Warehouse Shrinkage And Security - Part 1

Minimize theft through good procedures & alertness.

Theft of goods from furniture retailers is an increasing problem that many people ignore. Many of your products are easily sold by thieves or are stolen by employees to meet specific requests from their friends or associates, or even to furnish their own house! While even the largest entertainment centers have been taken, theft of electronic products, accessories and smaller furniture pieces is more typical. Since you cannot operate your warehouse like a bank vault, what steps can you take to protect your investment?

There are two types of theft. The first is a mass theft where thieves either hijack a truck or break into a warehouse. The second is pilferage or disappearance. Pilferage may involve collusion between truck drivers and warehouse people who load "extra" products on the truck when shipping or receive less than the full quantity of material off an inbound shipment. My experience over many years shows that employee theft in furniture retailers is much larger problem than theft by outsiders.

There are two ways to defend against theft and pilferage. One is a combination of physical deterrents and systems that make it difficult to break security. The second defense is by confirming the honesty of employees.

Electronic systems for warehouse security when the building isn't occupied can cover a wide range of services. They may include window and door monitors, movement sensors, sonic alarms or even closed loop video cameras that can be played back later. Possibly even more important is external security with adequate lighting of exterior walls so thieves don't have the cover of darkness in your parking lots and dock areas. You may also consider a gate to prevent access to the rear of the building.

Management's lack of concern for security is a major factor in thefts by warehouse and delivery people. The number one failure, in my opinion, is pre-employment screening. Personal interviews, drug screening, reference checks and background reviews all have merit. The absolute minimum is a series of phone calls to verify employment dates and whether they would rehire this person. Expect some companies to only disclose the dates of employment and the job title in today's 'sue everybody' environment. You may also want to use honesty tests that disclose attitudes of people who are likely to steal. These tests typically take less than an hour and can be scored immediately.

Management can also reduce the risks of employee theft by always driving around the back of the building when coming and going, checking the dumpster from time to time and walking through the warehouse at random times. Insist that your managers do the same. It takes so little time but shows employees that you are alert.

It may be necessary to use undercover contract employees to detect serious thefts by your employees. They are available from a variety of sources and may disclose other problems as well. Examples are on the job drug sales and other illegal enterprises.

Review how you handle returned goods. Many furniture retailer's procedures are inadequate.

For example: An entertainment center is picked up from the customer and never makes it back into inventory. It may have been entered into inventory but was actually dropped off somewhere else on the way back. If you have the same person picking up the unit and entering it back into inventory, your risks are increased dramatically. The lost unit will only show up when you take inventory and then it will probably simply be written off as a discrepancy.

Bottom line, hire the most honest people you can find yet maintain a healthy skepticism that they will always be honest. Maintain adequate controls and take time to walk the warehouse and check the facility outside regular hours.