The Season of Taking - ' ' (
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Chase-Pitkin deployed a software suite from SPSS—called ShowCase Suite—to track missing products in real time at the item level, thereby creating a perpetual inventory system.
“As retailers, all we used to be able to do was report at the department level, ‘Here’s what your shrink is: a million dollars of shrink in this certain department.’ Within that department, you can have tens of thousand of SKUs. Good luck trying to find it,” Dorsey said. “So you’d make a lot of general assumptions. Now when we take a physical inventory, not only do we report it at the department level, we can report it at the category down to item level.”
That’s delivered quite a few surprising insights, he said. Before deployment, the store was reporting more than 2 percent of its items as missing from shrinkage. In 2003, that figure dropped to 2 percent exactly and it dropped further to 1.7 percent in 2004 and Dorsey said that he expects it to drop to 1.5 percent in 2005.
But the software made a much more significant change, he said. Of that 2 percent of shrink, Dorsey said, about 30 percent was actually missing items, such as accounting errors, vendor glitches, receivables errors, mistakes during inventory counts and even products falling behind shelves.
"The SPSS tool has helped us take this phantom loss down to less than five percent," Dorsey said. "More importantly, it removed a point of denial at the stores. Before, when store managers were confronted with the shrink, they would go into denial instead of looking for what was really going on."
One department discovered, for example, that of its 10,000 SKUs, 16 items accounted for literally half of stolen products, Dorsey said. The company now tracks those items every week—which would be impossible store-wide and certainly chain-wide.
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Dorsey spoke of a battery mystery. The chain was experiencing a large amount of battery theft. The software identified the battery theft level as normal in all stores except four, which were experiencing extremely high levels of missing batteries. Trips to those stores found that those were the only stores that merchandised the batteries away from the front-end cashiers.
Once they moved them to the front, the shrink virtually went away.
“The minute we changed our merchandising position, our shrink virtually went away in those four stores. It went down to the company average,” Dorsey said. “In our old environment, without the business intelligence tool, it would have taken us about three months to figure it out. Instead, the analyst had the analysis done and the recommendation into the merchandising department within a half-hour.”
Another example was a $199 power tool package. Once identified, the chain repositioned cameras and discovered that customers were opening the package and also opening a package of something much less expensive (large lights). They would switch the contents and pay $19 for $199 worth of equipment. Solution: Customers must now pick up and pay for those tools at the customer service department.
Retail Center Editor Evan Schuman can be reached at Evan_Schuman@ziffdavis.com.
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