Shrinkage?

Supplier

You many have long term relationships and supplier certification in place but as ever, 'trust is good, check is better' particularly with shrink-wrapped pallets - what is in the middle of the pallet? Periodically you should carry out spot-checks on quality AND quantity by physically counting the number of tubes on a pallet or caps in a box . If you are buying materials on a roll you might check that the weight of the roll core has not been increased. An unnecessary extra few grammes of cardboard is far cheaper than expensive, laminated and branded labels.

Factory

Life happens and damage happens on filling and packing lines but factory personnel should be aware of the destination of their waste streams. Any branded packaging that is wasted should be 100% destroyed and factory managers should think carefully about sending waste to anyone other than a very professional and honest recycler. For example, any plastic bottles that are potentially usable could be filled with water and swapped for your branded bottles along the supply chain or even sold in the market. Yes, I have seen this happen many times!

Warehouse

A minefield full of potential shrinkage opportunities. Routine cycle counting will alert management to any variances and ensure stock available to promise really is available. Ensure you have clear segregation of duties so no individual has the access and authority to book stock in AND out. Monitor the relationships between operators and security personnel and rotate security shifts to avoid any 'comfortable arrangements'. Although it is a pain, I would also rotate third party security companies on a regular basis for the same reason. Keep an eye on damage levels and their segregation as this can always be used to substitute for good stock when backs are turned and the lights are dim.

Truck

Installation of tachographs and satellite navigation systems and sensors have helped to minimise shrinkage during transport but where there is an ill will, there is always a way. Did the driver sign off on what was actually loaded in or onto the vehicle? If not, there is the opportunity to stop for a break and remove a few cases from the centre of pallets which is not immediately obvious to the naked eye. Use an efficient route planning software, keep an eye on sat vav routings and any unexplained idle time and deviations from planned routes.

Customer

You may have reached thus far with 100% order integrity but you are far from safety and a signed 100% OTIF delivery note. On one notable occasion in the FMCG sector, a certain big name retailer continually reported delivery shortages. Now, nothing is ever 100% perfect but when they started complaining about non-receipt of full pallets I became suspicious. A personal close inspection of the unloading process saw the producer driver sent away to an inside office to get documents stamped. While he was away the customer dock operators calmly took 2 pallets from the load and hid them in a nearby electricity building. When the driver returned he was completely powerless and could do nothing but sign against a shortage.

Outlet

Oh no, not finished yet! Shrinkage can occur in store and not just through shop-lifting adventures. If you do not attach your promotional premia to the host SKU securely, they are liable to be removed. Unscrupulous retailers can 'ramp' the free product or gift thus destroying your FMCG promotional activity but increasing their revenue. If the item being promoted is not available in the same store, e.g. a pen, then you are simply giving it away to anyone with enough nerve to slide it into a pocket.

Human Failure

Unless you have some wonderfully integrated end to end ERP based on scanning, people will be required to input information and data in to a system at some stage of the chain. If your system involves a stack of Excel sheets then human input error is not likely, it is inevitable. Pieces typed in instead of cases or a part pallet load recorded as a full pallet or simply someone adding data to the wrong field or cell. Such errors will lead you to promise what you do not posses or conversely, leave you unnecessarily overstocked.

That is just a snap-shot of what can go wrong as the possibilities to shrink your top and bottom lines are endless. Conducting frequent cyclic stock counts and quickly reconciling the results to your inventory records is the most reliable method of discovering inventory loss while providing auditable evidence of discrepancies.

Help, I need somebody!

If you have any Customer Service, Supply Chain or Route to Market problems (or opportunities) you would like to discuss, then please reach out to Enchange.com via telephone, email or live chat.