Author Archives: Walter Palmer

Guest Blog: Eric White on Supply Chain Security

Supply Chain Security: Vulnerabilities and Loss-Combating Measures Retailers Can Take

The retail supply chain is subject to great vulnerability when it comes to potential losses.  The risks are obvious: goods being transported across and even between countries, changing hands several times.  Due to the large volume of goods, it is simply impossible to check every container and pallet of goods.  Over long periods of time, items are loaded and unloaded at several different locations, increasing the likelihood of damage.  All of these conditions increase the risk of loss to the retailer. 

To complicate matters more, there is no single supply chain configuration across retail.  Large retailers may have regional warehouses, distribution centers and corporate-owned truck fleets, whereas small retailers may rely exclusively on direct store deliveries (DSD) by vendors.  The risks in each of these situations are different and require targeted solutions.  Top concerns include physical security – as forklifts and high stacks of heavy inventory can cause accidents –  the security and integrity of merchandise during transport, proper receipt and verification of the right kind and amount of product at the store, and the oversight of vendor visits to prevent theft and/or administrative errors.

Retailers must take decisive steps to prevent potentially crippling losses that occur before the merchandise even reaches the store shelves.  The following are some strategic ways that retailers can help prevent supply chain losses.

Create processes

Building processes that impose consistent verification and corrective action is one of the most effective ways to battle losses occurring in the supply chain.  By narrowing the window of opportunity for purposeful or inadvertent losses to occur, retailers successfully reduce their risk and identify “red flags” before significant losses result.  For example, by having a merchandise receiving process by which particular employees are assigned and trained to manage the receipt of deliveries and compare item or pallet counts with invoices, there is a greatly reduced opportunity for losses associated with incorrect amounts or types of goods received. 

Verify those processes

It’s not enough to just put processes in place, but critical to continually monitor them for consistent implementation and proper execution.  A combination of regular and unannounced audits is a great way for retailers to determine with certainty whether or not recommended processes are being implemented properly throughout all locations.  Audits should be designed, not only to verify proper implementation, but to help pinpoint the root causes of problems in the supply chain.  When audits indicate a process failure, retailers can take action by assigning immediate follow-up tasks and notifying key players within the organization about problems that require further investigation.  Taking immediate action based on audit results is important to inciting change. 

Video surveillance provides another great way to verify that employees are properly trained and following-through with recommended procedures.  Without constant verification, processes may be little more than symbolic gestures on paper.

Control what you can

Another good strategy is for retailers to determine if there are parts of the supply chain management process that can or should be brought in-house or outsourced to prevent losses.  For example, by centralizing shipments to a warehouse, stores can receive complete loads, avoiding confusion that frequently occurs with the unloading of trucks that contain shipments for multiple destinations.  By ordering larger shipments to supply more stores, retailers benefit from larger volume orders, bigger discounts and less hassle.  In addition, if they use their own trucks to deliver items from the warehouse to the stores, they can potentially reduce risk of loss due to theft. 

Hiring a separate LP team to manage supply chain risk and losses could also be a good move.  Since the problems associated with supply chains are somewhat unique, they require dedicated solutions and resources to ensure product integrity until it reaches its place on the store shelf. The real key is to provide visibility into the problems.

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We are pleased to feature this guest blog by Eric White from Wren Solutions.  Eric has over 20 years of experience in our industry and currently serves director of retail strategy for Wren.  White maintains his regular blog at http://www.wrensolutions.com/LPXtra_blog/ and can be reached via email at eric.white@wrensolutions.com.

Ikea Halts Expansion in Russia due to Corruption

Ikea, the world’s biggest home-furnishings retailer, has been held up over the past few years as the model of a company that has opened in Russia while refusing to compromise their corporate standards on bribery and standards.  But, apparently they’ve had enough.  The company says it won’t build more stores outside the Moscow region until local officials stop withholding permission for two of their outlets due to Ikea’s refusal to pay bribes to safey inspectors.

Ikea’s experience is not unique.  Carrefour, Wal-mart, Royal Dutch Shell, and Nestle SA have all faced trumped up government regulation according to the National Anti-Corruption Committee, a NGO based in Moscow.  To read more, find the Bloomberg article here.

