Raw Material Sampling

Raw Material Sampling

It is imperative for any business engaged in procurement of bulk material (like manufacturing/ packaging sectors/ infra sector etc) to carryout proper sampling of inward raw material. This basic process is required to ensure business gets what it pays for, besides addressing other issues. Though this process and thought behind this is known to all concerned employees of a company right from purchase department to material handling department and upto production team, but, execution of this thought on ground leaves much to think about.

As we go through the details given below, magnitude of affect of not executing this process in fool proof manner would be self explanatory. Not only that, the gravity of negative impact of lax controls and execution, on business would dictate that businesses need to carry out thorough analysis of the process being followed by them.

General Trends

Most of the companies have documented process to carry out sampling of inbound raw material. Most of the process start with or have following guidelines for picking up samples from bulk material :

“It shall be duty of chemist on duty to pick up random sample from each consignment……. “ (or words to that affect).

Thereafter, complete chemical analytical process is defined.

The Problem Statement

I, as loss prevention team member, have serious observation on such open ended process. which are subjective in nature and can be interpreted differently by different employees. Following questions crop up at this very first step :-

If the material is on wheels and not homogenous, what actions are supposed to be carried out by chemist on ground to ensure that his samples are true representative of consignment– is he required to pick up samples while material is still on wheels?

Is he required to have the consignment unloaded and then draw samples?

If he has to pick up samples, is he required to pick up from various corners and layers of the consignment?

When he is drawing samples, who is present to witness his process?

Is transporter or supplier is allowed to witness this process? (they are affected most in case of rejection of material)

How many samples are to be drawn? (If only one sample is drawn, it will be consumed during chemical analytical process – what, in case sample is rejected? Is there any other sample, which maintains its integrity and represents true random sample, which is under analysis?)

If there are more than one samples drawn, do all samples have same homogeneity?

If more than one sample is drawn, how will those be handled and for what purpose? (Does supplier gets a sample? Would there be a sample available at later date and time for umpiring, should there be dispute between the receiver and supplier?)

How the integrity of samples is being maintained? (Are the packets containing samples sealed on site in presence of transporter or supplier?)

How long chemist is required to preserve the sample? (Is it defined in number of days or is at discretion of chemist?)

The list goes on…. Suffice to state that open-ended process, instead of addressing the issue, complicates it further. It is most desirable to write down processes which are very objective in nature and leaves no room for subjectivity.

Solutions

There are various ISO standards laid out for various kinds of raw material sampling. Detailed process would be different for liquids, gases, food grains, metals, non metals, ore etc. However, all process have some of common factors and thought process.

Question is, if open-ended process throws open more questions than it answers, then what is the solution?

The solution lies in getting it right first time and all the times thereafter. Any business process for raw material sampling should be able to address following issues :-

It should

lead to draw true representative sample of bulk material

define actions to fulfil conditions of ‘random sampling’

help in acceptance of consignments

facilitate testing for batch release

be able to control raw material

help in release of non – conforming products

help in maintaining integrity and identity of collected sample for defined duration

help in validation of analytical methods

be able to address legal disputes

Should be fair to receiver and supplier

be practical and executable from business perspective

Since every business has its own strategy, work culture, legacy and system support, no standard process which will fit all, can be defined at this stage. Process has to be specific to each business for it to be effective. But, if above mentioned issues are factored in process thought process, more often than not, it should close all loops.

