It’s well understood that in order to maximize their potential to make money, supermarket managers need to ensure that they’re selling as many of their products as possible. Margins are thin across the industry, and every time a food product is spoiled or otherwise gone to waste, that represents real dollars being squandered.
It’s therefore clear that “shrink” – defined as the amount of a retailer’s net margin eroded by products’ waste, theft and spoilage – is a major obstacle for managers looking to prop up supermarket profitability. According to a report from Cisco Systems, entitled “Reducing Shrink to Improve Retailer Profitability,” companies have plateaued in their ability to combat shrink. Total shrink-related losses declined 10 percent between 1993 and 2000, but they’ve dropped by only 2 percent in the years since.
“What’s holding supermarkets back from fighting shrink directly?”
This is troubling. And industry experts Dean Sivara, Mike Miller and David Meany, the authors behind the Cisco report, have argued that the problem is a disjointed approach to combating shrink. Managers are using a vast array of different processes and programs to investigate the program, and it’s not working.
“Store and department managers typically spend up to 12 hours per week analyzing reports generated by multiple applications and delivered in different formats to identify the root causes of shrink, and the data is often weeks old,” the experts stated. “That’s too late to prevent a case of milk from spoiling.”
Specifically, what’s holding supermarkets back from fighting shrink directly? Consider these four factors.
One key problem is that relevant information about shrink is often stored in too many different, disjointed places. There are inventory databases, point of sale portals and employees’ own brains, and little is done to bring all of these data points together.
Overwrought analytical processes
Analyzing all the information that’s out there is a painstaking process. It involves copying and pasting documents, compiling spreadsheets, writing reports and preventing them to others. By the time you’ve finished all this, it might be too late to make a real difference.
Confusion about reporting
Data is reported in so many different places that it can be hard to keep up. Everyone wants to fight shrink, but not enough people are on the same page about what to say, where to say it and how to spread the word.
Often, shrink is combated by managers, slaving away over their desks in back rooms, but they aren’t saying enough to the employees on the ground floor about what to do. It takes an expert professional to grab the reins and unite both managers and employees to do the right thing.
Leveraging partners that have succeeded in this area maybe the best way to decreasing profit erosion. Therefore, it might be time to outsource the process.