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Shrink Report - Adjusted

This section of your Shrink Report lists non-excluded counting variances for the reported month. These variances make up your Operational Level 3 - Shrink metric. The list is sorted by the greatest inventory reduction first (SHRINK COST column). Negative numbers in the SHRINK UNITS column indicate a reduction in inventory value (typically associated with theft and breakage) and positive numbers indicate inventory swell (errors and corrections). The report is processed by your inventory coordinator who may choose to meet with her manager or owner if she needs help resolving an issue like internal theft or a persistently sloppy inventory counter.

*SKUs in italics with descriptions preceded by asterisks are listed on your Variance Research report so these items are already under review by the inventory coordinator and manager or owner.

Report processing goals:

Pick out obvious research candidates not already on your Variance Worksheet and find and fix the root cause.
Make sure processes causing variances (shooting outs, Mango's Count Sheets, etc.) are understood and per policy.

For example, an Inventory Coordinator may choose to research and resolve a handful of less impactful variances from the Adjusted listing that are not part of the Variance Worksheet. He may also see 100 variances from a few four-foot sections and verify that the counting was directed by a manager or inventory coordinator and that the counting was accurately performed.

1. Key Concept - Understanding Adjusted and Excluded Shrink

Mango will exclude certain categories when measuring your Operational Level 3 - Shrink metric. SKUs classified below will be separated from your adjusted shrink listing and placed in the excluded section of your Shrink Report.

Adjusted Shrink vs. Excluded Shrink

Both adjusted and excluded shrink are listed (separately) in your Shrink Report, but the adjusted portion is only used in your Operational Level 3 - Shrink metric.

Print the table below here.

Excluded Shrink Classifications
Category	Class	Fineline	Other	Notes
Fasteners	561, 564, 566, 578, 580	- -	- -	If your store classifies fasteners differently (Class HIL for example) then Mango will not pick these up as Excluded unless there is a SKU match to Ace's catalog.
Store Supply	- -	- -	Location 1 = STORE	SKUs with a Location Code of STORE or where a SKU matches Mango's internal Store Supply database will be treated as Excluded. Consider utilizing Credit PO's (or Keep Stock Info=N) to minimize shrinkage noise.
Coupon	- -	- -	- -	SKUs with Coupon signatures are treated as excluded shrink. SKUs flagged with Coupons signatures are shown in your Exceptions.pdf report (Store Supply and Coupons, usually page 2).
Lumber	- -	- -	Record Type = L	Shrink to L - Lumber SKUs is treated as Excluded due to the amount of noise in this category. Lumber enabled stores can find Record Types in the upper-left corner of Inventory Maintenance.
Live Goods	752	- -	- -	Live goods can have significant shrinkage which is expected in this category.
Keep Stock = N	- -	- -	IMU Codes Tab	When a SKU's Keep Stock Info status is changed from Yes to No and the SKU had a QOH value, the loss in inventory value is shrink. Your Eagle system will not list the SKU in RPH but Mango will pick up the variance and list it as excluded.
Store Closeout = Y	- -	- -	IMU Codes Tab	Shrink due to closeout activity is treated as excluded.
Rental	--	--	Location 1 = RENT	Rental SKUs are treated as excluded shrink.
Bulk - Keys	510	- -	- -	If your store classifies keys differently (Class KEY for example) then Mango will not pick these up as Excluded unless there is a SKU match to Ace's catalog.
Bulk - Glass	151	- -	- -	Bulk Goods tend to be noisy and shrink is offset by sales to a corresponding dump SKU.
Bulk - Acrylic	152	- -	- -
Bulk - Wire	310	- -	- -	Bulk Goods tend to be noisy and shrink is offset by sales to a corresponding dump SKU.
Bulk - O-rings	404	- -	- -
Bulk - Tubing	466	- -	- -	Bulk Goods tend to be noisy and shrink is offset by sales to a corresponding dump SKU.
Bulk - Plastic Pipe	478	- -	- -
Bulk - Screen Repair	546	- -	- -	Bulk Goods tend to be noisy and shrink is offset by sales to a corresponding dump SKU.
Bulk - Chain	570	- -	- -
Bulk - Nails	573	- -	- -	Bulk Goods tend to be noisy and shrink is offset by sales to a corresponding dump SKU.
Bulk - Window Screen	575	- -	- -
Bulk - Rope	762	- -	- -	Bulk Goods tend to be noisy and shrink is offset by sales to a corresponding dump SKU.
Loc6:MGOEX	- -	- -	Location 6 = MGOEX	Setting a SKU's Location 6 to MGOEX will treat all shrink to the SKU as excluded. This setting can be used to classify a range of SKUs in your store if the above classifications are not suitable for your organization.
Stop Sale	- -	- -	- -	SKUs with active recalls or vendor stop sale notices are treated as excluded. Ideally, these items would be removed from inventory via a credit PO since a credit is typically issued from the vendor.

