During a downturn, businesses must show their true colours, particularly when it comes to measuring and managing shrinkage loss caused by theft, waste and process failure.
At Iceland we use a Colourworks analysis to define the key personality traits of staff: fiery red ‘be brief, be bright, be gone’ types; cool blue ‘give me details’ personnel; sunshine yellow staff who scream ‘involve me’ in all dealings with colleagues; and earth greens who want to know the business cares about them in the same way that they care about the business. Reds and yellows tend to be more extrovert, while blue or green energy personalities tend to be more analytical.
As a business, we would class Iceland as a cool blue because daily detailed analysis now drives our strategy to stop shrink vital when last year’s figures show the UK is losing £4bn a year through it.
Retail is a people business and it is people that cause the shrinkage in the first place, whether they are directly stealing or simply not processing stock correctly. This is why about 10 years ago Iceland decided to focus staff hearts and minds on profit protection by reducing all avoidable losses.
Now, almost a decade on, we have one of the lowest shrinkage figures on the high street. This has been achieved by every department working together to measure and manage loss out of the business by focusing on four fundamental factors: forensic data accuracy, ensuring product availability, minimising stock loss, and managing markdowns through inventory control. Consequently, stock loss and wastage figures are at an all-time low, not only for the UK food retail market but also compared with many European competitors.
We had to diagnose the root cause of where the losses were occurring. We developed a forensic management information system that can measure and manage as well as report figures in real time so any member of the management can see profit and loss and waste line by line, SKU by SKU at any time in any location. Shrink is not the sole preserve of the loss prevention team, but every department’s responsibility.
From board level down, departmental partnerships were formed to root out the causes of shrink. This collaborative approach involved loss prevention, supply chain, buying, retail operations, HR, finance and training, all of whom were tasked with delivering a strategy and implementing culture change based on teamwork. Daily and weekly, the buying, merchandising, retail operations, supply chain, finance and loss prevention teams meet to discuss cross-discipline co-operation points. The Colourworks analysis helped staff change their approach by identifying their ‘true colours’ and making them realise it was no longer ‘someone else’s problem’.
Stock loss used to be monitored quarterly. Now, inventory is measured daily increasing accuracy to 97%. Controlled centrally, reducing the waste and cost of markdowns is factored into the equation store by store every day.
The process of engendering the right collaborative approach starts on day one with an induction process that will lead to commitment through engagement with staff of all colours. It’s a cool blue approach that leads to a sunshine yellow outcome.
Ady Houghton is head of loss prevention at Iceland