Identifying Operational Failures

Abstract

Given our overarching premise that operational failures are the root cause of most forms of shrinkage, the next step is to describe an approach, which has been developed over a number of years by the ECR Europe Shrinkage Group for identifying these failures. This work, which began back in 1999 sprung from the Group's desire to develop a new way to begin to address the challenges of shrinkage within the retail sector. In the subsequent years, the Group has road tested this approach in over 40 companies and across more than 100 supply chains. It is thought to have produced savings in excess of 600 million for those companies that have used it. The approach is called the Shrinkage Road Map, and it is made up of a series of steps that enable loss prevention practitioners to more accurately identify the root causes of the problems they face and then develop 'fit for purpose' solutions to deal with these problems (Beck, Chapman & Peacock, 2002, 2003). What is unique about this method is that it was designed by a wide range of different groups including retail loss prevention practitioners, representatives from both manufacturers and logistics, and academics specialising in supply chain management and criminology. By bringing together such a multi-disciplinary group, a much more holistic, systemic and collaborative framework was achieved, which we believe can only add to the value of the Shrinkage Road Map (Beck et al., 2003). As detailed below, underlying this approach are five key principles. Key principles The first is the requirement to adopt a systemic approach to identifying and analysing stock loss problems from a supply chain perspective. Sup-ply chains consist of a large number of diverse activities, each concerned A. Beck et al., New Loss Prevention © Adrian Beck and Colin Peacock 2009 with different aspects of the handling of products and exchange of information. These various activities combine to form a series of processes and procedures (and potential areas for operational failures to occur). These processes and procedures consist of diverse, inter-linked tasks and hence analysing them enables the plethora of possible operational failures within the entire supply chain to be identified. The second is adopting a systematic approach to understanding the problems of shrinkage. Supply chains are inherently complex and there-fore to understand the vulnerabilities they present any investigation needs to break down the overall activity into a series of manageable com-ponent parts. In addition, one of the most common mistakes made by those investigating operational failures is a presumption that existing processes and procedures are being followed by those tasked to carry out the work. An understanding of the vulnerabilities posed by operational failures cannot be achieved through an analysis of presumed practices – being systematic therefore, also requires the development of first hand knowledge of what actually happens at each of the steps in the activity rather than what is supposed to happen as products move through the supply chain. The third is developing an approach which is focused on identifying the key areas of risk within the business, something which has been described as the 'hot concept' (Beck & Chapman, 2003). This seeks to identify the 'hot' products, places, processes and people within retail organisations and making them the focus of initial ameliorative actions. By doing this, the loss prevention function ensures that its limited resources are not spread too thinly and that their attention is focused on the vital few rather than the trivial many. The fourth principle underpinning the Shrinkage Road Map is the need for accurate and timely shrinkage data. As detailed earlier in this book (Chapter 6), a common failing of traditional approaches to dealing with shrinkage has been a lack of transparency in understanding the root causes of the problem. This in turn has led to knee jerk reactions and the implementation of 'solutions' premised on little or no reliable in-formation. The Shrinkage Road Map encourages the collection and ana-lysis of as much data as possible relating to the shrinkage problem under consideration prior to any decision-making relating to possible solutions. The final principle underpinning the Shrinkage Road Map is the impor-tance of developing a collaborative approach. We will come back to this in the next chapter where we look at how retail organisations can achieve operational excellence and develop an overarching loss prevention model for keeping shrinkage low, but identifying the root causes of operational 114 New Loss Prevention