - Isolate effects of actions - Inability to measure direct - Use success to reinforce effects relevance
  66. 66. Link to Shelf Out of Stocks Shelf Out of Stocks Un- Information Product not Store planned / Data Supplied Demand Operations Errors Examples: • Mis-picks • Master Data Errors • Not placed an order • Late deliveries • Wrong Bar Codes • Unrecorded In-Store • Theft in Transit damage • Damages • Mis-scan • Mis-count • Theft • Unrecorded waste
  67. 67. Empty Shelves
  68. 68. Approaches to collaboration Stage Steps Relevance - Quantify impact of shrinkage (and fear of shrinkage) in terms of: - direct measures: lost sales and additional costs, - indirect measures: shopper satisfaction; supply chain relationship. - Identifying role of supply chain partners in addressing shrinkage to create new value. - Link reward and recognition across functions to addressing shrinkage. Transparency - Collate line level data on shrinkage and sales. -Provide timely access to relevant information. Actions - Identify points of leverage, e.g. new product development; product launch; annual reviews; contract (re)negotiation. - Reach into each other’s organisations to find opportunities. - Engage cross functional team to co-create solutions. Consequences - Measure effect of work: new value created together -Disseminate and celebrate success
  69. 69. Case Study B&Q and PJH Group
  70. 70. B&Q and PJH Collaborating to Reduce Shrinkage
  71. 71. About B&Q and Kingfisher • Kingfisher is the Number 1 Home Improvement retailer in Europe & 3rd Largest in the World - 700 stores in 11 countries • 75,000 employees and serve 6m customers per week • 324 UK B&Q Stores 3000 – 16000 sq m • Castorama & Brico stores across European - France, Italy, Spain, Poland & Russia • Strategic alliance with Hornbach Germany • Over 50 stores in China, Korea and now Hong Kong
  72. 72. Introducing PJH Group • UK Number 1 Distributor supplying Kitchens, Bathrooms and Appliances • Sales Channels include B&Q, National House builders and High Street Retailers • Part of Globe Union Group of Companies – Worldwide locations in Asia, North America and Europe • 7 Distribution centres in the UK each with customer call centres • Over 50,000 sq mtr , E.25m stock holding for fast efficient service • 800 Staff • Global sourcing incl. Turkey, Italy, Germany, Spain, Asia, Egypt • Own Delivery Fleet 135 vehicles – Delivering to Store and to Home
  73. 73. PJH are B&Q’s biggest Supplier of… • Bathroom Suites • Individual Bathroom components • Showers • ..and soon bathroom taps • Products are sold from B&Q stores or delivered directly to B&Q customers
  74. 74. 2004 - PJH is B&Q’s Highest Shrinkage Vendor Shrinkage = Profit = 5.70% Sales Flushed Away
  75. 75. Starting the Journey to Lower Shrinkage • Commitment by senior management in both organisations from the outset. “It must be fixed” • SKU level shrinkage data, with trend data • Demonstrating low shrinkage = higher sales • Engineering shrinkage out of the product & packaging • Isolating shrinkage “cause and effect” in each area of the supply chain • Development of a “shrinkage pipeline” approach to cross functional working
  76. 76. The Shrinkage Pipeline – deal with root cause Maximum Profitability 1.Historically 1.Historically focus has focus has been here been here where where shrinkage Is shrinkage Is reported reported Commercial Supply Services Stores 2. Focus has to be on the root cause not the output Shrinkage
  77. 77. Aligning our Approach • Education Programme for Store Staff • Showroom Roadshow Events • Consultants – external health checks • Joint Initiatives & Action *Predicted figures
  78. 78. 50:50 Interactive Staff 15 £1 Million 14 £500,000 Education: 13 12 £250,000 £125,000 11 £64,000 10 £32,000 9 £16,000 8 £8,000 7 £4,000 “Who Wants to 6 5 £2,000 £1,000 4 be a PJH 3 2 £500 £300 £200 Millionaire” 1 £100
  79. 79. 15 £1 Million 14 £500,000 13 £250,000 12 £125,000 What does PJH 11 10 £64,000 £32,000 supply to B&Q? 9 8 £16,000 £8,000 7 £4,000 6 £2,000 5 £1,000 4 £500 3 £300 50:50 2 £200 1 £100 A: Kitchens B: Bathrooms C: Paint D: Garden Furniture
  80. 80. Roadshow Training Events…..
  81. 81. Sharing Data Across Both Organisations
  82. 82. Spare Parts Available for Stores
  83. 83. Anti-Shrink Packaging
  84. 84. Results so Far….
  85. 85. Store Compliance Improving
  86. 86. A Full Range On Sale to Customers
  87. 87. Sales are increasing…. se nc r ea sI S ale 106% 105% 103% 100% 2005 2006 2007 2008
  88. 88. …and Shrinkage is Reducing Sh ri n 5.70% ka g eR ed uc ti o n 4.20% 3.15% 2.30% 2005 2006 2007 2008
  89. 89. Any Questions?
  90. 90. Breakout Structure Introduction to the ECR Europe Shrinkage Group Scale of the Problem and the Size of the Prize Identifying Leadership in Loss Prevention Creating Collaborative Partnerships to Reduce Shrinkage Interactive Session on Collaboration Benchmark Feedback and Wrap Up
  91. 91. Interactive session Each table divides into two groups Each group reviews one case study (A or B) Use the collaboration cycle template to benchmark (i) retailer and (ii) supplier Contrast your case study with the other group on your table Highlight actions to improve collaboration
  92. 92. Collaboration Cycle template Relevance Consequences Transparency Actions
  93. 93. Relevance Transparency Actions Consequences - Clear link between - Detailed shrinkage - Structured - Measurable, direct shrink and sales. and sales data. projects. benefits. - Top management - Data mining. - Cross-function, - Celebrate success. High buy-in. - Data openly multi-company - Shrink linked to shared. teams. objectives across - Co-create functions. solutions. - Unquantified link - Reasonable data, - Ad-hoc projects. - Occasional wins. between shrink and not easy to access. - Internal teams. - Direct benefit sales. - Basic analysis. - ‘Off the shelf’ difficult to measure. Medium - Shrinkage owned - Ad-hoc answers. - Benefits mostly and managed in one communications. indirect. function. - Shrink and sales - Low resolution - No work to - No measurement. seen as separate. data. identify ‘root - No benefits. - LP works in - Difficult to access. cause’. - Nothing to Low isolation. - Impose unilateral - No sharing / celebrate. - No ownership. communication. ‘solutions’.
  94. 94. Collaboration Cycle template Relevance Consequences Transparency Actions
  95. 95. Case A Relevance Consequences Transparency Actions
  96. 96. Case B Relevance Consequences Transparency Actions
  97. 97. Breakout Structure Introduction to the ECR Europe Shrinkage Group Scale of the Problem and the Size of the Prize Identifying Leadership in Loss Prevention Creating Collaborative Partnerships to Reduce Shrinkage Interactive Session on Collaboration Benchmark Feedback and Wrap Up
  98. 98. Wrap Up Thank you Invitation to join the ECR Europe Shrinkage Working Group

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