Shrink Management and Process Improvement Case Study

Client: A multi-banner, $10B+ international supermarket retailer

The challenge

This client continued to experience increases in shrinkage despite several extensive internal reduction efforts. As a result, PwC Canada’s Retail Consulting Services was asked to assess the current state shrink-management approach and identify any opportunities to improve results.

Our approach

PwC Canada's Retail Consulting Services began by conducting a high-level assessment to identify and quantify the root causes of shrink by reviewing all functional areas of the business where loss occurs, including merchandising, marketing, supply chain, technology, finance, inventory control, and store operations. Utilizing a comprehensive review methodology, our team collected and analyzed relevant data and reports, assessed current state processes, and considered appropriate benchmark results for comparison purposes.

Through the assessment review process, PwC Canada's Retail Consulting Services was able to identify and quantify the primary causes of shrink and recommend specific initiatives to address the gaps identified with both people and processes. PwC Canada's Retail Consulting Services subsequently conducted a high-level, cost-benefit analysis to define a roadmap that detailed specific actions the client could take to reduce shrink in both the short and mid terms.

The result

• Developed new processes and identified individual accountabilities for merchandising to improve product lifecycle management, pricing program and data/price integrity
• Developed and implemented a store profiling capability to predict high shrink store locations prior to a full physical inventory based on key metrics. This enabled the client’s loss prevention, internal audit and store operations departments to focus their time and effort more effectively
• Implemented a production planning program in the perishable departments that reduced shrink by 15% to 27%
• The Retail Consulting Services process improvement recommendations were implemented and over the next year resulted in shrink improvements from 1.97% to 1.13%, equating to a $10-million reduction in one division