Merchandise Distribution

and loss prevention

• Methodology and technique used for merchandise distribution
from vendor to retailers premise depends on the size of the
merchandise.
• In house receiving : Small operations with few outlets have order
sent directly to the units. Eg: Oshkosh B’gosh
• Centralized receiving: Large department stores and specialty
organization, catalog operations, e-retail ventures and home
shopping receive their goods at a centralized location in which
all of the product go through a receiving procedure.
• Advantage:
• More space for merchandise on the selling floor
• Better control of goods
• Cost reduction
• Regional receiving: Brick and mortar operations having large no. of
units dispersed throughout a range of geographical locations,
most opt for regional receiving.
• Advantage :
• Merchandise reaches selling floor in less time
• Individual store receiving: happens in case of individual
 Merchandise distribution
technology
• Technology interfaces with suppliers.EDI and VMI
• EDI computer to computer exchange of data in a
format specified by retailers and vendors.
• No human intervention at either ends of the
transaction.
• Advantages:
• Better inventory management
• Reduced expenses, improved accuracy, better
business relationship, increased sales and
minimized of paperwork.
• VMI involves use of scanners at the retail operations
for inputs on sale of product and replenish
inventory. The onus is on the vendor to restock the
customers inventory.
• These technologies collectively are known as Quick
Response inventory systems.
 Receiving equipments
• Packaged merchandising
transporting
• Open and closed for maximum
security such as precious jewelry.
• Produces moved on swiveling
 casters that maneuver easily around
the selling floor.
• Stationary table
• Conveyor systems
•
 Merchandise checking
procedures
• Quantitative and qualitative checks are done on
the incoming merchandise.
• Direct checks: checker physically counts the
merchandise and make adjustment at this
point. Matches content with the purchase
order. It is the fastest technique but dishonest
checker may verify the content without
actually counting. Hence once verified
company has no recourse on shortages
• Blind checks: merchandise checker prepares
a list of items that are in the package.
• Semi checks: combine best features of other
two. Checker are provided with a list of items
without quantity.
• Quality checks are also done. Substitution
shipping
 Marking Merchandise
• Individual items must be marked for a number of
reasons:
• Eliminate possibility of charging different price.
• Give pertinent information: price, size are beneficial to
retailer such as Target and Wal mart and off pricers
like T J Maxx and Burlington Coat Factory that rely
upon customers to make their own choice.
• Assess price and determine their range
• By placing information such as vendor name , style
name, color, merchandise classification, size, and
price on the tag retailer gets to know the customers
response to the merchandise.
• Proper information on tag allows merchants to use EDI
and VMI systems to automatically adjust inventory
levels of the stock
• Evaluate stock turnover.
 Marking Procedure
• Handmarking
• Handheld equipment
• Computerised tags
 Definition Shrinkage

Shrinkage

Process Inter- Internal External

company
failures fraud theft theft
What Does Shrinkage Mean?
 Deliberate Under/Over Delivery
Inter-Company
 Invoice Errors
Fraud
 Quality and Weight of Items

 Inventory Errors  Promotion Errors

Process OPricing Errors  Stock Going Out of Date
Failures  Damage to Stock  Product Delivery/Scanning Errors

 Theft of Stock and Cash

Internal  Collusion
Theft

 Shoplifting  Till Snatches

External  Burglary
Theft
New Shrinkage Typology
Shrinkage Retail Iceberg
• Lack of visibility
• Lack of awareness
– When did it
49% happen?
– Where did it
happen?
– How did it happen?
51% – Who was
responsible?
• Lack of accountability
• Prioritisation of the most
visible/acceptable
 Causes of Retail Stock Loss
Study External Internal Process Vendor

Otago Univ (New Zealand) 68 12 20 3

European Theft Barometer 49 31 14 6

ECR Europe 38 28 27 7

Retail Council of Canada 35 40 18 7

Food Marketing Institute (US) 35 38 18 8

ECR Australia 35 25 29 11

NRSS (US) 33 47 15 5

National S’market (US) 20 57 ? ?

Location of the Problem

24% 5% 71%

Manufacturer Retail Retail

Distribution Distribution Stores
Retailer’s Missed Profit Opportunity

5%
wth
ro Average
in G
Average Retailer Margin

r g Retailer
Ma
4%
1.84% Shrink
62%
1.84%
Margin
3%

4.83%
2% Average
Retailer
Profit 2.99%
1% Margin

0%
Current Potential
 Deterrents and controls
• Retailer employ different deterrents and control
to address the problem of shoplifting
• Electronic articles surveillance systems also
known as tag alarm systems. Found to be the
most effective anti shoplifting tool available.
• Electromagnetic systems : The strip is not
removed but deactivated by a scanner.
• Acousto Magnetic: use RF systems
• Video surveillance
• Merchandise anchoring
• Magnifying Mirrors
• Try on room
•
• Employee programs
– Screening of applications
– Checking references
– Testing for drugs
– Psychological Testing
– Merchandise control: lockers for
employees personnel belongings
– Shopping sales associates: mystery
shopper
– Recognition programmes
– Offender persecution

 Trends in Merchandise
distribution and loss
prevention
• Expanded use of Technology
• Increased use for computerized tags
• Updating of EAS systems
• Applicant screening
• Information dissemination for fraud
prevention: eg: www.protx.com