Summary:
This article talks about how Wal-Mart has reported about losing $3 billion dollars in 2006 due to theft not only from shoplifters but also from employee theft, paperwork errors, and supplier fraud. Wal-Mart notices the shrinkage and is trying to do what it takes to try and prevent it from happening even if it doesn’t seem to affect Wal-Mart. Wal-Mart has made $348.6 billion dollars in profits due to sales the year before. The article goes into more detail about how employees contribute mostly to shrinkage. Statistics was also included; “ according to the National Retail Federation report for 2006, 74 % of all dollars lost came from employee theft, while shoplifting accounted for about 32 %, administrative errors account for 14 %, and supplier fraud accounts for 4 %. The remaining 3 % remains unaccounted for.”
Connection:
This connection between this article and Chapter 11 is that they both talk about shortages in physical inventory, the procedure to count and value the unsold merchandises. This article talks about how people could go in and take a product easily and just walk out without paying which would mean it would be considered as cost of goods sold. Also goods that are broken are also considered as COGS. The common scam is when an employee has a position as a cashier they could make it seem as if they scanned the product to mislead the security cameras when really it hasn’t been scanned which allows the customer to walk out, allowing that to happen would make the gross profit and net income decrease.
Personal Reflection:
You would have never guessed that employees are the main contributors to theft than actual customers. It always seems as though the customers are the ones that are always discussed about when loss of inventory is discovered. Businesses are always looking for ways to decrease the amount of inventory being stolen by using security cameras or store alarms at the entrance/exit. Businesses shouldn’t only have one, they should have both or even more if possible because even if you have a security camera you would know who took it and maybe just keep a closer look but you would rather just catch them on the day. Most businesses don’t invest in security because it’s too expensive but in my opinion it would be more costly to lose inventory continuously due to lack of security then to just invest in them once.
http://www.associatedcontent.com/article/280537/walmart_posts_a_3_billion_dollar_loss.html
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Their sales this year topped $400B. Given the same percent to sale, their shrink would be about $4B.
ReplyDeleteIt's important to know that a 1% shrink result is a fairly acceptable and predictable loss. For the giant they are, that loss amount in outstanding.
Pat Murphy
President
LPT Security Consulting
Hi anita! I am shocked that employees are the main contributors to theft than their actual customers. However the accountants should have caught the shortage in physical inventory by looking at the numbers more carefully. After this incident, walmart should invest heavily into security rather than keep losing valuable merchandise. I also find it ridiculous that the article states that losing $3 billion does not affect Walmart because that money could have went to a better cause.
ReplyDeleteryan W
In the world of technology, many stores nowadays use computers to keep track of inventory but I think that counting the inventory physically would allow the owner know what is exactly going on. I was a little surprise to find out that most of stores theft is from their employees. I mean, after looking at applications and having numerous numbers of interviews, to find out that the person that is hired, is dishonest, is a little disappointing. I agree with you that a security system is important, but not only on the customers but also the employees. I believe that video cameras should not only be out around the stores where consumers are, but also in places where employees are walking in and out.
ReplyDeleteJessica ye