Download - Tackling Shrinkage to Improve Your Bottom Line ECR Europe Annual Congress, Brussels May 2004
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