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Don't Treat Your Distribution Center Differently

Posted on 8/27/13 2:35 PM

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Distribution CenterWhen I first got into the outsource business I didn’t know much about distribution center loss prevention. By that I mean, I assumed that their loss prevention programs operated in the same basic manner as a store program. I didn’t consider that a company might treat their DCs differently, after all it’s the same merchandise, operated by the same level of worker, with all the same risks sans shoplifting. What I came to understand was that distribution centers often operate under a different reporting structure and that they seldom follow the same loss prevention programs as the stores. I also discovered that often, until something actually went wrong e.g. employee caught stealing, there was a lot of resistance to implementing the foundational programs used in the field.

The arguments presented usually centered on the “uniqueness” of the distribution facility. Statements such as:

“Our employees are different than those in the stores”
“We have tighter supervision”
“We don’t have any real shrink problems”
“We monitor quality control better”

All those things may be true and correct, but it isn’t exactly a solid argument against a loss prevention program. After all, those are statements that many stores or field supervisors could make. So let’s take a look at each of those four arguments and determine if, in fact, they are reason not to implement that same types of programs we use in the field:

“Our employees are different than those in the stores”

Maybe they are, but mostly they are not. Human behavior is human behavior. Dishonesty and error is not a function of stores, it’s a function of employees. People who work in distribution centers are not part of some group with better work ethic or integrity. True they may enjoy a different type of job, but we know no job (politician, police, stockbroker, banker, doctor, lawyer) is immune from dishonesty or error. If you have employees, you need programs to monitor activity and to alert you to potential issues.

“We have tighter supervision”

That is questionable. You may have more supervisors in a DC, but you have more people…and more places things can go wrong. Cameras and supervisors are helpful to deterrence but if they were a cure all, we could fix all of our shrink problems with a little more payroll. Nope - people who want to steal will find a way to do so and even under close supervision mistakes are made. Additionally, DC employs tend to build strong relationships because of community breaks and lunches - these relationships are the first ingredient in collusion.

"We don’t have any real shrink problems"

The majority of the time, this is true. In my experience the reason is that many of the losses are booked to the stores and not the DC. Any year that a distribution center reports an overage means the field suffered that loss and for a DC to be almost spot on, seems to defy the laws of both human nature and probability.

“We monitor quality control better”

A simple process of carton inspection can provide a good indicator of the shrink problem. Have an objective person or persons pull a sampling of cartons going to stores. Verify both count and content to the manifest. I would be surprised if over a period of six months (especially at the holidays) if 100% accuracy was recorded. 98% may sound good enough, but if the DC ships 100 million in goods each year, 2 million of that will either not be shipped or shipped incorrectly. 2 million is a lot of shrink for the stores to own.

The principles and standards of loss prevention remain consistent across all business operations. True, unique functions must be added to a DC program and also true that some things will receive greater focus than others. We may spend more time investigating narcotics use in a DC or trade out shoplifting discussions for safety discussions. What doesn’t change however is the basics. An LP program run by a a set of objective individuals (ones that don’t report to the DC manager). An audit function that ensures both adherence to policy and quality control. An investigative function that responds to issues of loss. An educational and awareness program for the employees. An inventory control process that doesn’t place the burden of loss and error on the store partners.

Distribution Centers are different in many ways, but the one way they are not different is that they employ human beings. And anywhere there is human activity there will be issues. So don’t treat the DC differently. Implement the same types of loss prevention programs with the same standards and accountability as the stores.

 Authored by:

Ray Esposito   Ray Esposito

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