WAREHOUSE – CHALLENGES AND LOSS PREVENTION
Warehousing is a growing concept which is playing a crucial role in the modern supply chain and logistics sector. There are many safety and security hurdles that are present and can seriously hamper the progress of the logistics and these hurdles generally lie mostly within an organization. Losses in Inventory and processes which are not structured and organized are serious contributory factors and sadly organizations unwittingly are accountable or rather guilty of allowing gaps for nefarious individuals to take advantage of such loopholes.
Processes with its complexities and security in a Warehouse are complimentary and must be in sync to constantly monitor and react to situations and weaknesses in a process to avert a potential criminal act. It is therefore pertinent to look closely into how the safety and the security of the warehouse can be improved and what methods and materials can be placed that will ensure a secured environment.
It is also essential that employee’s training and standard operating procedures be adopted within the warehouses which will substantially improve the effectiveness of the warehousing Security and services. Proper safety and security protocols needs to be established.
That said, there is no single, simple solution to prevent warehouse theft. It takes a combination of strong processes, security systems, warehouse management software and excellent hiring criteria to reduce theft in your business.
Let us begin with the challenges that are present within the warehouse’s safety and security and how those challenges are met by the Company.
- The efficiency of the Warehouse – steps needed to ensure efficiency.
- Impact of safety and security. – on the supply of logistics.
- Analyzation – the current steps and measures that are being in-place within the Company in the safety and security of the warehouses.
- Recommendation – what steps can be undertaken by the Company to ensure the safety and the security of their warehouses in the near future.
BRIEF ON WAREHOUSE THEFT AND PREVENTION.
Inventory
Start tackling warehouse theft by ensuring we take cognizance of it and spot it and principally look at Inventories.
Ensure that inventories are correctly tracked so that we can identify the difference between the types of losses we may suffer, by combining stock take and cycle counts to accurately assess the inventory on the books.
Stock takes vs. cycle count, and how they help to prevent warehouse theft
Warehouse Management Systems (WMS) allows us to be more flexible and efficient in a warehouse, moving from traditional stock take methods to cycle counting.
The main benefit of cycle counting is that it does not require a shutdown of the entire business operation.
Cycle counts ensures that the inventory is frequently checked for accuracy – without interrupting your operations. We simply count small subsets of inventory in various locations in your warehouse, on an immediate, daily or weekly basis. Not only is this a more productive and efficient method of inventory control, it is easier to spot theft because we can spot discrepancies sooner rather than later.
Missing stock vs. theft: how to tell the difference
Inventory shrinkage in your warehouse is normal, within certain limits. There are many reasons why you are experiencing inventory loss – as we can see below:
Cause of SHRINKAGE:
- Damage
- Obsolescence
- Display/Sample
- Theft
Establish where these items could be going outside of theft- How many could be destroyed, spoiled, obsolete or on display.
Example: If you store consumables of food items, how many been lost due to expiry, exposure or recall.
Common formula of Inventory Shrinkage as below.
INVENTORY SHRINKAGE = INVENTORY ON THE BOOKS – PHYSICAL INVENTORY.
The best way to identify theft in your warehouse is to conduct regular stock takes.
The more accurate your inventory data, the faster you will pick up on theft. In the absence or delayed stock takes, we may not even notice that inventory levels are shrinking suspiciously until months down the line – by which time you will be hemorrhaging cash.
Look out for the following red flags that could indicate warehouse theft:
- Your stock levels do not match your sales records.
- Sales seem to dip on days when particular staff are on duty.
- Staff rumors on theft is taking place.
- Certain team members avoid taking their annual leave.
- Important documentation (such as invoices) are missing or appear as duplicates rather than originals.
- Stock is constantly found near exits or loading bays.
It is a very tedious and complex operation to identify theft within a warehouse involving a multitude of personnel ranging from senior management to the general worker. Constant vigilance and firm Security measures on the ground and monitoring of administrative documents emanating from the various departments within the warehouse is the precursor to eliminating or reducing the incidences of theft.
The definitive approach when faced with discrepancies is to investigate them immediately. A delayed reaction will inevitably result in a predicament to ascertain whether the missing stock items are lost or stolen.
Knowing where your stock is, or isn’t, is critical, and from this point, we advise taking precautionary measures to raise awareness, identify weak points and limit the opportunity for theft.
Personnel
1. Conduct background checks before hiring staff, contractors and transporters.
It might seem like a no-brainer but doing a basic background check on criminal records will drastically decrease your chances of warehouse theft.
“Numerous subsets of screening services may be included in an employment background check. Which ones we choose will depend on a whole host of variables, including the nature of your industry, nature of your business, what kind of role you’re hiring for, wherein the corporate hierarchy that role falls, and your organization’s level of risk tolerance. Beyond that, we should be mindful of the laws and regulations affecting your organization.”