Multi Tasking Of Cameras in Retail Business Facility

Most retailers have CCTV coverage for their shopping areas. More often than not, such cameras are installed with ‘security’ perspective ie cameras have been installed to assist security team in investigations. Retailers also have centralised control room, where ‘security team’ views camera feeds daily. Cameras also assist law enforcing agencies in case some case is reported to them.
Installing cameras, providing necessary cabling and storage media, providing IP connectivity and allied service expenses are quite heavy drain on finances of retailers who survive on wafer thin margins. Not only that, using cameras exclusively for ‘security’ purposes amounts to exploiting not even half of potential of these cameras.
To optimise usage of such costly infrastructure and to derive maximum Return On Investments, retailers can use these cameras for following additional purposes:-
Remote visit to stores by senior management teams.
Remote visit to stores by customer care department to ascertain if store is customer friendly or ‘have a feel’ of store from customer perspective.
Remote visit to stores by merchandising team to ensure correct application of planogram.
Remote visits by security heads to save on physical travel to each store each time. Though there is no substitute for on ground work, but, at times, distances are so large and time consuming that it is not cost effective to visit each store as routine.
Fruits and Vegetable team can use cameras for quality inspection of their SKUs at various points of day.
Operations team can remotely visit stores to check store presentation.

These are only few parameters on which cameras can be used by multiple teams simultaneously, thereby optimising the usage and deriving full benefits from infrastructure that is already in place.

INSULATING COMPANY OFFICIALS FROM BRUTAL ATTACKS BY ITS EMPLOYEES

Recent cases of violence in business premises (manufacturing units, Head Offices etc) by either the agitating employees or high handedness of company officials does not speak high of Indian Business community. Though, as of now, the cases are low on percentage figures, but, loss of any human life due to such aggression is not a healthy quote for any business house. Take example of Sep 2009 incident in Southern India, where in a senior employee of reputed company was brutally assaulted by agitating workers, later 26 workers were arrested. Earlier on a CEO was done to death by agitating employees in NOIDA, later 146 employees of the company were arrested on charges of attacking their CEO. Prior to this, there was brutal attack by company and law enforcing agencies on agitating workers in Gurgaon factory. During Sep 2009, 300 managers of a reputed MNC were prevented from leaving office and hostage like situation was created by agitating employees. Fear of injury being caused to managers by agitating employees was highly possible, but, by some divine power, the same got averted. In yet another incident, ONE lakh workers of major industrial hub struck work during Oct 2009. These agitations not only cost precious human lives but also avoidable financial loss due to loss in manhours to the tune of 35-40 million rupees. All the above incidents are disturbing and leads not only to avoidable loss of precious human lives and financial loss, but, also cries out for urgent and effective need of business community to prevent re-occurrence of such issues. Let’s examine some of the basic steps, we can take to prevent such issues in first place and if misfortune strikes a business, then ways and means to contain damage to business or its employees.
Reasons For Agitation There is no dearth of material which study the reasons for labour unrest. Also, there is no dearth of material which deals with prevention of such incidents. Despite that, such incidents occur with alarming regularity (most of them getting unreported for fear of loss of reputation of affected business house). Since, occurrence is getting regular and reasons for labour unrest are well known, let’s examine, thresholds at which such labour unrest manifests into physical threat to other senior employees.

Feeling of Being Aggrieved/Exploited By and large, a situation of conflict arises out of feeling of being aggrieved / exploited. Both parties ie the company and its employees feel that they are the victims. Company feels that it is being forced to accept certain irrational conditions by its employees. On the other side, the employees feel that they have not been treated fairly by company and have reasons to be aggrieved. Ultimately, a situation gets created in which both parties start walking on parallel lines as "Agrieved" with no chance of meeting for acceptable solution.

Conflict of Interests. Workers and Company have divergent view on issues at hand. Both sides get driven by sense of righteousness. Both sides also have a view point that there is no merit in other side’s view and hence cannot be accommodated.
Possible Developing Situations - If above situation develops, it would have serious repurcursions. Since all other means of pacification have failed so far, the following could be possible manifestation at this stage:-
(a) Workers can form groups with an aim to take fence sitters on their side. Feeling of ‘us’ (ie employees) and ‘them’ (ie company for which they work’ creeps in.
(b) Productivity starts getting affected.
(c) Indiscipline is wide spread amongst employees.
(d) Efforts are made by workers to discuss the issues with company officials but get lukewarm response or rejection of their demands.
(e) Workers start sit in at gates or within premises.
(f) Workers might resort to mass leave.
(g) Possible physical clash with company’s security set up.
(h) Company officials could be taken hostages by workers to force a favourable decision.
(i) Intervention by law enforcing agency leading to business disruption.

