Planning For Prevention

Real-time access to shrinkage data can give executives powerful insights into reducing losses

C-stores have always been susceptible to theft and fraud because of their high-traffic locations, high-volume and low-value products, as well as relatively low-wage employees. The goal to minimize shoplifting is an essential focus, especially in stores that stay open around the clock.

There is a growing awareness on store designs and physical security — aided by devices such as security cameras — as fundamental to minimizing the risk of loss from theft, along with employee training and awareness programs, which can help optimize loss prevention and lower the rate of inventory shrinkage.

The key to controlling loss is for c-store executives and store management to have real-time access to shrinkage data. Detailed analysis of transaction data can reveal not only shrinkage, but also other forms of loss, such as deliveries of goods that fall short of the quantities requested.

If management can see where shrinkage is happening, they can identify opportunities to reduce it through change in store layout or product placement. Managers could also be provided with meaningful incentives to reduce shrinkage.

Although employees can help reduce shrinkage, they can also help cause it. For example, while drive-offs or gasoline theft can be costly prospects, some of these incidents may in fact be employee theft. Employees may be pocketing cash payments for gas sales from customers and recording these payments as drive-offs.

A simple way to identify such activity is to look for drive-off payments in round dollar amounts such as $10 or $20. These amounts are consistent with a cash sale, but inconsistent with the uneven sales amounts commonly associated with drive-offs, in which customers typically stop pumping when they see that the salesclerk's attention has been diverted. A review of these anomalies may reveal a pattern attributable to an individual employee.

Having a large number of similar stores works to the organization's advantage in identifying instances of potential fraud. Corporate managers can compare store performances, revealing variances that may be indicators of operating weaknesses or fraud at specific stores. Other fraud indicators can include questionable credit card returns or missing or delayed bank deposits or cash receipts.

Hiring policies are also important. By adopting hiring policies that include background and credit card checks, businesses can minimize their exposure to the types of o employees that are most likely to commit fraud. It is more cost-effective to prevent the wrong people from joining the entity than it is to control the risk of fraud after they have been hired

Paying close attention to issues of theft and shrinkage — and addressing concerns promptly when they arise — is vital. When small isolated incidents are either ignored or not dealt with quickly, significant shrinkage and related issues can result. Failing to address employee fraud can foster a belief among employees that they can get away with such behaviors — and hence can encourage additional incidents.