Utilizing Procedural Reviews and Audits to Impact Shrink

If you were to poll retail asset protection/loss prevention associates and ask them what one of their top responsibilities was they would overwhelmingly state that it was Shrink prevention and protecting the bottom line.??And they would be correct.

?Shrink is a significant problem for retailers, as it can significantly impact a company's bottom line and change the dynamic for growth and shareholder return.??The recent news that shrink has eclipsed 100 billion dollars annually across retail has raised many an eyebrow, and to those of us in the industry, validated why the role of the LP/AP professional is so critically important today.

Shrink refers to the loss of inventory that occurs due to various factors such as theft, fraud, administrative errors, and operational inefficiencies. To minimize shrink, it is important for retailers to implement a shrink reduction plan that includes the use of performance audits and compliance tools.?In a later article I will be discussing the need for specialized and targeted High Shrink response tools.?But for now, let’s talk general shrink prevention.

Ever since I went through training with Walmart a long time ago, a key component embraced in keeping our shrink very low was the utilization of procedural reviews.? Procedural reviews were and still are an essential element of a shrink reduction plan, as they help to ensure that all employees are following established processes and procedures.

Before a procedural review (or audit) can be rolled out, there must be considerable research and cooperation with operations, training, as well as input from all the departments within the retail organization that author and oversee standard operating procedures.?As well, it is essential for LP/AP and or internal audit to understand those key operational touch points that need to be in place to avoid significant loss.?For instance, a management override to approve a suspicious return, or having a front-end supervisor validating voided transactions.?Should these processes be bypassed or executed without validation, they become theft avenues for less than honest employees to exploit.?

Since not all shrink is intentional, one must understand proper protocol in all aspects of merchandising, receiving, as well as inventory management.?Failure to capture proper markdowns or making improper inventory adjustments can and will lead to shrink.

Building procedural reviews is essentially outlining the proper ways of executing each roll or each employee in the store, as well as understand each process that the employees execute hundreds if not thousands of times daily.?

Once in place, the role of the LP/AP associate as auditor takes on a critical role in the organization, as it not only helps lead to shrink avenues, but it also allows the LP/AP associate to become a trainer, which is as important as being a shrink buster.?

Procedural reviews can also be conducted by store operations teams and involve reviewing and assessing the effectiveness of current processes and procedures of their store. By identifying any gaps or weaknesses in these processes, retailers can take steps to improve them, ultimately helping to reduce shrink, while strengthening the understanding of the employee as to why certain things are done the way they are done.??This especially true when discussing the high employee turnover at retail stores nationwide.

Internal audits can also play a crucial role in keeping shrink in check. Auditors within a retail company can conduct unannounced store audits to identify any issues that may be contributing to shrink. These audits can focus on specific areas of the store that have higher shrink rates and can help to identify the root causes of the shrink. By targeting higher shrink stores for audits, retailers can isolate the outlying shrink offenders and take steps to address the underlying issues.

In addition to procedural reviews and internal audits, compliance checks are another important tool in a shrink reduction plan. These checks involve reviewing and verifying that all employees are following established policies and procedures and can help to identify any areas where employees may be deviating from these standards. Compliance checks usually involve areas that can impact the retailer externally by avoiding fines and shutdowns by the ATF, OSHA and Fire Marshalls who oversee life safety and high-risk employee activity.?? By conducting regular compliance checks, retailers can ensure that all employees are adhering to established processes and procedures, helping to reduce shrink.

Overall, procedural reviews, audits, and compliance checks are an essential part of an overall shrink reduction plan. By designing and implementing these tools, retailers can identify and address the root causes of shrink, ultimately helping to protect their bottom line and improve their overall performance, while teaching and training current and new employees, and keeping the retail operation running efficiently.