Crime in the supply chain costs dearly, so what needs to be done? Rod Addy reports
Retailers lose £29.4bn globally a year to crime, according to the latest figures in Leicester University’s report, The Illicit Market in Stolen Fast Moving Consumer Goods.
It’s the kind of figure that demands urgent action, but the study, carried out on behalf of Gillette, says that all stages of the supply chain are affected by crime and there are no simple answers.
The solution partly revolves around identifying the products most at risk of being stolen, says the report. The acronym CRAVED may be familiar to some, describing hot products as Concealable, Removable, Available, Valuable, Enjoyable and Disposable.
But the study stresses that the last three characteristics are the most important and disposability is the foremost factor. A tighter definition of disposable items would include products that are affordable, easily transportable and easily hidden. Batteries, cigarettes and cosmetics would all count.
Once the most susceptible goods have been identified, the next step is the need to determine the key points in the supply chain where they disappear. Professor Martin Gill, the report’s author and director of Perpetuity Research & Consultancy International, says: “There are lots of points at which goods go missing. For example, they could be transported by reliable firms who sometimes sub-contract to firms that don’t have the same security standards.”
Recognising the limits of any one method in pinpointing weaknesses is vital. For example, the study questions the reliability of security equipment and procedures, and the deployment of security personnel. Retailers differ over which systems are most effective and more independent work is necessary to identify the best.
The study warns that companies should not rely on RFID (radio frequency identification) as a cure-all to combat illicit activity, because it will be years before it is in widespread enough use. Gill says: “The problem lies in the idea that you can take technology that has been proven to work in one context and automatically transfer it to another. It’s got to be properly used.”
Many of the initiatives intended to stop thieves actually make their lives easier, according to one investigation carried out during the research.
These range from an unfounded belief in the effectiveness of RFID tags and a lack of systematic stock counting for merchandising initiatives, to an unwarranted faith in security precautions, or poor store and operational management.
But there were a number of solutions. These included tighter but simpler controls on staff access to the stockroom and stricter compliance monitoring by operational, not loss-prevention, staff.
Plastic protectors and RFID tags were removed from packs, which were replaced with new clamshell packaging that was more attractive, easier to handle and required no additional protection. Other measures included moving displays to store areas that were better supervised, as well as more regular stock counts and stock refilling for displays.
The store manager resolved to work more closely with the operations team, who had a greater impact on developing procedures and compliance than the loss prevention team. Operations employees were also better equipped to be ambassadors to promote best practice to other stores.
They also had a greater incentive to combat theft because they benefited directly from reduced losses and higher sales. The measures taken boosted sales by 50% for a sustained three-month period, with losses of all types below 1%.If companies acknowledge technology is only part of the answer, that could open them up to focus on other ways of fighting the illicit market. The report highlights several action points to target theft.
They begin with the grocery industry itself. Aside from accurately assessing supply leaks and imposing effective controls, suppliers need to work with retailers and wholesalers to use the sales environment to discourage theft. Vulnerable products could be placed high up on shelves, for example.
There also needs to be adequate training for shop workers, says Gill. Staff need to know which products are most vulnerable as well as the thieves’ tricks of the trade.
Tighter controls on buyers to ensure they source products from reputable suppliers would also help, says Gill, as would additional legislation forcing traders to prove the legitimacy of goods.
One area requiring more legislation is the internet, suggests Gill. He argues web sites should be policed more stringently: “This could involve ensuring internet service providers are aware of the issues, or random checks of other sites to see if similar goods are being sold on them.”
The industry should not only look inwards, but also focus on consumer advertising to convey the benefits of buying from reputable sources and the negative effects of funding illicit traders. For example, the report flags up how much money made on the illicit market funds terrorist activity.
Of course, the government, trade and regulatory bodies can co-operate with the industry here, introducing further projects and schemes to target traders.
But Gill cautions: “If retailers want to bring about change, they have got to provide concrete evidence. What are the specific manifestations of theft? What is the scale of the problem?”
The evidence is that the problem is as multi-faceted as it is big. By answering some of these questions, retailers and suppliers will start to get to grips with it.
Then, and only then, will they be able to introduce effective measures that mitigate rather than exacerbate the problem and stop themselves becoming the victims of illicit activity.
