Discussion – Shrink Management

Discussion – Shrink Management

Shoplifting is the number one cause of shrinkage in retail stores in the US. It can occur in many ways, such as interfering with price tags, hiding goods, or moving goods from one container to another container. It accounts for about 35% of yearly losses in retail stores.

Dishonest staff members use multiple creative methods to steal from retail stores. For instance, attendants can deliberately fail to scan the goods of an accomplice. Also, dishonest employees issue fake returns and gift cards, sell smuggled merchandise, and outright steal cash.

Supplier fraud is the least contributor to shrinkage. Examples include invoice duplication, charging undelivered goods, and when suppliers bribe staff members to facilitate fraud (Webb, 2016). Some businesses tend to ignore this form of theft due to the small amounts involved, but it may worsen.

Operational errors and losses also contribute to retail shrinkage. Operational errors arise from wrongful bookkeeping records, which may lead to losses (Webb, 2016). Also, operating losses may result from day-to-day accidents such as a customer knocking off and breaking items to the extent that they are unsellable.

Shrinkage Prevention

According to Beck & Peacock (2009), one of the proven ways used to prevent shrinkage is stock tracking. That requires the business to create a reliable record of current inventory numbers. Henceforth, the retailer can compare sales to inventory to detect and address any mismatches.

Another strategy used by retail stores to prevent employee theft is the implementation of internal checks and balances. For instance, having different people to perform inventory management and accounting duties will prevent internal theft. Apart from preventing internal theft, the strategy will also alleviate potential errors that lead to losses.

Recommendation

Installing CCTV cameras will prevent the leading causes of shrinkage, which are shoplifting and employee theft. A warning should accompany that those who are found culpable will be prosecuted. If people know they are being watched, they are less likely to steal.

References

Beck, A., & Peacock, C. (2009). New loss prevention: Redefining shrinkage management. Springer.

Webb, G. (2016). An Empirical Analysis Of Inventory Shrinkage In Retail Sector Of India. https://doi.org/10.13140/RG.2.2.28932.88961

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Operations managers have an obligation to their organization to take effective steps to minimize shrinkage. However, some loss prevention tools may not be cost-effective or applicable, particularly when trying to prevent losses across multiple categories. Recognizing and understanding the primary causes of shrink allows managers to develop procedures and systems that efficiently target those causes in their businesses.

Instructions

1. Read the following article, analyze this week’s course content, and complete outside research to answer the prompts below:
   • The Worldwide Impact of Shrink. Costa, M. (2018, Jul 1). losspreventionmedia.com
2. Compare and contrast the following causes of shrink. Evaluate the underlying reasons that allow shrink to occur in a typical business other than your own:
   • Shoplifting
   • Supplier fraud
   • Operational error
   • Employee theft
   • Organized retail theft
3. Form conclusions about the effectiveness of most loss prevention systems and procedures used in retail businesses. If possible, use external resources to support your conclusions (e.g., meet with the party responsible for loss prevention at a local business to discuss how they work to prevent losses).
4. Propose one specific recommendation for reducing shrinkage in typical retail businesses.