Electronics DepartmentDamage & Shrinkage Control At Spar Hyper Market Submitted By AshishSarolia IMT Ghaziabad
Last 3 months AnalysisMonth Net Sales Shrinkage Value Shrinkage %Feb 4277170 16389.9 0.383March 7948348 16406.8 0.206April 7429813 6433.29 0.086 Net Sales 9000000 8000000 7000000 6000000 5000000 4000000 Net Sales 3000000 2000000 1000000 0 Feb March April Shrinkage % 0.45 0.4 0.35 0.3 0.25 0.2 Shrinkage % 0.15 0.1 0.05 0 Feb March April
Note – Shrinkage Percentage=Shrinkage Value/Net sales *100Note – Net sales doesn’t have a definite pattern but shrinkage percentage has decreased from.38% in February to .08 percent in April.Note – Presently we are having a damage stock of 212474 rupees that is lying into CDIT back room.Total Number of damaged products is 380. Types of Damages and Losses 1. Manufacturing Damages – This kind of damages happens due to technical problems in the product and procurement of faulty products from vendors. This is completely outside the purview of the company and little can be done about this other than having a good replacement policy in place. 2. Transportation Damages – This kind of damages happens due to movement of stock from one place from other or from Distribution center to Store. These are the main cause of damages and can only reduce by proper handling of the stock. 3. Customer caused Damages – This kind of damages happens due to movements and improper handling of the products by the customers. This happens because of customer unawareness and poor display management of the products. 4. Shrinkage – This is not actually damage but caused due to customer theft and difference between physical stock and system stock. This is a big loss to company as neither can we get a replacement nor we can get a price for that product so this should be minimized. 5. Mishandling By the sales staff – This kind of damages happens due to callousness and poor handling of the products by the sales persons.
Major Issues1Situation DescriptionCurrent Situation Display pieces is put up by company(Spar) itselfProblems in current Situation Whole cost of damage and responsibility of safeguarding lies with the company(Spar)Possible Solution Display Pieces should be sponsored by respective vendor2Situation DescriptionCurrent Situation Ageing stock is moved to the inventory till their sell off to the scrap dealerProblems in current Situation 1. Overburdening to the inventory room and inventory team 2. Less resell value due to no such policy of Mark DownPossible Solution There should be a 90 days scrap Mark down policy on ageing stock3Situation DescriptionCurrent Situation Some Personal EntertainmentProducts don’t have security tag and there is no security lock in the shelves containing these productsProblems in current Situation Vulnerable to customer theftPossible Solution 1. There should be security tags on all small appliances like headphones pen-drives CD’s etc. 2. There should be security lock on shelves like the shelves sponsored by promoters 3. There should be a security personnel at the bay containing small appliances so that customer theft can be minimized4Situation DescriptionCurrent Situation Damaged products are lying in the CDIT Back room for more than 6 monthsProblems in current Situation 1. Company is losing precious inventory space 2. Company is also losing money on these damaged products as it is not able to get replacement productsPossible Solution 1. There should be a good return back and replacement policy
with vendor 2. Non-compliance on the part of the vendor should be dealt strictly e.g. Money should be debited from his account 3. Buyers should be make more accountable for non- compliance of the vendor 4. Follow a Mark down policy5Situation DescriptionCurrent Situation Cluttered Shelves containing MixersProblems in current Situation More prone to damages while displaying and customer inspectionPossible Solution Utilize the free space in same department and Use optimal display patterns6Situation DescriptionCurrent Situation Product wires hanging out from the shelvesProblems in current Situation More prone to damages while customer movementsPossible Solution Respective Sales persons should be more vigilant7Situation DescriptionCurrent Situation Blenders are kept erect without any supportProblems in current Situation More prone to damages while customer movements and placing back on shelvesPossible Solution There should be blender stand or jar for holding them8Situation DescriptionCurrent Situation Water purifiers are kept on the stack of boxesProblems in current Situation More prone to damages while customer movementsPossible Solution Purifier should have stands sponsored by company
Suggestions There should be more power sockets for display products. Mix up of GM products with Electronics Products should be do away with. Sales persons should be encouraged to visit competitor’s Store to observe best things in the industry and implement that in our store for the better growth prospect.Why should we use a mark down policy?Time Period 60-90 90-120 120-180 180-270 270-365 >365(In days )No.of 1520 532 727 939 336 839productsTotal value of 2468927 563940 465570 626870 405094 468578the products Total 8% 9% 60-90 90-120 50% 120-180 13% 180-270 9% 270-365 11% >365
Sub Category Wise Ageing Stock (Value in rs.) sub category 60-90(Days) 90-120 120-180 180-270 270-365 >365 Personal Care 60369 1883 31674 29365 8743 10060 Personal Entertainment 210779 87860 46558 15644 19486 48599 IT 32211 5111 45873 30072 11842 92310 Home Entertainment 1840678 339658 153060 157019 72252 91491 Large Appliance 131458 56873 24329 76826 11307 27214 Small Appliances 193432 72555 164075 317944 281462 198903Note – The data mentioned here are the ageing stocks till Jan 2012. 60-90 2% 8% 9% 1% 5% Personal Care Personal Entertainment IT Home Entertainment Large Appliance Small Appliances 75%*Home Entertainment here includes LCD, LED, and Plasma TV etc.
