How to Deal with Shrinkage at Walmart

This article discusses the issue of shrinkage at Walmart and provides insights on how to deal with it. It highlights the causes of shrinkage and suggests proper training for employees as an effective solution. Various measures to reduce shrinkage are also discussed, including crime prevention through environmental design, loss prevention technologies, audits, and benefit denial systems.

Running Head: HOW TO DEAL WITH SHRINKAGE AT WALMART
How to deal with the issue of shrinkage by providing proper training to employees
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HOW TO DEAL WITH SHRINKAGE AT WALMART
Introduction
Technology has changed the way business is conducted. Retail shrinkage problem is one
of the serious issues affecting modern businesses. According to (Beck, 2017), retail shrinkage
accounts for approximately $38 billion in losses every year. Retail shrinkage, in this case,
implies the difference between the recorded inventories at the end of the year as compared to
what had been recorded at the beginning of the year. Such losses are often attributed to factors
such as theft, shoplifting, auditing issues, vendor fraud, as well as administrative errors. As
expected, there is a high correlation between the complexity of the stores or business entity with
retail shrinkage. It is worth noting that retail shrinkage poses a serious profit threat to businesses
that have low-profit margins such as grocery stores. Whereas internal theft accounts for the
highest amount of retail shrinkage, external theft such as robbery also accounts for appreciable
retail shrinkage (Shukur, Månsson, & Sjölander, 2014).
Thesis – This paper explains how to deal with the issue of shrinkage by providing proper training
to employees at Walmart.
Many businesses have adopted a combination of various measures in their efforts to
reduce retail shrinkage. (Wang, Huang, & Tung, 2016), highlights crime prevention through
environmental design (CPTED), loss prevention technologies, audits, benefit denial systems,
among others as some of the most viable measures. For instance, most retail stores, warehouses,
and workshops have an architectural layout purposely designed to make it possible to control
retail shrinkage. Also, the invention of auditing technologies has made it possible for businesses
to carry out audits in real time using auditing software (Bensoussan, Çakanyıldırım, Li & Sethi,
2013). This way, it is possible to tell when retail shrinkage is happening and therefore be in a

HOW TO DEAL WITH SHRINKAGE AT WALMART
position to employ necessary measures in time. The use of video technology including 24-hour
CCTV surveillance systems has come in handy in addressing the problem at hand.
With the overwhelming improvement in technology, more businesses are using
computerized processing systems as a replacement for human labour. In conjunction with the
computerized systems are various control subsystems such as electronic article surveillance,
radio frequency identification devices (Fan et al., 2014). The use of such systems has enabled
control of stock movement thereby reducing retail shrinkage significantly. However, use of such
systems has lately been augmented with the use of human resource. For instance, many
businesses have employed loss prevention specialists, loss prevention specialists’ agents and
store detectives, internal and external auditors. More importantly, there has been a significant
investment in software and network security personnel to protect the business from internal or
external hacking or any form of system compromise. The bottom line is that synergistic use of
these methods can go a long way in reducing retail shrinkage significantly (Sheng, Tijun &
Weili, 2010).
Walmart being a mega retail store also faces the problem of retail shrinkage. Despite
having automated many of its processes, the company has to use human resource in most of its
operation. It is therefore essential that when dealing with a problem like a shrinkage that the
company educated its employees on its advantages and its disadvantages. Some factors leading
to retail shrinkage including:
Shoplifting -Shoplifting is a prevalent method of theft, and the products that are stolen
vary widely in value and size. Some shoplifters steal a few small items while others take greater
risks, aiming for bigger, more accessible products. Companies introduce some methods to reduce
shoplifting such as the introduction of electronic tags to expensive products and clothing which