Retailers lose £29.4bn globally a year to crime, according to the latest figures in Leicester University’s report, The Illicit Market in Stolen Fast Moving Consumer Goods.
It’s the kind of figure that demands urgent action, but the study, carried out on behalf of Gillette, says that all stages of the supply chain are affected by crime and there are no simple answers.
The solution partly revolves around identifying the products most at risk of being stolen, says the report. The acronym CRAVED may be familiar to some, describing hot products as Concealable, Removable, Available, Valuable, Enjoyable and Disposable.
But the study stresses that the last three characteristics are the most important and disposability is the foremost factor. A tighter definition of disposable items would include products that are affordable, easily transportable and easily hidden. Batteries, cigarettes and cosmetics would all count.
Once the most susceptible goods have been identified, the next step is the need to determine the key points in the supply chain where they disappear. Professor Martin Gill, the report’s author and director of Perpetuity Research & Consultancy International, says: “There are lots of points at which goods go missing. For example, they could be transported by reliable firms who sometimes sub-contract to firms that don’t have the same security standards.”
Recognising the limits of any one method in pinpointing weaknesses is vital. For example, the study questions the reliability of security equipment and procedures, and the deployment of security personnel. Retailers differ over which systems are most effective and more independent work is necessary to identify the best.
The study warns that companies should not rely on RFID (radio frequency identification) as a cure-all to combat illicit activity, because it will be years before it is in widespread enough use. Gill says: “The problem lies in the idea that you can take technology that has been proven to work in one context and automatically transfer it to another. It’s got to be properly used.”
Many of the initiatives intended to stop thieves actually make their lives easier, according to one investigation carried out during the research.
These range from an unfounded belief in the effectiveness of RFID tags and a lack of systematic stock counting for merchandising initiatives, to an unwarranted faith in security precautions, or poor store and operational management.
But there were a number of solutions. These included tighter but simpler controls on staff access to the stockroom and stricter compliance monitoring by operational, not loss-prevention, staff.
Plastic protectors and RFID tags were removed from packs, which were replaced with new clamshell packaging that was more attractive, easier to handle and required no additional protection. Other measures included moving displays to store areas that were better supervised, as well as more regular stock counts and stock refilling for displays.
The store manager resolved to work more closely with the operations team, who had a greater impact on developing procedures and compliance than the loss prevention team. Operations employees were also better equipped to be ambassadors to promote best practice to other stores.
They also had a greater incentive to combat theft because they benefited directly from reduced losses and higher sales. The measures taken boosted sales by 50% for a sustained three-month period, with losses of all types below 1%.If companies acknowledge technology is only part of the answer, that could open them up to focus on other ways of fighting the illicit market. The report highlights several action points to target theft.
They begin with the grocery industry itself. Aside from accurately assessing supply leaks and imposing effective controls, suppliers need to work with retailers and wholesalers to use the sales environment to discourage theft. Vulnerable products could be placed high up on shelves, for example.
There also needs to be adequate training for shop workers, says Gill. Staff need to know which products are most vulnerable as well as the thieves’ tricks of the trade.
Tighter controls on buyers to ensure they source products from reputable suppliers would also help, says Gill, as would additional legislation forcing traders to prove the legitimacy of goods.
One area requiring more legislation is the internet, suggests Gill. He argues web sites should be policed more stringently: “This could involve ensuring internet service providers are aware of the issues, or random checks of other sites to see if similar goods are being sold on them.”
The industry should not only look inwards, but also focus on consumer advertising to convey the benefits of buying from reputable sources and the negative effects of funding illicit traders. For example, the report flags up how much money made on the illicit market funds terrorist activity.
Of course, the government, trade and regulatory bodies can co-operate with the industry here, introducing further projects and schemes to target traders.
But Gill cautions: “If retailers want to bring about change, they have got to provide concrete evidence. What are the specific manifestations of theft? What is the scale of the problem?”
The evidence is that the problem is as multi-faceted as it is big. By answering some of these questions, retailers and suppliers will start to get to grips with it.
Then, and only then, will they be able to introduce effective measures that mitigate rather than exacerbate the problem and stop themselves becoming the victims of illicit activity.
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