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Tackling Shrinkage to Improve Your Bottom Line. ECR Europe Annual Congress, Brussels May 2004. Welcome. Colin Peacock The Gillette Company Co-chair, Shrinkage Working Group. John Fonteijn Royal Ahold Co-chair, Shrinkage Working Group. The ECR Europe Shrinkage Project. Excellence in
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Tackling Shrinkage to Improve Your Bottom Line ECR Europe Annual Congress, Brussels May 2004
Welcome Colin Peacock The Gillette Company Co-chair, Shrinkage Working Group John Fonteijn Royal Ahold Co-chair, Shrinkage Working Group
Excellence in Crime and Security Management Supply Chain and Logistics Expertise Academics
Three Key Messages 1. Shrink = Profit Opportunity 2. Collaboration is critical 3. The ECR approach is working
€24 billion per year €461 million per week €65 million per day €2.7million per hour Message #1Shrinkage = Profit Opportunity • Lower Shrink
3% Profit 1.8% Shrink Message #1Shrinkage = Profit Opportunity • Lower Shrink 4% 3% % of Sales 2% 1% 0
Savings 4% 30% Uplift Profit 3% 3.9% 2% 0.9% Shrink 1% 0 Message #1Shrinkage = Profit Opportunity • Lower Shrink % of Sales
Message #1Shrinkage = Profit Opportunity • Lower Shrink • Lower Costs
Message #1Shrinkage = Profit Opportunity 10%+ Sales Increase • Lower Shrink • Lower Costs • Increased Sales
Message #1Shrinkage = Profit Opportunity open sale = 80%+ sales increase • Lower Shrink • Lower Costs • Increased Sales
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 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 Approach • Work with suppliers / academics / government • Problem solving • Treat like our overall business; • Strategy • Accountability & Internal Controls
SHRINK: 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
Places People Products Processes Message #2Collaboration is Critical • Internal and External • Prevention orientated • Focused - 80/20
Role of the Executive Team Nikolaus Ritter Managing 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 Responsibility
Executive involvement ? SHRINK influences PROFIT Profit = Executive Responsibility
Executive involvement ? SHRINK impacts OPERATIONS Operations = Executive Responsibility
Executive involvement ? SHRINKAGE = EXECUTIVE RESPONSIBILITY
Examples of the Makro Way…
Examples at Makro Belgium • Basic approach: • cross-functional • result-driven • structured approach
Examples at Makro Belgium • Cross-functional Example 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 driven Example: 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) -0,5 -36% 1998 2004
0. Wake Up 1. Plan 2. Map & Measure 6. Evaluate 3. Analyse 5. Implement 4. Develop Solutions Examples at Makro Belgium • Structured approach • Executive Training • National Road Map • Shrink Training
Lessons Learned
Key lessons • Executive involvement • Need for a “captain” • Internal collaboration is fundamental • Collaboration with suppliers is essential Operations Supplier Buying
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
36 32 28 24 20 16 12 8 4 0 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 Message #3The ECR approach is working • Data led Losses across store universe Average % of Stores
0. Wake Up 1. Plan 2. Map & Measure 6. Evaluate 3. Analyse 5. Implement 4. Develop Solutions Message #3The ECR approach is working The ECR Shrinkage Road Map • Data led • Structured
Message #3The ECR approach is working • Data led • Structured • Removes process failures
Retailer Supplier Country Results Category Ahold Sokolow Poland 43% loss reduction Sausages Coop P&G Italy Factory and DC operations tightened up Deodorants Feira Nova Danone Portugal 46% total shrinkage reduction Yoghurt 40% loss reduction 12% sales increase Sainsbury’s Industry UK Spirits Sonae Colgate Oral Care Portugal 29% loss reduction Tesco Gillette Shaving Hungary 74% loss reduction 288% sales increase Ulmer Gillette Portugal 78% loss reduction 55% sales increase Shaving Wickes GET UK 7% loss reduction Electrical Success Achieved
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