Steps to process Shrink Report - Adjusted

Look through the variances and determine if any are good candidates for extra variance research.
Print the pages with the SKUs deserving more research.
Try to understand the process which caused the variance (shooting outs, Mango's count sheets, other)
Perform variance research.
Meet with your manager or owner to resolve the cause (if warranted).

2. Adjusted Shrink - Overview

Bolding
Bolded SKUs indicate the need for extra variance research. They are not listed on the Variance Worksheet and are a lower research priority, but your Inventory Coordinator should review these and pick out variances that need extra research. Variances are bolded when the shrink/swell is under/over $20 and also meet these conditions: not on the Variance Worksheet and not a correction to a previous variance. You may also see bolded CS RC (Count Sheet Random Count types) which is part of your Operational Level 1 - IRA checklist, indicating extra variance research on random counts when the store's random sample last month was below 80% IRA.

Italics
SKUs in italics are also listed on your Variance Worksheet so are already under review.

Column - Shrink Units
The SKU's net quantity-on-hand adjustment for the month (variance). Negative numbers represent a reduction in quantity-on-hand as in breakage or theft; positive numbers represent an increase in quantity-on-hand and are errors or corrections.

Column - Shrink Cost
The SKU's variance times its replacement cost (shrink). Negative numbers represent a reduction in inventory value as in breakage or theft; positive numbers represent an increase in inventory value and are errors or corrections.

Column - Research Hint

If it can, Mango will show an abbreviated hint to aid variance research. The table below explains the various hints you may see.

Research Hints
Category	Hint
AHCOM	Ace Hardware .com sales and shrink event occurred within 7 days of each other.
BS+	SKUs in a possible back stock position exhibited by a SKU's quanitity-on-hand being greater than shelf quantity entered in Location 3.
CS --	CS stands for Count Sheet, followed by the Count Sheet's two-digit Count Type. This SKU was listed on last month's Mango Count Sheets.
Cashier Error?	SKUs that are commonly rung incorrectly at checkout.
Central RSC	SKUs ordered on your regular order and delivered via UPS from a centrally located warehouse (RSC). These SKUs on your Ace purchase order are received in your computer (RRP) along with your regular order (when delivered by your regular truck) but are physically delivered later via a secondary freight carrier like UPS. Because of this, there is a lag between the SKU's quantity on hand after receipt and the SKU's physical quantity. Because of this, Central RSC SKUs should be recounted if shrinkage is experienced.
Correction	The variance this month reverses the variance from last month.
Defective?	Items that are commonly found to be defective. Perhaps the item was returned using “R” (Return to Stock, quantity on hand increased by one) instead of “D” (quantity on hand not changed).
DISC	The SKU is discontinued from your warehouse. If it was zeroed out, make sure a replacement was investigated.
Dup SKU	This SKU has an exact duplicate that only varies by case. Check your Exception report for the Duplicate SKU section which will show the duplicate SKUs.
High Shrink Rate	These SKUs experience a high shrink rate across all stores.
HOT	This SKU is exhibiting persistent shrink and may be a shoplifting issue or a procedural issue.
ICM	Item was potentially a new/old SKU for an Inventory Change Management (ICM). SKUs may have been confused when counting.
Item Setup	The SKU has a fundamental setup issue with its Order Multiple and/or Unit Multiple that causes persistent shrinkage. Check your Master Exception report Item Setup section for more information on the SKU.
Kit	This SKU has been accidentally set up as a Kit Header. Check your Master Exception report Ket Header section for more information.
Multi+	SKUs in multiple locations exhibited by a floor location in Location 2 field in IMU. Check the other location(s) for inventory.
NoRPH	This SKU does not have a corresponding shrink record (RPH) in your Eagle system which indicates an imbalance in shrinkage. Give us a call if you see many NoRPH's appearing on your shrink report. (734) 301.4510.
Packaging?	SKUs that may have a packaging issue causing breakage.
RCIN	A recent RCIN was performed on the SKU. RCIN SKUs are commonly counted incorrectly because dissimilar-looking items have been combined into the same SKU in the back office but the SKUs have not been combined on the sales floor.
Receive Error?	SKUs commonly received incorrectly. For example, NS (Non Stock) displays and other items received as one package with many different SKUs inside.
Rep. SKU
Store Use?	SKUs which are used commonly throughout the store, e.g. toilet paper, packing tape, snap knife. These items should be charged through the store house account rather than run through your shrink system.
Theft?	Items that are commonly stolen. e.g. candy, snacks, drinks, liquid laundry detergent.
UPC x-link	Items listed on your Master Exception Report with a UPC cross link. These items will exhibit shrinkage until the x-link is fixed via your Master Exception Report.
Zeroed	the SKUs quantity on hand was likely set to zero, usually during your weekly shooting outs process.