“The bottom line is that when they’re done properly, background checks can help ensure the integrity, fairness, and consistency of the hiring process. That’s good for those doing the hiring, of course, but it also benefits honest candidates who are playing by the rules and giving employers an accurate picture of themselves and their qualifications.”
Check the criminal history of potential employees as well as checking with previous employers to find out how long the person worked there and why they left. Trust your gut – if you’re not sure about someone’s credibility, don’t hire them.
Company Policy
1. Educate employees about company policy on theft.
Make sure all your staff are aware that we have a zero-tolerance policy when it comes to theft or fraud. Have them sign a code of conduct that clearly outlines how violations will be punished.
Additionally, we can identify anonymous channels for staff to report any suspicious activity (whistle blower). If everyone knows that their colleagues are keeping an eye out, it will deter thieves due to a higher chance of being caught.
2. Deal with thefts immediately, in line with your company policy.
If we experience a theft, or series of thefts, look at attendance to see who was on duty when the stock went missing. If we notice a pattern between missing stock and certain staff members on duty, monitor their activity in the warehouse.
If we notice any suspicious behavior (such as consistently clocking in or out at odd times) then we may need to investigate further. This can be done in-line with the company policy education and process.
3. Maximize managerial/supervisory visibility in warehouse.
Having a strong managerial or supervisory presence on your warehouse floor will deter theft. It can, however, be difficult for warehouse managers to spend a lot of time on the floor, as many of their duties require a computer. That’s the main reason where the managers can leverage on the floor supervisor to ensure everything in order.
4. Limit access to stock in your warehouse
Use the physical layout of your warehouse to create barriers that help to prevent theft. Separate your receiving and shipping docks where possible, to prevent newly received stock exiting on an outbound truck before it even enters your warehouse.
Keep your pick faces and inventory storage locations as far away from your shipping and receiving areas as possible. The only stock that should be near these areas are incoming and outgoing orders.
Provide visiting truck drivers with a dedicated lounge area to wait while orders are being loaded or unloaded. Only staff should have access to your warehouse or distribution area.
Security systems.
1. Ensure a robust security system in your warehouse
Security systems like access control, CCTV cameras, Motion Intrusion sensors and Alarms, will not only deter criminals but also alert and provide evidence of the potential theft. As for the CCTVs these cameras should be strategically placed in high-risk critical areas. We can also install security mirrors to maximize visibility and prevent blind spots in hard-to-reach corners of your warehouse.
Additional security measures like unplanned warehouse walk-throughs by supervisors, team leaders or management can act as an additional deterrent. Make sure these walk-throughs are completely unpredictable. Some key areas to check include shipping and receiving bays, and entrances and exits.
Security personnel should be stationed at every entrance/exit to the building. Be sure to inspect any vehicles leaving your warehouse to check for any unauthorized stock leaving the premises.
Staff and visitors’ parking should be located separately from your warehouse operations. No private vehicles should be near your warehouse.
Theft rationale
Knowing why employees steal will help us to curb the theft in a more effective way.
Why do employees steal?
In an ideal world, we would not need to ask such a question, however, there are three common reasons for staff to develop light fingers:
Poverty
Very often when an employee is struggling financially, they may be tempted to steal from their employer – either taking items home for their family or to sell for cash. Their justification is that they need the item/s more than we do, thinking the company will not miss or can easily afford to replace missing stock.
Entitlement
Some staff may believe that the company they work for owes them something. They don’t see pilfering stock as theft – it’s simply taking what was rightfully theirs to begin with.
Opportunistic
Finally, we have opportunists. These thieves will take something desirable just because they can. Small stock items like makeup, clothing, foodstuff, and electronics are most at risk of opportunistic theft, as the thieves will take items that are easy to access and conceal.
A warehouse management system (WMS) helps to prevent theft.
The less accurate your inventory records, the faster your warehouse becomes an easy target.
Knowing exactly what stock we have in hand and where its located in the warehouse helps us to identify missing stock immediately and ultimately reduces warehouse theft.
However, trying to keep track of stock manually often leads to errors – especially if you are doing infrequent stock takes.
To conclude the Brief, it is vital that we stay vigilant and put all the processes together as part of loss prevention in our Distribution Centers. Theft, fraud, pilferage potential criminal activities are all inevitable circumstances that impact any and every warehouse. Most of above illustrations were already outlined in our Global Strategic Security Guideline and TAPA Standards.
I will leave you with this very simple quote and analogy –
“THE NUMBER ONE RULE OF THIEVES IS THAT NOTHING IS TOO SMALL TO STEAL “
Rightly so then we must remember that – “SECURITY HAS NO HOLIDAY”
Thank you,
Regards,
Parthiban Kanniah
Country Senior Security Manager.
DKSH Malaysia Sdn Bhd.