Preventive Measures

The aim of any business enterprise would, naturally, be to prevent occurrence of such issues. Damage control exercise begins once preventive measures fail. However, even in the event of failure of preventive measures, the company negotiators shall be much better armed if they are aware of situation in totality - abinitio. Such task is best performed by company’s security staff and if that is not available, then by HR team. The following should be incorporated as part of preventive measures :-

(a) Feel The Pulse – It is of great importance to management team of the company to know the morale of their work force. There could be various reasons for employees being dissatisfied. Company may or may not be in a position to address those issues, but, it would lead to serious repercussions, if management is not even aware of the issues leading to large scale dissatisfaction amongst employees. Existance of such status, if prevailing in company, is freely available, in and around the workplaces, but, there has to be some one with basic common sense to pick them up and pass it up the chain. Efforts be made to address the concerns at this stage only.

(b) Prevent Accidents Work related accident like, electrocution of employee, an employee getting injured at his place of work, an employee falling down from height etc are some to reasons which immediately unite all workers to raise their personal safety issues. Since reaction is spontaneous and emotional, it can lead to senior employees being manhandled by agitating workers for company’s failure to provide them safe working environment. Business needs to be very careful and devise such processes which would prevent such accidents. In the event of such misfortune striking the workplace, speedy medical attention and care be provided to employee. There should be well prepared and rehearsed disaster management plan in large businesses.

(c) Identify Inciting Leaders In any group, there would be some leader or if no leader is naturally available, the situation would demand that some leader would emerge spontaneously. Though, it is healthy to have leadership for workers, but, what needs to be ensured that leadership is genuine and balanced, which contributes not only to well being of employees but also to business on whom they are dependent.

(d) Anticipate Business leaders, should be able to anticipate workers reaction to their decisions. For example, it would be too naïve to ignore the fact that mass termination of workers would agitate large work force and this group would retaliate against such decisions.

(e) Controlled Entry Entry to work place where large work force works should be controlled. It should be ensured that people from outside the premises do not get mixed up with agitating work force or influence own work force in such a manner that it is detrimental to business.

(f) Keep Communicating In the interest of business, it is imperative that management keeps all means of communication with its employees open at all stages. This is more prudent in case of lower rung workers as they form bulk of workforce and have potential to harm most. Knowing their morale would assist management to ascertain pressure points for such work force. As a correlation to that, it could be safetly stated that if such work force is motivated, they will produce wonders for any business.


Handling the Most Difficult – Hostage Situation

Personal physical attacks on company’s senior executives by agitating workers are, by and large, result of uncontrolled emotions of anger and hate and there is not much a company can do once this unfortunate incident takes place, except to contain any further damage to life and property and await law enforcing agency’s assistance. However, the most difficult situation arises when agitating workers take company officials as hostages with an aim to force acceptance of their demand. It is worthwhile to mention that all measures be taken, earlier on, to prevent occurrence of such situations. But, if every thing else fails, then how to deal with it….

At this stage, the primary task is to ensure the following:-

(a) Isolate the Area with an aim to prevent any further damage to life and property. Entry and exit to the area should be strictly controlled. Such isolation will also help in case the situation spirals out of control and warrants law enforcing agency’s intervention.
(b) Contain damage by organizing negotiation as early as possible. The faster it is done, the better it is to control temper and emotions.
(c) Information must be gathered on the following
Number of hostage takers including knowledge of whether they
are armed or not and their leadership.
Number of hostages and their profile, age, sex etc.
Emotional status of hostage takers.
Their demands etc.

