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  • 1. Hot Product Controllers South Africa
  • 2. Briefing • The Awful Truth • The HPC Programme • Collaborative Approach • Recruitment /Standards • Understanding why employees steal • Understanding shrinkage and the effects • Identifying your hot products • HPC Function • Shrinkage results • Benefits • Closing
  • 3. The Awful Truth • Pick n Pay is a general merchandise retailer with over 775 outlets in sub Sahara Africa. • In 2003, shrinkage was above 2% in the Gauteng region and Store Managers began to defensively merchandise hot product on shelf or behind service counters. • Shrinkage results on Mach3 blades exceeded R800,000 (6 months). • Pick n Pay required a solution that would reduce loss and improve availability.
  • 4. The HPC Programme • In August 2003, it was agreed that a collaborative approach was needed between manufactures and retailers. • The 80/20 principle was used to identify hot products and hot stores (data mining) • The solution was developed around improving the handling process of hot products from receiving to the shelf (non-malicious shrinkage). • The understanding was that by reducing shrinkage we would improve product availability and increase sales.
  • 5. Collaborative Approach • Pick n Pay approached certain manufactures to participate in this trail. • The benefit for the manufacturers was to improve on shelf availability and reduce OOS. • It was agreed that the retailer would pay 50% of the cost and the manufactures would equally split 50% of the cost • HPC cost per store = €850.00 • Retail cost per store = €425,00 • x 10 Manufactures cost per store = €42.00
  • 6. Understanding why people steal… • An overwhelming 79% of workers admit they have or would consider stealing from their employers (Kessler & Associates) • The real reason people steal is opportunity. When companies make it easy through lack of control, an atmosphere of theft is created. • Employees steal to the extent management permits it. There's no shortcut to prevent it, you have to remove the opportunity, create awareness and achieve their support. • The human mind is ingenious as ever when it comes to acquiring illegitimate goods •
  • 7. 10-10-80 Rule The good news is that Employee Theft there is much a business can do to sway this 80% to their side. 10% We spend 90% 10% of our security budget chasing Take away the opportunity - the bad guys raise the risk 80% You & Me Baddies Good Guys
  • 8. Understand Shrinkage Non Malicious Malicious System set up errors • General Public Theft Picking errors • Grazing Delivery error (short or over) • Personal Use POS Scanning errors • Theft for Resale Pricing errors Start first by addressing the non • Colleague Theft Product damage of loss malicious causes • POS Fraud Product out of date • Grazing • Refunds Markdown • Collusion Transfer to other site error • Contractor Theft Counting error • Supplier Fraud Information misalignment
  • 9. Shrinkage Effects
  • 10. What We Do Know… Shrinkage transcends departmental and company boundaries It’s not just shoplifting It’s not all stores Its not all products - 80/20 principle applies (not all products cause shrink i.e. 20% of products cause 80% shrink). CRAVED (Concealable, Removable, Available, Valuable, Enjoyable and Disposable)
  • 11. Identifying Your Hot Products Shrinkage Overview Western Cape EDIBLE GROCERIES G12 (1.5%) LIQUOR G14 (1.4%) NON EDIBLE GROCERIES G13 (0.4%) TOILETRIES G15 (2.0%) HARDWARE H20 (2.1%)
  • 12. Edible Groceries G12 Shrinkage Breakdown
  • 13. Hot Products
  • 14. Retailers Opportunity 5% Average Average Retailer Margin 4% Retailer 1.84% Shrink Margin 3% 2% Average Retailer 4.83% Profit 2.99% 1% Margin 0% Current Potential
  • 15. Solution HPC Checks • Double Checks delivery Delivery • Improves data accuracy • Moves goods out of vulnerable area Fast Tracks • Reduces opportunities for theft/damages • Reduce access to hot products Secure Storage • One key holder / accountability • Replenish at rate of sale Shelf Replenishment • Planograms maintained • Reduce SOOS Daily Counts • Identifies theft during & after-hours • Improves staff awareness Evaluation • Measures and adapts
  • 16. Checking Delivery • Must be present for all hot product deliveries • The HPC must be called to receiving as soon as the delivery truck arrives • Must be present when the delivery is off- loaded from the truck • Ensure that delivered goods are off-loaded to your satisfaction (invoice sequence) • Use the copy of the delivery invoice to independently check the quantities and ensure that the goods are accurately received • Check the delivery with the Receiving Manager (not after)
  • 17. When Checking the Invoice • Ensure the delivery address is correct with the correct store code • Invoice must be checked top to bottom or vice versa • When checking each line, check that product description, unit of sale, quantity and packaging are correct • Ensure that delivered quantities match what is recorded on the invoice • All hot product boxes must be opened and packs individually counted • Accuracy is more important than speed – do not be intimidated or rushed whilst counting • Check for dummy packing • Check for damages or tampered boxes • Check for short deliveries
  • 18. Fast Tracking • The receiving area is busy with staff and product movement • The receiving area is usually congested with stock • It’s a vulnerable area • Its not a good place to leave hot products • The HPC must immediately move all Hot Products away from the receiving area to the Hot Product Locker • No other staff member or merchandiser should be allowed to handle hot products.
