Five Sources of Produce Shrink Every Grocer Should Monitor

By Karen VanBrunt

Global retail shrink in 2010 reached $107.284 billion, according to the Centre for Retail Research’s annual Global Retail Theft Barometer (GRTB) — down -5.6 percent over the previous year as retailers put nearly 10 percent more funds into security and loss prevention. In the U.S., internal error and administrative failure counted for a substantial 16.9 percent of losses, or $18.1 billion.

For grocers, a healthy portion of that $18.1 billion loss can be traced back to operational errors, such as those that occur when produce scale PLU items are handled at POS. All too often, these items are not calculated accurately into the customer’s order, resulting in substantial shrink.

Below are five key areas that grocers should monitor to stay ahead of produce shrink:

OPERATIONAL LOSSES

1. PLU Entry
Red and yellow peppers cost more than green peppers, while vine tomatoes cost more than plum tomatoes. Similarly, prices are different for organic versus regular produce. Cashiers often confuse PLU numbers for produce items that are similar to each other, particularly when they are in a rush. Proper aging of these items and cashier awareness are essential to preventing unnecessary losses.

Solution
Managers can incorporate mandatory produce tests each week/month, asking employees to identify PLU’s for various fruits and vegetables. This needn’t take a lot of time and can focus on the most commonly confused items. Typically, six items per test is sufficient.

2. Weighing vs. Counting
Cashiers must know if a particular item should be entered by quantity or by weight. Apples, for example, should be weighed and navel oranges should be counted. Furthermore, managers must train cashiers to enter the proper quantity each time so that four navel oranges in a bag aren’t entered as one orange.

Solution
In addition to checking for PLU accuracy, incorporate weighing vs. counting items into weekly/monthly tests.

3. Weighing by the Cashier
Cashiers are trained to be fast, but there is such a thing as being too fast. In an effort to move their line along, cashiers often remove items from the scale at the same time they press “enter” on the keypad, meaning that the item’s full weight is not on the scale when the POS system calculates the cost. While this usually happens unknowingly, it does happen quite often and the resulting losses can be dramatic.

Solutions
Make employees aware of these possibilities so that they can monitor both themselves and customers with a knowing eye. Show cashiers firsthand that items can register at varying prices depending on whether or not the item is placed in the center of the scale and depending upon timing when removing an item from the scale.

During weekly/monthly tests, have the CSM process an order to get an accurate total and then ask each cashier to process the order as they normally would. Direct observation and video data can then be used to discover flaws when the two totals do not match.
FRAUD

4. Weighing by the Customer
Just because a customer places an item on the scale does not mean they are paying their fair share. Customers will often place an item off to the side, leaving only a portion of the item to register on the scale.

Solutions
Whether intentional or not, self-checkout station managers must be aware of this practice and ensure that customers place items in the center of the scale at all times. Managers must also keep an eye out for customers who hold onto and slightly lift bags while weighing produce to reduce its weight.

5. Improper PLU
One of the most common forms of self-checkout fraud occurs when a customer intentionally enters the wrong PLU number for a given item. For example, the PLU numbers for bananas and pinto beans are commonly entered when purchasing other, more expensive items like meat and seafood. Don’t get stuck selling items from the olive bar at pinto bean prices.

Solutions
Make sure that someone with solid multitasking abilities is manning the self-checkout post. These employees need to oversee multiple registers simultaneously while keeping an eye on both physical and on-screen activity, so the ability to multitask is essential. Auditors should utilize loss prevention software to run regular queries on low-value items—items that ring up at less than a designated value (for example, items selling between zero and five cents). This data, combined with video of the transaction, will often reveal incidences of self-checkout fraud, among other things.

Special analysis should be conducted on the top five PLU’s –bananas, pinto beans, and so on. Doing so will identify transactions where PLU numbers are being abused. Note that these types of transactions will not flag on any internal report that is run because they simply look like “sales.” However, video synchronized with data will identify these types of fraud cases.

Oftentimes, when a red flag alert comes up, the self-checkout station manager will simply clear it without investigating the situation. Managers should investigate why the alert occurred before clearing it. Was an extra item placed into the bag without being scanned? Was the proper PLU used? Auditors equipped with item and transaction-level video can also run queries on common fraud targets like shrimp and meat. Quickly scanning through video clips of ground beef sales, for example, will help you catch the meat associate who tagged T-bone steak as ground beef.

In a world of increasing technological complexity, both new threats and new solutions arise regularly. Grocers who consistently train their employees and monitor their stores, employees, and customers will reveal new patterns of fraud and operational shrink and will be the ones to benefit from, and despite of, these ongoing changes.

You can learn more about the author, Karen VanBrunt, who is the director of professional auditing services for Agilence Inc., by clicking here.