Initial 15-30 minutes are crucial in such situations. During this period emotions run high, both in hostage takers and in hostages. During this phase, the effort of hostages will be to arrange escape and for hostage takers, it would be reverse to above and ensure that none of hostages goes out. Greater the number of employees held as hostage, better chances of demands being met to workers advantage – so they believe. Once the above actions have been taken, company must start immediate negotiations with hostage takers.

Though, dealing with such extreme situation in business is much easier than dealing with terror related hostage situation or robbery or other law and order related hostage situations, but, still the task is not that easy to allow it to spiral out of control. That would result into injury to or loss of human life.

Negotiations must be conducted by empowered person of the company, who is authorized to take certain spot decisions. What ever way the negotiations move, it must be ensured that no false statements be made by negotiators. Credibility of company and that of negotiator must be maintained. You never know, there could be a similar situation later on. If, negotiators are not trustworthy, we may land up ‘non-negotiable’ case next time. That would result in avoidable loss of human lives.

HEIGHT OF INNOVATION TO DEFEAT BUSINESS CONTROLS IN SCRATCH CARD PROMOTIONS

1. Did any business leader ever thought that scratch cards can be provided to desired customers, free of cost and that too by following all business processes? Here is how it can be done -

2. To fulfil the above requirement, the cashier shall proceed as under :-

He shall scan certain SKUs and generate the bill of the required amount which shall entitle the customer to get one scratch card. Once that is done, promotional scratch card is duly handed over to the customer (friend).

Customer scratches the card. Let’s presume customer gets the Rs 100/- as prize.
Next bill shall be generated in which all the previously billed SKUs shall be ‘refunded’ and customer shall shop for the amount which his scratch cards entitles him to.

3. In the instant case, the customer gets to buy SKUs worth Rs 100/- free of cost or I would say that he purchased SKUs at the cost of the store.
IS THERE ANY READER WHO COULD THINK OF THIS WAY OF BEATING THE SYSTEM ?

4. Not only this, smart cashiers would also know the denomination of scratch cards by merely looking at bar codes of scratch cards. Generally bar coding follow a set pattern and smart cashiers know the sequence of bar codes which indicates to them the denomination of scratch cards even without scratching the cards.

SMART WAYS TO DEFEAT BUSINESS CONTROLS

Business Parameters

1. It has been seen that retailers lay down lot of emphasis in controlling losses. Business rolls out lot of processes, carries out strict controls for implementation of same and continuously studies data to discern deviation. However, as the saying goes, howsoever smart someone is , there is some one else somewhere, who is still smarter. Key to controlling losses in organized is to stay a step ahead of such malicious ‘minds’.

General

2. Organised retailers have devised ways and means to MONITOR dump, line voids, refunds and shrink, because those are the avenues which are known to have been misused by staff. Even official studies of various independent bodies have established the fact that internal thefts cause losses amounting to approximately 34 % of total losses being suffered by the business.


Stores have been given specified targets of shrink, which is not permissible to be crossed or if they are crossed - they are questioned by management. Now, if some employee has to steal continuously, what he / she can do to not to raise alarm, keep the store shrink within acceptable parameters and still steal?

3. To understand the above, lets’ first discuss, how the genuine refund transaction impacts inventory and cash. Generally, for customer satisfaction, organized retailers have granted customers a facility, wherein, they (customers) can return the SKU to them (store) in case customers are not satisfied with the product for any of the defined reasons. Generally, customer has to bring back the product accompanied by original sales invoice / cash memo. That translates into following physical issues:-
· There is a person (customer) visiting the store and who is not satisfied with the product. He / family members are the ones who had purchased the product from the retailer in past (within stipulated time frame – generally not more than a week back).
· He/ She (customer) has a proof of the product being purchased on earlier occasion from the retailer outlet.
· There is a product in physical form which was purchased earlier and is now being sought to be refunded.
· All the above three sequence entail movement of men and material in the store from outside.
4. When, a cashier has to refund the product, the customer hands over the product to cashier, cashier carries out his point of sale activities, a refund invoice gets generated by the printer, showing the amount due to the customer and cash is handed over to the customer or is adjusted in customer’s bill. The faulty product received by the cashier is then placed back at appropriate shelf or is sent in back house if there are some quality issues.

