tackling shrinkage to improve your bottom line ecr europe annual congress, brussels may 2004

Tackling Shrinkage to Improve Tackling Shrinkage to Improve Your Bottom Line Your Bottom Line

ECR Europe Annual Congress, Brussels

May 2004

WelcomeWelcomeColin Peacock

The Gillette CompanyCo-chair, Shrinkage

Working Group

John FonteijnRoyal Ahold

Co-chair, Shrinkage Working Group

The ECR Europe Shrinkage Project

Supply Chain and Logistics Expertise

Academics

Excellence in Crime and Security

Management

Three Key Messages

1. Shrink = Profit Opportunity

2. Collaboration is critical

3. The ECR approach is working

€24 billionper year

Message #1Shrinkage = Profit Opportunity

€461 millionper week

• Lower Shrink

€65 millionper day

€2.7millionper hour

Message #1Shrinkage = Profit Opportunity

• Lower Shrink

0

1%

2%

3%

4%

1.8%

Shrink

Profit

3%% ofSales

Message #1Shrinkage = Profit Opportunity

• Lower Shrink

0

1%

2%

3%

4%

Profit

Shrink

0.9%

30% Uplift Savings

3.9%% ofSales

Message #1Shrinkage = Profit Opportunity

• Lower Shrink

• Lower Costs

Message #1Shrinkage = Profit Opportunity

• Lower Shrink

• Lower Costs

• Increased Sales

10%+ Sales

Increase

Message #1Shrinkage = Profit Opportunity

• Lower Shrink

• Lower Costs

• Increased Sales

open sale = 80%+

salesincrease

SHRINK: Fighting Back

Anders Moberg

President & CEO Royal Ahold

Shrink is a:

•Strategic issue

• State of mind

• Joint fight

The Three Causes

• Process failure

• Fraud

• Theft

ECR Shrink Reduction Road Map

1. Develop project plan

2. Map key processes

3. Analyse risk

4. Risk-reduction solutions

5. Implementation plans

6. Evaluation procedures

Fighting ShrinkFighting Shrink

• Programs and targets

• Build shrink into the corporate culture

• Tone at the top

• Working together in the supply chain

Working Together

• Align measurements

• Increase transparency

• Share information

Ahold and Shrink ApproachAhold and Shrink Approach

• Work with suppliers / academics / government

• Problem solving

• Treat like our overall business; – Strategy

– Accountability & Internal Controls

SHRINK: Fighting BackSHRINK: Fighting Back

Thank you

Three Key Messages

1. Shrink = Profit Opportunity

2. Collaboration is Critical

3. The ECR approach is working

Message #2Collaboration is Critical

• Internal and External

Message #2Collaboration is Critical

• Internal and External

• Prevention orientated

Message #2Collaboration is Critical

• Internal and External

• Prevention orientated

• Focused - 80/20

People

Places

Products Processes

Role of the Executive TeamRole of the Executive Team

Nikolaus RitterManaging Director

Makro Belgium

Programme

• Why Executive involvement in shrinkage

issues ?

• Examples from Makro Cash&Carry Belgium

• Lessons learned

Three Good Reasons

For Executive Involvement

in Shrinkage

Executive involvement ?

SHRINK is a RISK

Risk Management = Executive ResponsibilityRisk Management = Executive Responsibility

Executive involvement ?

SHRINK influences PROFIT

Profit = Executive ResponsibilityProfit = Executive Responsibility

Executive involvement ?

SHRINK impacts OPERATIONS

Operations = Executive ResponsibilityOperations = Executive Responsibility

Executive involvement ?

SHRINKAGESHRINKAGE

==

EXECUTIVE RESPONSIBILITYEXECUTIVE RESPONSIBILITY

Examples

of

the Makro Way…

Examples at Makro Belgium

• Basic approach:

– cross-functional– result-driven– structured approach

Examples at Makro Belgium

• Cross-functionalExample 1:

Loss Prevention Committee- Chaired by Managing

Director- Members: Buying Director

Food, Buying Director Non-food, Director of Operations, Financial Director, Head of Internal Audit, Loss Prevention Manager

Examples at Makro Belgium

• Result drivenExample:

Annual Shrinkage report- Annual focussed report

on operational Shrinkage, comparing long-term and short-term evolution

- Drill down to product level

SHRINKAGE (% of TO at COST)

1998 2004

-36%-0,5

Examples at Makro Belgium

• Structured approach

• Executive Training

• National Road Map

• Shrink Training

0. Wake Up

2. Map &Measure

4. Develop Solutions

5. Implement

6. Evaluate

1. Plan

3. Analyse

Lessons

Learned

Key lessons

• Executive involvement• Need for a “captain”• Internal collaboration

is fundamental• Collaboration with

suppliers is essential

OperationsOperations

BuyingBuying SupplierSupplier

Thank you

Three Key Messages

1. Shrink = Profit Opportunity

2. Collaboration is Critical

3. The ECR approach is working

Research Conclusions

• Existing Approaches not working

• Underlying cause is poor management

• Good management is the solution

Message #3The ECR approach is working

• Data led

0

4

8

12

16

20

24

28

32

36

0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 5.5 6 6.5 7 7.5 8 8.5 9

Losses acrossstore universe

Average

% o

f Sto

res

Message #3The ECR approach is working

• Data led

• Structured

0. Wake Up

2. Map &Measure

4. Develop Solutions

5. Implement

6. Evaluate

1. Plan

3. Analyse

The ECR Shrinkage Road Map

Message #3The ECR approach is working

• Data led

• Structured

• Removes process failures

Success Achieved

46% total shrinkage reductionPortugalFeira Nova

74% loss reduction288% sales increaseHungaryTesco

40% loss reduction

12% sales increaseUKSainsbury’s

7% loss reductionUKWickes

Factory and DC operations tightened upItalyCoop

43% loss reductionPolandAhold

78% loss reduction

55% sales increasePortugalUlmer

29% loss reductionPortugalSonae

ResultsCountrySupplierRetailer

Danone

Gillette

Industry

GET

P&G

Sokolow

Gillette

Colgate

Category

Yoghurt

Shaving

Spirits

Electrical

Deodorants

Sausages

Shaving

Oral Care

Video: What happened next?

Three Key Messages

1. Shrink = Profit Opportunity

2. Collaboration is critical

3. The ECR approach is working

Your Call to Action

Q: How big is your shrink opportunity?

Q: Will increased collaboration help?

A: Use the ECR Approach– Buy the ECR Blue Book from www.ecrnet.org

Better Still.......

• Invest 90 minutes with us

– Join us at our Shrink Breakout Session

– Tonight at 5.30pm

– In the Green Room

Thank YouThank You