Tackling Shrinkage to Improve Tackling Shrinkage to Improve Your Bottom Line Your Bottom Line
ECR Europe Annual Congress, Brussels
May 2004
WelcomeWelcomeColin Peacock
The Gillette CompanyCo-chair, Shrinkage
Working Group
John FonteijnRoyal Ahold
Co-chair, Shrinkage Working Group
The ECR Europe Shrinkage Project
Supply Chain and Logistics Expertise
Academics
Excellence in Crime and Security
Management
Three Key Messages
1. Shrink = Profit Opportunity
2. Collaboration is critical
3. The ECR approach is working
€24 billionper year
Message #1Shrinkage = Profit Opportunity
€461 millionper week
• Lower Shrink
€65 millionper day
€2.7millionper hour
Message #1Shrinkage = Profit Opportunity
• Lower Shrink
0
1%
2%
3%
4%
1.8%
Shrink
Profit
3%% ofSales
Message #1Shrinkage = Profit Opportunity
• Lower Shrink
0
1%
2%
3%
4%
Profit
Shrink
0.9%
30% Uplift Savings
3.9%% ofSales
Message #1Shrinkage = Profit Opportunity
• Lower Shrink
• Lower Costs
Message #1Shrinkage = Profit Opportunity
• Lower Shrink
• Lower Costs
• Increased Sales
10%+ Sales
Increase
Message #1Shrinkage = Profit Opportunity
• Lower Shrink
• Lower Costs
• Increased Sales
open sale = 80%+
salesincrease
SHRINK: Fighting Back
Anders Moberg
President & CEO Royal Ahold
Shrink is a:
•Strategic issue
• State of mind
• Joint fight
The Three Causes
• Process failure
• Fraud
• Theft
ECR Shrink Reduction Road Map
1. Develop project plan
2. Map key processes
3. Analyse risk
4. Risk-reduction solutions
5. Implementation plans
6. Evaluation procedures
Fighting ShrinkFighting Shrink
• Programs and targets
• Build shrink into the corporate culture
• Tone at the top
• Working together in the supply chain
Working Together
• Align measurements
• Increase transparency
• Share information
Ahold and Shrink ApproachAhold and Shrink Approach
• Work with suppliers / academics / government
• Problem solving
• Treat like our overall business; – Strategy
– Accountability & Internal Controls
SHRINK: Fighting BackSHRINK: Fighting Back
Thank you
Three Key Messages
1. Shrink = Profit Opportunity
2. Collaboration is Critical
3. The ECR approach is working
Message #2Collaboration is Critical
• Internal and External
Message #2Collaboration is Critical
• Internal and External
• Prevention orientated
Message #2Collaboration is Critical
• Internal and External
• Prevention orientated
• Focused - 80/20
People
Places
Products Processes
Role of the Executive TeamRole of the Executive Team
Nikolaus RitterManaging Director
Makro Belgium
Programme
• Why Executive involvement in shrinkage
issues ?
• Examples from Makro Cash&Carry Belgium
• Lessons learned
Three Good Reasons
For Executive Involvement
in Shrinkage
Executive involvement ?
SHRINK is a RISK
Risk Management = Executive ResponsibilityRisk Management = Executive Responsibility
Executive involvement ?
SHRINK influences PROFIT
Profit = Executive ResponsibilityProfit = Executive Responsibility
Executive involvement ?
SHRINK impacts OPERATIONS
Operations = Executive ResponsibilityOperations = Executive Responsibility
Executive involvement ?
SHRINKAGESHRINKAGE
==
EXECUTIVE RESPONSIBILITYEXECUTIVE RESPONSIBILITY
Examples
of
the Makro Way…
Examples at Makro Belgium
• Basic approach:
– cross-functional– result-driven– structured approach
Examples at Makro Belgium
• Cross-functionalExample 1:
Loss Prevention Committee- Chaired by Managing
Director- Members: Buying Director
Food, Buying Director Non-food, Director of Operations, Financial Director, Head of Internal Audit, Loss Prevention Manager
Examples at Makro Belgium
• Result drivenExample:
Annual Shrinkage report- Annual focussed report
on operational Shrinkage, comparing long-term and short-term evolution
- Drill down to product level
SHRINKAGE (% of TO at COST)
1998 2004
-36%-0,5
Examples at Makro Belgium
• Structured approach
• Executive Training
• National Road Map
• Shrink Training
0. Wake Up
2. Map &Measure
4. Develop Solutions
5. Implement
6. Evaluate
1. Plan
3. Analyse
Lessons
Learned
Key lessons
• Executive involvement• Need for a “captain”• Internal collaboration
is fundamental• Collaboration with
suppliers is essential
OperationsOperations
BuyingBuying SupplierSupplier
Thank you
Three Key Messages
1. Shrink = Profit Opportunity
2. Collaboration is Critical
3. The ECR approach is working
Research Conclusions
• Existing Approaches not working
• Underlying cause is poor management
• Good management is the solution
Message #3The ECR approach is working
• Data led
0
4
8
12
16
20
24
28
32
36
0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 5.5 6 6.5 7 7.5 8 8.5 9
Losses acrossstore universe
Average
% o
f Sto
res
Message #3The ECR approach is working
• Data led
• Structured
0. Wake Up
2. Map &Measure
4. Develop Solutions
5. Implement
6. Evaluate
1. Plan
3. Analyse
The ECR Shrinkage Road Map
Message #3The ECR approach is working
• Data led
• Structured
• Removes process failures
Success Achieved
46% total shrinkage reductionPortugalFeira Nova
74% loss reduction288% sales increaseHungaryTesco
40% loss reduction
12% sales increaseUKSainsbury’s
7% loss reductionUKWickes
Factory and DC operations tightened upItalyCoop
43% loss reductionPolandAhold
78% loss reduction
55% sales increasePortugalUlmer
29% loss reductionPortugalSonae
ResultsCountrySupplierRetailer
Danone
Gillette
Industry
GET
P&G
Sokolow
Gillette
Colgate
Category
Yoghurt
Shaving
Spirits
Electrical
Deodorants
Sausages
Shaving
Oral Care
Video: What happened next?
Three Key Messages
1. Shrink = Profit Opportunity
2. Collaboration is critical
3. The ECR approach is working
Your Call to Action
Q: How big is your shrink opportunity?
Q: Will increased collaboration help?
A: Use the ECR Approach– Buy the ECR Blue Book from www.ecrnet.org
Better Still.......
• Invest 90 minutes with us
– Join us at our Shrink Breakout Session
– Tonight at 5.30pm
– In the Green Room
Thank YouThank You