Tuesday, 25 February 2014
"We’ve seen a significant improvement in shrink using rascal’s returns management processes – by around 50%. Adding the inbound process has seen a further 30% reduction."
Bob Holden - Stock Operations Manager, Sainsbury’s

Accurately estimating ‘shrink’ (the net margin eroded by waste, theft and spoilage) across a retailer’s news and magazines category is very difficult. What is indisputable though, is that shrink costs retailers millions of pounds every year. But there is a way to minimise its effect without having to pay for and manage lots of expensive, complex and time-consuming processes.

Here, Peter Kemble, MD of rascal systems, explains their approach to managing shrink – and how the company’s automated mobile-based technology is helping some of their customers reduce shrink by up to 65%.

The first question to ask is how big is the shrink problem and what’s behind it? “It’s a hard one to quantify” explains, Peter, “But in our experience, in a well-run retailer with a dedicated resource, it’s usually over 5% – and in the convenience format it’s generally considerably higher. Every retail category has some shrink, but newspapers and magazines especially so, because it’s the fastest moving (newspapers 1 day shelf life). The fact that late editions go to print about 10pm and are on the shelves early the next morning is pretty impressive.”

So it’s the quick turnaround, manual processes, and sheer number of titles that create more opportunities for shrink? “Exactly. Errors often occur during goods-in as lots of products look and feel similar. Plus, stock delivered to store is often left unsecured, and checked by shop staff, rather than being managed through retailers’ centrally controlled and managed networks.”

And what about returns? “There’s plenty of scope for shrink, here. No more so than the 2-3 day returns window for higher value weekend papers. The window for magazines is 21 days, but the category’s numerous titles, editions and promotions make it difficult to monitor for a time-poor store colleague. A ‘bit late’ means zero credit”, Peter adds.

Another major issue for retailers is being unable to accurately track stock and payment information needed for total control of goods-in and returns. Wholesalers’ systems use a 15-digit barcode, but typically, retailers’ use 13 digits, so have only title-level info. This means that retailers are less able to get a truly accurate read on their stock movements and shrink.

Peter continues, “Theoretically, both parties should have a centralised view of invoicing, as well as the value of returns and credits.” However, without the use of rascal this information is buried in paperwork across multiple sites and simply backs up as new editions come out and returns and credits are processed. With rascal in place, head office is able to get full visibility that these important checks are being done, and that the charges on the invoice are valid.

Any other major contributors to shrink? “Yes, while shrink affects store profitability, it doesn’t affect staff pay, so there’s less motivation to comply with processes, making it tough for retail operations, category or loss prevention managers to have the visibility and means to enforce compliance. Thanks to its simplicity, rascal is able to deliver a high level of category compliance that is easy to maintain.”

So there’s a snapshot of some of the major causes of shrink and the significant challenges facing retailers. But how can rascal systems help? “Put simply, our automated mobile-based system replaces the disjointed and inefficient methods many retailers adopt to tackling shrink, bringing a whole new level of simplicity, visibility and control.”

Simplicity for store staff means a hand-held PDA that tells them step-by-step exactly what they need to do. As well as all but eliminating paperwork, it ensures continuity of information during changeovers, and more disciplined and compliant staff. “It takes about 20-30 minutes to train someone up on the system, but will save them around 5 hours a week”, Peter adds. “Time they can spend on customer service or other tasks in store.” In terms of visibility, the solution helps reduce shrink by providing clear and easy-to-understand Management Information about stock, along with claims and crediting activity. All data is captured electronically in real-time, and stored on rascal's servers for use in reports and analysis. “We have a specialist team identifying trends and patterns and helping our retail partners to spot issues that may contribute to shrink”, elaborates Peter. “We’ll then work with the retailer to remedy the cause, whether it’s an operational, process, or compliance issue. Combining both business intelligence and human analytics enables us to give retailers a previously unachievable level of insight – insight they can use to regain control of shrink. So is it this insight that sets rascal apart? “Yes”, concludes Peter. “But it’s also the sophistication of our solution, its comprehensive nature, and the fact we’re continually developing it and upgrading and adding new functionality. Importantly, all of our innovations are designed and delivered as a direct result of listening to feedback from rascal’s retail partners.”