Sweat the Details
Johnson stresses the value of paying attention to even the smallest detail, such as nixing the idea of certain products as neighbors. “We don’t keep 20-year shingles right next to 25-year shingles, for example,” he says. “Simple things prevent mistakes, and all of this effort is to minimize mistakes.”
One of his latest initiatives is to conduct quarterly inventories of his nine hottest-selling products. If the inventories reveal any problems with undercounts, miscounts, or shrinkage, he’ll use the data to attack the issue. If they reveal all is well with those products, he’ll pick the next nine products on his top sales list and start counting them quarterly.
Locking Down
Smart design and inventory management also can play a part in reducing shrinkage. In Charlotte, Paris says the fact that he conducts cycle counts whenever he suspects trouble helped limit
H & S Lumber’s 2006 shrinkage total to just $2,000 out of $8 million in sales. He also credits improvements to the chain-link fence surrounding his tiny yard to keep out the occasional thief. “We had gates that swing together, and they were going between the middle of them,” he reports. “We replaced those with a big slider that locks, and a local fellow invented a box that padlocks it so that you can’t get a pair of bolt cutters up there.”
Fences, however, won’t keep out dishonest employees. Hub Kelsh, owner of an Atlanta-based loss prevention firm, says insider jobs account for the more damaging loss numbers in his 38 years of retail detective work centered around lumberyards; the industry totals are impossible to monitor or even guess, he says. But even the commonly accepted 1% loss on $8 million would add up to $80,000.
While intelligent cameras that scan the yard and notify managers of unusual movement are a boon and fences are a must, Kelsh doesn’t recommend owners rely on these gadgets too heavily. After all, inside jobs involve complicated schemes: A forklift driver in cahoots with a builder, for instance, fleeced one of his current clients to the tune of $50,000 to $100,000 in just eight months. It’s far more important to develop a workplace culture to accompany loss-prevention tools, in Kelsh’s experience. “You can get your money’s worth from a security camera system if you use it during the daytime. Cameras are effective as a deterrent only when they affect the mind of the perpetrator,” he says. In other words, if an employee is contemplating a crime, he will make a final decision based on his awareness of the camera.
“Every day, multiple times a day, the manager needs to say over the loudspeaker, ‘Larry, I noticed you very carefully strapped down the blue truck that’s out there now, and I want to say thanks.’ Or, while a customer’s vehicle is in the yard, announce, ‘Larry, make sure you take good care of Mr. Jones–he’s one of our best customers.’ That way, the PA system reminds everyone they’re on camera.”
Like many aspects of pro supply, inventory management always returns to you and your people. “One of the pitfalls lumberyards fall into is to stick to the idea that a lot of our inventory loss is caused by our customers,” Johnson says. “Most of us would find that we are the cause,” he points out.