Item Wise Break Up of Ageing Stock sub category 60-90(Days) 90-120 120-180 180-270 270-365 >365 Personal Care 20 3 39 21 5 9 Personal 1177 375 192 166 106 185 Entertainment IT 80 43 226 341 20 265Home Entertainment 88 42 46 105 60 184 Large Appliance 8 6 1 6 1 4 Small Appliances 147 63 223 300 144 192 Total 1520 532 727 939 336 839 Total 17% 60-90 31% 90-120 7% 120-180 180-270 19% 270-365 11% >365 15% 60-90 1% 1% 6% 10% Personal Care 5% Personal Entertainment IT Home Entertainment Large Appliance 77% Small Appliances
Conclusions: We have 50% of our ageing items in 60-90 days period. That’s why we should have a 90 days markup policy on these products so that we can sell them on lower margin instead of let them aged more. Value wise share is always greater for Home Entertainment but no. of item wise its always personal entertainment which is more because of having products with low price. Although we have 75% of items from Home entertainment category in 60-90 days bracket but as the bracket size increases, items from small appliances category occupies more space. More Items are in 60-90 Days aged category so they need to be mark down so as to get a reasonable value from them. Personal Entertainment and Small Appliances are the major products in each aged category. Brand Wise Ageing Stocks Brand Name Total products with more Total Value (In Rs.) than 120 days ageing stock Symphony 50 191164 LG 9 126697 Hama 847 111861 Maharaja 89 94415 Sony 7 86713 Kodak 19 84432 Panasonic 50 73818 Kenstar 20 65895 Nova 39 57538 Inalsa 48 55251 Morphy Richards 35 50165 Khaitan 44 48252 Whirlpool 6 48046 Philips 40 45269 Lenco 12 44053 Vega 44 37302 Prestige 21 34607 Usha 23 32048 Baltra 183 28606
Gryphon 28 25805 Pagaria 26 24689 Volcco 21 20317 Kenwood 7 20230 Skullcandy 14 17790 EzeeMix 22 16044 Kailash 10 15555 Suraksha 11 8044 Italia 16 8024 Logitech 8 7912 Lords 23 6739 Pigeon 20 6000 Radical 47 4810Conclusions Apart from big vendors, there is more number of small vendors whose products are lying for more than 120 days so there is a strong need of a mark down policy plus strong return back policy. Some of vendors are not getting requisite sales and they are moved from shelves to back room but still they are not taken back by vendor so such vendors should be called quickly so as to vacate back room. CD ROM’s and DVD Rom’s are ageing but they don’t have some ageing characteristics like small appliances so their mark down policy should be different.Security Tags CostingThere are 2 types of security tags 1. Soft security Tag 2. Hard Security Tag Type Cost(In Rs) Probable use ReusabilitySoft Security Tag 3 On CD’s and DVD’s Non-ReusableHard Security Tag 10 Headphones, Pen Reusable Drives, Mouse’s
Security Tag usageProduct Name Current Stock Type Of Tag Past 3 Months Total cost Total Avg to be put Sales(Volume) of putting Shrinkage of Shrinkage/Month tags Past 3 MonthsCD’s And DVD’s 2886 Soft 4686 8658 7126 2375Headphones & 368 Hard 3680 6796 2265EarphonesPen Drives And - Hard - - -Memory Cards Conclusions: Security Tags cost varies between 3-10 Rs but on comparing their cost with total shrinkage of past 3 months then putting tags are still a viable option. Also reusable security Tags will serve for long thus over a long time hard security tags cost will reduce to less than 1 Rs. Although Soft security tags cost 3 Rs but their cost will be compensate by less shrinkage which is in the tune of 2375 each month. Vendors who can be persuaded for putting Display pieces Sub Category Vendor Name Major Products Total Total Name pieces Sales Sold Large Appliances L G ELECTRONICS Refrigerators, Washing Machines, TV’s 742 11781944 INDIA PVT LTD Large Appliances SAMSUNG INDIA LCD,LED 594 10837732 ELECTRONICS PVT. LTD. Large/Small VIDEOCON Coolers,Irons,Cookers(Kenstar),Refrigerators 1531 6130048 Appliances INDUSTRIES LIMITED Small Appliances FAIRDEAL Mixer, Irons,Kettles (Morphy Richards) 2547 5114472
TECHNOLOGIES INDIA LTDSMALL APPLIANCE ASTHA Ascent Steam Iron ENTERPRISES Top Contributors Vendor Name % Contribution L G ELECTRONICS INDIA PVT LTD 14.45 SAMSUNG INDIA ELECTRONICS PVT. LTD. 13.29 VIDEOCON INDUSTRIES LIMITED 7.52 SAPNA DISTRIBUTORS 7.4 FAIRDEAL CONSUMER DURABLES PVT LTD 6.1 PHILIPS ELECTRONICS INDIA LTD 4.59 USHA INTERNATIONAL LTD 3.53 SREENIVASA DISTRIBUTORS 3.48 BAJAJ ELECTRICALS LTD 2.76 MIRC ELECTRONICS LTD 2.72 TANSIHA MARKETING 2.45 VISION INTERACTIVE SYSTEMS (CON) 2.02 Total 70.31 Conclusions: Top 12 vendors are contributing for overall 70% sales of electronics department. Large appliances vendors like Samsung and LG got total sales of above 1 crore from the store so we can persuade them to put their display pieces thus we can reduce our damage responsibility. Small Appliances vendors are also getting good sales from store so they can be asked to give free display piece whose damage and replacement responsibility will rest on vendor. Thus we will significantly reduce our damages. As we are giving good sales to each vendor thus they all need to be more responsible about replacement otherwise their lateness should be dealt strictly.