Thursday, August 03, 2006

Preventing theft in business: Let us count the ways

LOSSES are painful for retailers, no matter how small they are. If left unchecked, the small losses of today will inevitably lead to substantial losses in the future.

Retailers in the Philippines know this only too well. With margins no longer as healthy as they used to be due to rising costs and weakening purchasing power of Filipinos, losses are something they can ill afford.

And this holds true for both big and small retailers, no matter what field they are in.Business Monday recently talked to some leading retail outlets in their industry about how they are fighting the battle against losses on two fronts–internal, which covers employees and suppliers, and external theft by customers or shoplifting.

Waffle Time

Having over 300 carts selling waffles all over the Philippines is both a good and a bad thing.
It’s good because Waffle Time, the leading operator of food carts selling waffles, has grown so fast in less than five years in the business. But it’s also bad because it opens the network up to organized pilferage, largely by the employees themselves.

Waffle Time operations consultant George Wieneke says that in Waffle Time’s case, it is not really money that is lost, but the quality of the waffles.

For example, if each batch of waffle mixture is good for 10 waffles, employees will sometimes produce 12 or more, and then pocket the gain from the extra waffles.

As a result, the waffles are not as firm and do not taste as well as if the proper proportion was followed.
There have also been cases of employees using their own fillings, such as hotdogs, thus, earning for themselves a little extra money.

Wieneke says management learned of these compromises to quality from the customers who have complained about their waffles. And because Waffle Time always keeps an ear out to meet customers’ expectations, it was able to put in the necessary controls to arrest further losses.

Wieneke says there are now three to five layers of counterchecks to make sure that the employees are preparing and selling the waffles as they should.

More auditors have likewise been hired to make more frequent outlet checks. Accounting is also now being checked weekly, and not monthly to keep a closer look at financial trends.

“These added controls will really take more time and effort, but it is better to do it than to compromise the quality,” Wieneke says.

He adds that it is also important for Waffle Time to file cases against erring crew members and even franchisees, if only to show them that Waffle Time means business and is willing to go to great lengths to protect its products’ integrity.
“For us, a loss of 10 percent is still tolerable, going higher than that will be a cause for great concern,” he says.


For men’s clothes manufacturer Novecento, manual checking is still the best way to combat pilferage.

Warren Habaluyas, head of Novecento’s operations, says that while having a good software system will go a long way in addressing theft and inventory losses, there is still something to be said about actual physical checking by management and employees.

Habaluyas explains that physical checking of inventory every month allows management to immediately detect discrepancies in volume and value of sales, which can be due to pilferage.

Novecento also instructs cashiers and sales staff in each of the five branches to give a daily sales summary.
To prevent possible collusion, Novecento periodically rotates staff, so they won’t get too comfortable with each other and give in to the temptation to cover up theft, if there is any.

“We also believe in hands-on management, which means that we go to the different branches at all hours of the day, just to keep people on their toes,” he says.

Novecento, however, has still invested in a point-of-sale system, primarily to detect inventory and sales.

“With our system, we will know what products need to be immediately replenished because inventory is running low,” Habaluyas says.

Having a working inventory and loss prevention system is part of Novecento’s plans to eventually open the network to franchising.

Habaluyas says the company is in the process of manualizing all its operations in preparation for franchising and the entry of new investors.

“We plan to strengthen the Novecento brand and then have between 30 and 40 stores in five years,” he says.


Manual checking of inventory also works well for Ansons, one of the Philippines’ oldest department stores, specializing in appliances.

Kenneth Ng, vice president for operations of Ansons, says in an interview that the Ansons chain has been able to keep losses due to pilferage down to less than one percent of its total sales because of old-fashioned
vigilance and sales controls.

Ng says it also helps that Ansons sells products such as refrigerators, washing machines and television sets, which are quite hard to spirit out of their stores, thus, there is not much need to invest in sophisticated radio frequency tags to set off alarms, for example.

What Ansons invests in is controls, such as having customers show passes to the guard before they can take out their purchases.

He says similar systems are used in the warehouses, to make sure that all products that go out of them are properly documented when they reach the different stores.

“But we are careful about keeping the balance between security and customer convenience,” Ng says.
To prevent losses due to internal pilferage, Ng says Ansons takes extra effort to study prospective hires to see if they have the moral fortitude needed for the job.

“We have been lucky so far in the hiring of our people,” he says.

Ansons has five branches all over Metro Manila and says plans are underway to expand in the next few years, building on its 40-year heritage and reputation for selling goods at low prices.


For many of the Philippines’ supermarkets, pilferage or shoplifting inevitably becomes part of operations.

Cynthia L. Siy, category management and systems administration manager of WalterMart supermarkets, says among the most pilfered items are milk, personal care items such as deodorants, toothpaste and imported canned goods.

Siy says these incidents point to the fact that there are many poor and unemployed people around WalterMart, which has made a name for being the prime community center in areas where it has branches.

“They get these items because they want to feed their family,” Siy says, “and also because these items are very easy to sell outside by syndicates.”

Siy says many professional shoplifters have devised very creative ways to get items out of the store.

There are those who wear baggy clothes to hide cans of milk and meat products. There are also those who wear pants with very long pockets to hide small, but valuable items such as batteries and cigarettes.

Siy says that for WalterMart, the best way to combat shoplifting or to at least keep it to a minimum is to keep vigilant sales people on the floor.

She explains that while WalterMart has invested in close circuit cameras to monitor the comings and goings of people on the floor, it only works as long as there are people looking at them all the time.

Siy says what has worked better for WalterMart is having a lot of people on the shop floor, explaining that there is nothing more that scares off would-be shoplifters than people looking at them.

Siy adds that WalterMart has designed the shop floor in such a way that the items most prone to pilferage are positioned near the cashiers. These include the milk, wine, cigarettes and over the counter medicine.
The idea, she says, is to keep sales loss due to pilferage down to less than 1 percent of total sales.
“If it gets over 1 percent, that will be too much,” she says.

by Tina Arceo-Dumlao of Inquirer

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