5. The system data also changes and it adds one SKU to the store book count and reduces the amount given to the customer from its cash balance.

6. Now lets’ see how fraudulent store employee can manipulate above system. Malicious cashier do not wait for customer to come up with some SKU. The SKU is picked up from the store shelf only or product number is fed to the point of sale terminal by cashier himself or herself. later, refund transaction is carried out for the above bill. As given above, the terminal shall generate the cash to be given to customer. Since there is no customer, cashier picks up the cash himself / herself. As regards the SKU, since there is no SKU which has moved in physically, though the book stock shall increase by the numbers which have been refunded, but, physical stock shall not increase. NOW THAT WOULD BE COUNTED AS SHRINK.

7. Further more, smart store employees shall not permit shrink to increase in above manner. To prevent that they will simply post the refunded SKUs in dump, thereby effectively reducing refunded SKU from the store book count. Overall, NO SHRINK – NO ACCOUNTABILITY AND STILL THE STORE STAFF IS ABLE TO MAKE A KILL FOR THEMSELVES.

Mitigation Process

8. Data analyst has to study the dump data together with voided items and refund item data.

PATTERN RECOGNITION – A TOOL TO DETECT MALICIOUS USAGE OF LOYALTY CARD / CASH / GIFT COUPON

Historical Perspective of Loyalty Cards according to a report

Loyalty programme, as is wildly spread today was first conceived in 1981 by
American Airlines and was known as AAdvantage. It quickly turned into a source
of competitive advantage and other airlines were forced to respond in kind.
Further development is well known: loyalty programmes soon outgrew the confines
of the airline industry. The expansion that started in closely linked industries
(e.g. car rental and hospitality industry) later advanced into retail trade,
banking and insurance, service industry etc.

1. Underlying aim of loyalty programme was to act as exit barrier for existing customers and also to act as bait for new customers. It is widely believed Loyal customers not only shop themselves, but, if they are treated well they land up recommending others as well – mode of most potent - free word of mouth advertisement
2. To roll out an end to end loyalty programme, companies spend a lot not only in terms of visible discounts or addition of monetary value to loyal customers, but, lot of time, money, IT resources, hardware and man hours are devoted to sustain the same. Loyalty programme does not necessarily mean ‘Repeat Business’ only. The data so available to the companies is also used for variety of purposes, like :-
Discern purchasing pattern to streamline supply chain and stocking.

• Design promotions
• Add value to company’s valuation.
• Retention and Advocacy of brand
• Improve customer care and relationship.
  

3. Overall, a company may take major marketing policy decisions based on the data available through its loyalty programme.

GROUND SITUATION
4. So far so good. But the fact is that retailers all over the world have serious problems of having dishonest employees on board. Staff dishonesty is common . To be specific, there have been serious criminal cases of loyalty programmes being misued by dishonest employees causing loss to the company to the tune of $ 80,000/- in one specific case only. Another study shows that multiple redemption of loyalty bonus costs half a billion dollars to the company

5. Since the problem of staff dishonesty is real, lets see how the loyalty programmes are being misused by dishonest employees :-

• Coupon can be reused which have been already used once earlier on
• Company can loose money or merchandise directly.
• Sweet Hearting.
• Fraudulent accumulation of bonus points on loyalty cards by internal staff.