  • 19. Secure Storage • All hot products must be secured in a separate locker facility within the store • Ensure that the locker door is secured and that the key cannot be duplicated • The HPC is the primary key holder – the Store Manager or other designated manager may handle the locker key • Spare locker keys must be sealed (float bag) and secured in the cash office safe • Staff members or designated merchandisers are only allowed access to the locker under supervision from the HPC • Locker keys must be signed in/out the store OB book under supervision from the Store / Assistant Manager • Check your locker daily for any possible holes in the fencing or open ceiling boards.
  • 20. Shelf Replenishment • Too little stock on display leads to out-of-stocks and frustrates shoppers resulting in lost sales. • Too many products on display attract thieves and results in stock loss. • Replenish at rate of sale – little but often as follows:
  • 21. Daily Stock Counts • What is measured is managed • Helps you to identify shrinkage, sales and OOS issues • Improves staff awareness • Allows you to measure and adapt • Use the stock count system to do daily counts on all hot products both at opening and closing times. • Count products on the sales floor (front) and in the locker (back) • Obtain daily sales data for each hot product • Measure and adapt
  • 22. Measure & Adapt • Identify shoplifting activity • Identify theft from display / locker afterhours • Identify poor shelf availability • Identify out-of-stocks • Report all shrinkage issues to the relevant Store Manager • Send OOS Alerts to the relevant manufacturers • Send planogram alerts to the relevant manufactures
  • 23. HPC Results HEALTH FOOD 200,000.00 180,000.00 160,000.00 HPC VARIANCE 140,000.00 120,000.00 100,000.00 80,000.00 60,000.00 40,000.00 20,000.00 0.00 -20,000.00 Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Series1 156,432.0 169,489.0 11,772.00 6,806.00 12,518.00 4,384.00 4,950.00 1,368.05 5,068.00 17,312.00 4,908.00 ASSESSMENT CYCLES
  • 24. HPC Results ELECTRICAL 400,000.00 350,000.00 HPC VARIANCE 300,000.00 250,000.00 200,000.00 150,000.00 100,000.00 50,000.00 0.00 Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Series1 357,223.00 192,989.00 51,326.00 29,276.00 67,274.00 36,924.00 11,974.00 21,183.52 11,974.00 29,586.00 44,398.00 ASSESSMENT CYCLES
  • 25. HPC Results DENTAL CARE 160,000.00 140,000.00 HPC VARIANCES 120,000.00 100,000.00 80,000.00 60,000.00 40,000.00 20,000.00 0.00 -20,000.00 Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Series1 139,405.0 130,734.0 12,874.00 6,176.00 8,031.00 -1,672.00 560.00 926.40 560.00 3,953.00 -2,245.00 ASSESSMENT CYCLES
  • 26. HPC Results MEDICINE / AGEST 120,000.00 100,000.00 80,000.00 60,000.00 40,000.00 20,000.00 0.00 -20,000.00 -40,000.00 -60,000.00 -80,000.00 -100,000.00 Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Series1 91,827.00 30,502.00 -78,258.00 2,930.00 11,957.00 40,363.00 1,112.00 3,819.96 0.00 7,319.00 8,454.00
  • 27. HPC Results RAZORS & BLADES 140,000.00 120,000.00 100,000.00 80,000.00 60,000.00 40,000.00 20,000.00 0.00 Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Series1 130,576.00 104,168.00 44,450.00 55,042.00 81,790.00 46,501.00 19,736.00 44,077.39 19,736.00 21,147.00 35,699.00
  • 28. HPC Results SKIN CARE 400,000.00 350,000.00 300,000.00 250,000.00 200,000.00 150,000.00 100,000.00 50,000.00 0.00 Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Series1 341,461.0 253,913.0 36,083.00 39,066.00 32,372.00 19,868.00 18,006.00 23,814.31 18,006.00 42,514.50 15,872.00
  • 29. HPC Results LADIES TOILETRIES 120,000.00 100,000.00 80,000.00 60,000.00 40,000.00 20,000.00 0.00 -20,000.00 Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Series1 108,684.0 100,252.0 5,797.00 -298.00 8,170.00 -717.00 2,015.00 3,218.45 2,015.00 -1,844.00 -1,630.00
  • 30. HPC Results CONSOLIDATED SUMMARY 14 STORES 1,600,000.00 1,400,000.00 1,200,000.00 1,000,000.00 800,000.00 600,000.00 400,000.00 200,000.00 0.00 Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Series1 1,338,226.0 1,049,542.0 84,044.00 138,998.00 222,112.00 145,651.00 58,353.00 98,408.08 57,359.00 119,987.50 105,456.00
  • 31. Benefits WIN WIN • Lower Costs Retailer • Lower Out Of Stocks • Higher Brand Loyalty • More Open Merchandising • Better planning & execution • Lower Costs • Greater Choice • Increased Sales • Higher Store Loyalty / • Consumer Satisfaction • Increased Profits Penetration • More convenience • Efficient Replenishment • Increased Sales • Increased Profits Manufacturer Consumer WIN • Manufactures can increase sales by 78% if products are moved from defensive to open sale • Retail profits could be 30% higher if shrinkage is reduced by 50%
  • 32. “If it works in South Africa it will work anywhere” Thank You