RILA Loss Prevention Show

The Retail Industry Leaders Association’s Loss Prevention, Auditing, and Safety Conference will be held this year from April 11-14th at the Gaylord Palms Resort and Convention Center in Orlando, FL. I’ve had the opportunity to participate in this event over the last several years and have always walked away with lots of new ideas and insights as a result. This year’s agenda is loaded with some great sessions and I will be highlighting a few of them over the next several weeks to give you some ideas about why you should be there next month.

On Thursday, April 14th, there is going to be a great opportunity to hear from some of the leading Loss Prevention executives in the industry about the challenges they are facing, the issues that keep them up at night, and how their strategies are evolving and changing with the needs of their businesses and the economic context of the last few years. Joining Lisa LaBruno, Vice-President of Loss Prevention and Legal Affairs for RILA, will be:

  • Monica Mullins – Vice-President of Asset Protection & Safety for Wal-mart Stores
  • Mike Lamb – Vice-President of Asset Protection for The Home Depot
  • Paul Stone – Vice-President of Asset Protection for Best Buy

This is a great line-up of seasoned veterans who run the AP efforts at some of the most successful organizations in the industry. There will also be an opportunity to ask them questions that are on your mind and get their input to help you inform your own thought process. In fact, at the end of this post, I will give you a link to submit questions in advance to be incorporated into the session.

I’ve had a chance to talk with each of the panelists this week and get some insights into what is on their minds for this session. There were three themes that emerged from these conversations. First, everyone talked about the challenge of attracting and developing great talent for their Asset Protection group. In an environment where everyone is doing “more with less,” the need for outstanding individuals is obvious but the other challenge I heard from them was how to dedicate time on everyone’s busy schedules to make sure managers are spending time on development and not putting it behind other, pressing issues. These panelists will share how they are able to prioritize this issue despite the pace of the business that only gets faster.

Second, the panelists talked about the need to constantly recalibrate and examine their own strategies for their departments and how they must change over time based on needs of the organization, budgetary considerations, and results. How broad of a role should AP/LP play in operational issues, safety, merchandising, and risk management? Does expanding the role of your team create a risk of taking the focus off of shrinkage results and “core” responsibilities such as investigations, physical security, and operational controls? I know from conversations with executives from across the industry that this is a top-of-mind issue for many, so this session will help inform your thinking on how you approach this for your company.

Third, everyone talked about the need for developing strong business cases and return on investment models for their programs and proposals. While others may think that budget dollars flow more easily in large organizations represented by the panelists, they can assure that they do not. Like almost every loss prevention executive I know, each of them stressed the importance of this issue and several talked about how it has led them to look for fewer “cookie cutter” approaches and more individualized strategies by region, district, and store.

Those three themes alone would make for a compelling reason to attend, but the most anticipated part of this session will be the opportunity to present questions to the panel that are on your mind and have them respond. If you have a question or issue you would like to see addressed, please email kylee.coffman@rila.org. Thanks for your input and I look forward to seeing you in Orlando!

FMI Asset Protection Conference – 3/6-3/9/2011

The Food Marketing Institute (FMI) Asset Protection Conference will be held next week in Orlando, FL at the Buena Vista Palace Hotel.  This conference focuses on the grocery and pharmacy segments and their particular risks, exposures, and concerns.  Rhett Asher, Vice-President of Industry Relations, has worked with industry leaders to put together a full agenda and the weather looks like it is going to be great.  The event kicks off on Sunday night with a welcome reception.  For more information, visit the above link.

Fraud/Corruption Continues in the Spotlight

It seems as if there is no end to high profile fraud and corruption cases in the news.  In the past couple of weeks, we’ve seen the two senior executives at China’s leading e-commerce site, Alibaba, resign due to pervasive fraud on their site and the former Security Director for Rooms to Go charged in a major kickback scheme by federal prosecutors.

In addition to the direct losses caused by these types of frauds, organizations face business disruption, bad publicity, and, in the case of U.S. organizations, potential Sarbannes-Oxley issues or FCPA compliance liability if the fraud or kickback involves government officials.  While this has typically been the domain of the finance or internal audit group, the Loss Prevention/Asset Protection function may have a role to play.  This topic certainly merits a conversation with your organization’s CFO to discuss how your function can support and assist on this important topic.