HOW TO DEAL WITH SHRINKAGE AT WALMART
will give an alert if the customer leaves the store without purchasing the product (Choi,
Rabinovich, & Richards, 2019).
One area that shoplifters target is self-checkout devices. These are checkout machines,
often many in one area, where customers are able to process their own goods by scanning
barcodes and weighing and entering product name or a code for products which do not have
barcodes. The aim of these machines is to reduce the manpower that is required to serve
customers and as a consequence increase the speed and efficiency in which customers can be
served at. Because of the increased role of the customer in processing goods and the resulting
decreased role of staff, it is relatively easy for shoplifters to steal items, especially through
scanning and paying for some items and not others. One method of decreasing the prevalence of
this is to have one or more security staff around the area of the self-checkouts, monitoring the
behavior of customers, in particular, looking for abnormal behavior or body language which can
be an indicator that a customer may be being deceitful.
Theft at the register - The employee operating the register has numerous opportunities
to steal from the company without their actions being immediately obvious to the employer or
the systems that are in place. One method of this is to take advantage of customers that don’t
want receipts, such as those who buy a single item like a drink or a packet of cigarettes. After the
atcustomer has left, the employee will mark the sale as void and either pocket the cash or take
note of the amount. Taking the cash for all such instances out of the till when they balance it at
the end of the day. Theft can also occur in cooperation between staff and customers. Here the
cashier scans items in a deceitful manner, passing some items by the scanner without scanning
them, entering the bar code for a lower cost item, or keeping a low-cost barcode on them and

HOW TO DEAL WITH SHRINKAGE AT WALMART
scanning this instead (Zhou & Piramuthu, 2015).
Summary
Loss prevention is an important part of the management of a business, as significant
profits are lost through theft. Theft can occur from within the company or outside of it by a
variety of techniques such as shoplifting, financial fraud and theft at the register. There is a range
of techniques that businesses use to minimize losses from shoplifting. These include the use of
physical security, electronic security tags and internal investigations. A significant portion of
Walmart’s staff is involved in security. This is an important factor for any company, as
decreasing theft can result in a significant increase in profits. Whether security is managed from
within the company, as is the case for Walmart, or is contracted in from an external company, it
is an important factor in company operation.
Next Step
Educating the employees aims at letting them know the losses that the company is
suffering due to shrinkage. Walmart’s employees should be made aware that, internal
investigations can be conducted to determine dishonest employees or those engaging in corrupt
activities. As a consequence, Walmart’s internal investigations must be carefully planned and
sensitive to the needs of the employees. Typically, a specific case of employee theft or
corruption is suspected before any action is taken, and this forms the basis of the investigation. It
is often helpful to provide employees with an anonymous way of reporting information, as they
may feel pressured by colleagues not to give up anything that could be compromising. Through
employee’s education, employees should be made aware of their rights and the activities that
would lead Walmart to take legal actions against any of them. When shrinkage is significantly

HOW TO DEAL WITH SHRINKAGE AT WALMART
reduced, Walmart should give incentives to employees to ensure that they remain committed to
reducing the problem of shrinkage.
As a long term strategy, Walmart needs to look at a Warehouse Management System and
suitable software systems for capturing information about inventory and its movement. This
should ideally be aligned with the store POS (Point Of Sale) software, so that receiving and
transferring goods becomes more convenient. Warehouse Management systems help in locating
goods internally, assigning defined location to each and every product. Of course, this fourth
stage involves considerable cost implications. Depending on the revenues and the future growth
potential, Walmart need to decide on this stage of technology implementation.

HOW TO DEAL WITH SHRINKAGE AT WALMART
References
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International Review of Retail, Distribution and Consumer Research, 27(4), 407-423.
doi:10.1080/09593969.2017.1319402
Bensoussan, A. D., Çakanyıldırım, M., Li, M., & Sethi, S. P. (2013). Optimal inventory control
with shrinkage and observed sales. Stochastics, 85(4), 589-603.
doi:10.1080/17442508.2013.802091
Choi, M., Rabinovich, E., & Richards, T. J. (2019). Supply Chain Contracts and Inventory
Shrinkage: An Empirical Analysis in the Grocery Retailing Industry. Decision Sciences.
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Fan, T., Chang, X., Gu, C., Yi, J., & Deng, S. (2014). Benefits of RFID technology for reducing
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Sheng, D., Tijun, F., & Weili, H. (2010). Analysis the Impact of the RFID Technology on
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Wang, K., Huang, Y., & Tung, C. (2016). A return-policy contract with a stock-dependent
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HOW TO DEAL WITH SHRINKAGE AT WALMART
Zhou, W., & Piramuthu, S. (2015). Identification shrinkage in inventory management: an RFID-
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