Electronics Department

Damage & Shrinkage Control

At Spar Hyper Market

Submitted By

AshishSarolia

IMT Ghaziabad

Last 3 months Analysis

Month Net Sales Shrinkage Value Shrinkage %

Feb 4277170 16389.9 0.383

March 7948348 16406.8 0.206

April 7429813 6433.29 0.086

0

1000000

2000000

3000000

4000000

5000000

6000000

7000000

8000000

9000000

Feb March April

Net Sales

Net Sales

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

Feb March April

Shrinkage %

Shrinkage %

Note – Shrinkage Percentage=Shrinkage Value/Net sales *100

Note – 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 Issues

1

Situation Description

Current Situation Display pieces is put up by company(Spar) itself

Problems 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 vendor

2

Situation Description

Current Situation Ageing stock is moved to the inventory till their sell off to the scrap dealer

Problems in current Situation 1. Overburdening to the inventory room and inventory team 2. Less resell value due to no such policy of Mark Down

Possible Solution There should be a 90 days scrap Mark down policy on ageing stock

3

Situation Description

Current Situation Some Personal EntertainmentProducts don’t have security tag and there is no security lock in the shelves containing these products

Problems in current Situation Vulnerable to customer theft

Possible 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 minimized

4

Situation Description

Current Situation Damaged products are lying in the CDIT Back room for more than 6 months

Problems 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 products

Possible 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 policy

5

Situation Description

Current Situation Cluttered Shelves containing Mixers

Problems in current Situation More prone to damages while displaying and customer inspection

Possible Solution Utilize the free space in same department and Use optimal display patterns

6

Situation Description

Current Situation Product wires hanging out from the shelves

Problems in current Situation More prone to damages while customer movements

Possible Solution Respective Sales persons should be more vigilant

7

Situation Description

Current Situation Blenders are kept erect without any support

Problems in current Situation More prone to damages while customer movements and placing back on shelves

Possible Solution There should be blender stand or jar for holding them

8

Situation Description

Current Situation Water purifiers are kept on the stack of boxes

Problems in current Situation More prone to damages while customer movements

Possible 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 (In days )

60-90 90-120 120-180 180-270 270-365 >365

No.of products

1520 532 727 939 336 839

Total value of the products

2468927

563940

465570

626870

405094

468578

50%

11%

9%

13%

8% 9%

Total

60-90

90-120

120-180

180-270

270-365

>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 198903

Note – The data mentioned here are the ageing stocks till Jan 2012.

*Home Entertainment here includes LCD, LED, and Plasma TV etc.

2%

9% 1%

75%

5%

8%

60-90

Personal Care

Personal Entertainment

IT

Home Entertainment

Large Appliance

Small Appliances

0%

16% 1%

60%

10%

13%

90-120

7%

10%

10%

33%5%

35%

120-180

5% 2%5%

25%

12%

51%

180-2702% 5%

3%

18%

3%69%

270-365

2%

10%

20%

20%

6%

42%

>365

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 Entertainment

1177 375 192 166 106 185

IT 80 43 226 341 20 265

Home 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

31%

11%

15%

19%

7%

17%

Total

60-90

90-120

120-180

180-270

270-365

>365

1%

77%

5%

6%

1%

10%

60-90

Personal Care

Personal Entertainment

IT

Home Entertainment

Large Appliance

Small Appliances

1%

70%

8%

8%

1% 12%

90-120

5%

27%

31%

6%0%

31%

120-180

2%

18%

36%11%1%

32%

180-2701%

32%

6%

18%0%

43%

270-365

1%

22%

32%

22%

0%

23%

>365

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 than 120 day's ageing stock

Total Value (In Rs.)

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

Conclusions

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 Costing

There are 2 types of security tags

1. Soft security Tag

2. Hard Security Tag

Type Cost(In Rs) Probable use Reusability

Soft Security Tag 3 On CD’s and DVD’s Non-Reusable

Hard Security Tag 10 Headphones, Pen Drives, Mouse’s

Reusable

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 4810

Security Tag usage

Product Name Current Stock Type Of Tag to be put

Past 3 Months Sales(Volume)

Total cost of putting tags

Total Shrinkage of Past 3 Months

Avg Shrinkage/Month

CD’s And DVD’s 2886 Soft 4686 8658 7126 2375

Headphones & Earphones

368 Hard 3680 6796 2265

Pen Drives And Memory Cards

- Hard - - -

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 Name

Vendor Name Major Products Total pieces Sold

Total Sales

Large Appliances L G ELECTRONICS INDIA PVT LTD

Refrigerators, Washing Machines, TV’s 742

11781944

Large Appliances SAMSUNG INDIA ELECTRONICS PVT. LTD.

LCD,LED

594

10837732

Large/Small Appliances

VIDEOCON INDUSTRIES LIMITED

Coolers,Irons,Cookers(Kenstar),Refrigerators 1531

6130048

Small Appliances FAIRDEAL Mixer, Irons,Kettles (Morphy Richards) 2547 5114472

CONSUMER DURABLES PVT LTD

Small Appliances PHILIPS ELECTRONICS INDIA LTD

Dryers,shavers 2575

3738348

SMALL APPLIANCE

USHA INTERNATIONAL LTD

Ceiling Fan, Cookers,irons 2394

2877526

Small Appliances SREENIVASA DISTRIBUTORS

Emergency Lights, rice cookers (Pigeon Brand)

2293

2840044

Small Appliances BAJAJ ELECTRICALS LTD

Steam Irons 3142

2249967

Gaming Software VISION INTERACTIVE SYSTEMS (CON)

CD,DVD 15294

1646747

Small Appliances UNIVERSAL CORPORATION LTD (ELECTRONICS)

Shavers,trimmers 472

1575864

Large Appliances MADHUKAR DOMESTIC APPLIANCES (P) LTD

Pure it Water Purifier,steam Irons etc. 1092

1229720

Small Appliances MAHARAJA WHITELINE INDUSTRIES LTD

Mixers 1148

967537

Small Appliances MILLION LIGHTS

Hair Dryers 1612

798775

Gaming Software QUIXOT

MULTIMEDIA PVT LTD

CD,DVD 3031

474729

Small Appliances ARYAH TRADING CORPORATION (WIPRO GM)

Wipro Emergency Lights 401

418314

COMP.ACCESSORIES INTEX Headphones,Pen Drives,Speakers,Web cams 3422 388196

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.

TECHNOLOGIES INDIA LTD

SMALL APPLIANCE

ASTHA ENTERPRISES

Ascent Steam Iron