Loss Control — Worst Word Ever — “Shrinkage”
Loss control is a vital element of the retail sector. Anyone who worked for a major retailer is familiar with the mandatory training videos. One of the pieces we were shown during my tenure in retail was about customer theft and how to spot a shoplifter. The security teams are in place to monitor the sales floor incognito and in a separate office keep their keenly trained eyes on the security cameras. In the security business, the term for inventory unaccounted for, “shrinkage”.
On the lighter side, some may recall shrinkage from the classic Seinfeld sitcom. The episode George is accidentally seen nude after swimming in a cold pool by Jerry’s girlfriend. No need to add additional commentary, you either know what they meant by “shrinkage” or not. Unfortunately, loss control is not a comedy. It is a real-world issue for retail, wholesalers and manufacturers.
Loss control is an important element of calculating inventory versus sales. Shrinkage is not a scientific method applied to missing stock. It does encompass any unexplained goods gone missing. Since we cannot catch all the petty thieves, we can address measures to reduce the frequency, and the severity of unsold, missing goods. Frequency is the number of incidences. Since we don’t always know how many times a theft occurs, we can best estimate by regular consistent inventory audits. The important element is consistency. When conducting audits on a calendared schedule, the data is more useful. For example, if an audit is completed every 3 months, we can assess patterns. We can also include surprise audits. And we can conduct more frequent inventory counts of items with a higher degree of theft. Severity applies to the impact of losses. For example, the latest audit estimated total value of goods at “x”, the losses totaled, “y”. When the average for a series of audits is compared, a result with a higher ratio of losses to inventory value occur, the severity is higher.
There are measures a retailer can implement to discourage or reduce theft by keeping some higher cost items in a secured case or behind a sales counter. Intentionally posting a clerk on the sales floor. Criminals usually don’t like to be asked if they want any help. A common tip off to a shoplifter is nervousness. Be careful, we can’t assume unusual behavior equals an ill intent. The person may be on medication or just socially inept. Training employees how to identify a thief, and what types of behaviors they exhibit is definitely a smart business practice. The store may also hire under cover security agents not advertised to the general staff. It is a good idea to clue in the general manager and shift managers of course. Last thing a retail store needs is an embarrassing situation to happen in view of customers.
Shrinkage also occurs internally. Employees by virtue of receiving a paycheck doesn’t mean he is pure. It is important to also train staff to be aware of fellow employees taking advantage of a lax security process. In fact, there are numerous cases of employees stealing for years before being caught. Theft includes any asset of the business: currency, inventory, company owned property to name a few. A major black eye for any business is theft of customer information. We address identity theft in a series about consumer protection. As business owners it is wise to periodically conduct employee interviews. It is an opportunity to learn about staff and their ambitions. It is reasonable to assume she doesn’t want to be a cashier for her working life. It is also an opportunity to identify your star workers and reward them with more responsibility and ideally pay.
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