THE CAUSE

6. Putting it simply – loose controls in the business are the primary reason for such dishonesty spreading around and that is contagious as well. Since Dishonest employees have strong code of conduct amongst themselves , it is difficult to detect as well. Most important is the fact that the victim in this case is not ‘visible’ to offender and hence no guilt feeling of offender.
MITIGATION PROCESS – RECOGNIZING THE PATTERN
7. Since most of the loyalty programmes are riding on business internal IT back bone, by default, we have data stored in data warehouse. Such data can be used to discern a fraudulent usage of loyalty card or discount coupon. Suitable data can be generated with the following threshold values indicative of fraudulent transaction:-

• Gift card / coupons have unique bar code or serial numbers. A report could be generated when such gift card / coupon have been encashed for multiple times.
• When a loyalty card has been swiped for multiple times at the same store (say for example 5 times a day), the data could be flagged for ground checks as it is generally not possible for a customer to shop that many times a day. Such situation would come up if few customers have not got themselves enrolled for loyalty programme, but, internal staff having personal loyalty card or loyalty card in the name of his / her relative, is being swiped to get accumulations for themselves or for their relatives and friends against the purchases made by customers without loyalty card.
• Businesses can design other threshold values based on specific processes of their respective businesses.
  

PLANNING A PLANOGRAM – LOSS PREVENTION WAY

Background

1. As Wikipedia has defined, “Planogram is a diagram of fixtures and products that illustrates how and where retail products should be displayed, usually on a store shelf in order to increase customer purchases. They may also be referred to as plano-grams, plan-o-grams or POGs.” It is required for helping customers, optimizing inventory and presenting similar looks of same format stores of retailer across city or geographical area.
2. Planograms can be ‘Demand Driven’ or ‘Supply Driven’ or mix of both of them. But, the underlying purpose of the retailer is how to sell more to earn more. I had queried from peers in our forum as to what is desirable aim for designing a store planogram. They came up with absolutely logical answers. Some logically stated that we should stock what is demanded, but, others had equal force in their comments that we can stock fresh products and create a demand. Both sides had strong reasons to support their thoughts. I was amazed to know that highest in the businesses have their feet on ground and they think of basics. And why not – there is no rocket science involved in selling. It is oldest profession in the world.
3. Whatever is the principle basis of designing a planogram by a retailer, the survey shows that faulty planogram can lead to unanticipated and unacceptable losses. (Question of what planogram should be based on is not debated here as it is exclusive privilege of retailer to decide the same on his own merits).
The Study
4. A dip-stick survey across various organised retail departmental stores was carried out in East Delhi (An area dominated by low income group in Delhi, India. The area is densely populated inviting number of organised retail chain shops. The study showed that most retailers have stocked latest brands of daily use items and most of these products remained unsold till they neared their Expiry or Best Before Date. At this stage, the products were marked down and the stocks got cleared, triggering fresh supplies and the cycle goes on. Under mentioned data is eye opener in itself :-

6. The basic reason for above mentioned losses is NON MOVEMENT OF STOCK FROM DISPLAY SHELVES TO CUSTOMERS. But the fact is that they impact bottomline. First problem is how to identify such stocks. The answer lies in analysis of store sales data over a period of time. For example, if data can indicate what all merchandise have not moved from the store for last 30, probably it is time to take note of this report. In other words, Data Analyst can be tasked to establish a pattern between the planogram and non moving inventory.

The Mitigation Process

7. After having identified non moving stock, then comes the issue of identifying reasons for the same and addressing the root cause. There could be variety of reasons why a particular product is not saleable from a particular store – could be there is no demand for that stock in the store catchment area or the product does not match customer satisfaction or could be pricing is not correct or some other issue. The concerned merchandising team and store team is best equipped to handle particular situation.

8. What ever the reason, some of the the solution lie in one or all of the following:-

(a) Non Selling Stock could be moved inter-store for liquidation and / or placement of fresh orders suspended.

(b) Planogram could be changed for the particular store in which there in Non Moving Inventory and be replaced with the products which will sell in the geographical area (unless business is stocking SKUs to build up a demand)
(c) Article could be replaced with similar product which has a history of good sales. Say for example Old Spice talcum powder is not selling over a period of time, but, Cinthol powder is doing fine, then, probably Old Spice needs to be removed from store planogram or promotion could be designed to help customer go for old spice.