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Thinking Shrink And Loss Before Merchandise Hits Your Stores?

Posted on 2/16/12 9:30 AM

In the retail business, distribution centers (DC) are the hub of inventory control. The majority of your inventory will cycle through these centers, be placed on trucks and eventually off-loaded to your retail stores. With such a high value of inventory going through these doors, how are you protecting this environment?

Most retailers have detailed loss prevention (LP) programs within their retail stores. However, you might be surprised to learn how cursory some programs are within distribution centers. Without a proper program, designed specifically to prevent loss in a distribution (or cross-dock) center, your business may be susceptible to substantial loss. Here are some important elements for creating a distribution center loss prevention program.

Physical Security

Distribution centers are often very large in square footage and often have many people, both employees and outside contractors, walking through on a regular basis. Controlling this type of environment begins with a good physical security system.DC image resized 600

Access control systems, along with strict policies regarding visitors and contractors, will reduce the opportunity for people to easily walk through a facility. CCTV systems throughout the facility should include strategically placed cameras, unobstructed by rack systems or blind spots. Systems should be set up to track activity throughout the entire facility; ideally to follow the flow of an individual in and out of each area. The system should be monitored live, as well as have the capability to record activity and produce reports.

Another measure is to post uniformed guards at doors, which will deter foul play and potential crime. Patrolling guards increase awareness of the security of a facility and can also help deter issues. Implementing specific patrols will also help identify concerns and allow the ability to react quickly to issues as needed.

It is essential to physically protect your facility properly; securing the building from the outside in.

Training and Awareness

A solid LP awareness program is always a great training tool not only for DC associates but also management. Like a store loss prevention program, a DC program should be developed to educate your DC team on how loss occurs, how they can prevent loss and what to do if they discover or witness the occurrence of a loss. Keeping the topic of loss prevention “front and center”, using visual training and awareness materials, will keep it front of mind with your team. Some ideas include tracking incidents through visual mapping or records, posters showing examples of how loss occurs and implementing a Tip-Line or Business Abuse Line.

Shrink Awareness

How do you determine the shrink percentage in your DC locations? Some retailers actually calculate distribution center shrink percentage; while others take an inventory and spread the DC shrink across their retail stores’ results. Regardless of how you determine the shrink percentage of your DC(s), you must team up with operations to prevent it.

Much like in retail locations, many shortages that occur in DCs are operational. Work with your DC operations management team to ensure that not only LP policies are followed, but operational policies and procedures are also sound. Get involved with new hire orientations, understand how the policies and procedures of your distribution center can affect shrink. Build a partnership with operations, so together you can ensure operational compliance, which in turn, assists in the prevention of loss.

Audits and Assessments

A solid audit/assessment program will ensure operational compliance within all departments in your DC. Not only should a DC be assessed by the LP team, but departmental self audits should also take place throughout the year. If necessary, due to the size of a facility, create shorter, individual assessment criteria lists for each specific section of your facility, e.g.: Inbound, Outbound, Break Pack, Logistics, Warehouse and Safety and assess those sections regularly over a certain period of time.

Assessments and audits will provide your teams (loss prevention, operations) data to develop action plans, support known loss concerns and identify potential concerns before they become major issues.

Community & Law Enforcement Partnerships

Creating a good partnership with Law Enforcement is important to creating a safe environment for your team. Invite Law Enforcement officials to tour your facility and discuss potential situations. Talk through scenarios that could occur and develop action plans with police and fire departments. Provide maps of your DC to police and fire officials to ensure they are familiar with entrances and exits. This will not only help them better understand your building but will create a partnership that may be helpful in time of crisis.

Getting your team involved in community events is a great way to not only support your local area, but also fosters a “great place to work” mentality. It also boosts recruiting and networking opportunities. Charity, Fire Department, and Law Enforcement events are great opportunities to promote your team and business.

Written by Joe Faul, National Client Services Manager

Topics: shrink awareness

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