Totals Section

3. Variance Research

Use the help below to guide your variance research steps.

Both Operational Level 1 - IRA and Operational Level 3 - Shrink are hard to achieve without good initial inventory counts and tight inventory procedures. Variance research provides critical feedback into the quality of your inventory counters, cashiers, and store procedures. In most stores, the inventory coordinator handles this responsibility where he/she acts like a detective, selects a handful of variances, and tries to find the root cause. When a root cause is found then he/she will work with the store manager or owner to resolve the issue.

Variance research goals:

Ensure staff is able to obtain a good count the first time (no sloppy counters nor sloppy shelves).
Look to find and fix gaps in store procedures dealing with the movement of inventory.
Look to find and fix cashiering errors so that sales analysis and order point calculations are maintained.
Identify significant store or vendor mistakes.
Detect theft: internal, customer, vendor, and delivery.
Accurately measure Operational Level 1 - IRA and Operational Level 3 - Shrink

Variance Research Overview

Few stores have the luxury to research every counting variance, that's why limiting counting processes (Mango best practices) and getting reliable first counts are critical first steps. Your task is to pick the most impactful counting variances and then audit them to discover the root cause. Once the cause is identified then fixing its source will help reduce future variances and in turn make research easier the next time.

The inventory coordinator is responsible for three variance research processes:

PIP research (ongoing throughout the week)
Shrink Report - Variance Worksheet (monthly)
Manager/Owner meeting to review Variance Worksheet (monthly)

How much time should I spend?

It depends on the dollar amount and nature of the variance. High-dollar shrink (+/- $100) should be resolved to completion including video if possible. Or if you think you might be on the trail of discovering theft or a procedural mistake then you should spend a lot of time since the problem is not likely to go away. However, there will be many variances where finding the root cause will be difficult. For example, shrinkage to 5 cans of 13322 Great Stuff insulation may be difficult to exactly pin down due to its high sales volume.

I don't have time for variance research!

PIP Research

Quantity-on-hand variance research is the most important accuracy process in your store. PIP research is typically performed by your inventory coordinator where he/she diligently scrutinizes variances in the Physical Inventory Posting (PIP) viewer before variances are finalized. You should set dollar thresholds $15.00 (for example) that trigger mandatory research when the variance dollar amount is
exceeded. Stores employing good variance research can quickly find and fix the root cause of inaccuracy.

1. Get a good first count

2. Research variances in PIP before RPI is run

3. Perform deep variance research

Module 1 - Prerequisite

Module 2 - Computer Work

The steps below will guide you through research performed on the computer. Do your best to spot the variance's cause using Eagle's ITR function so that a floor recount is not necessary.

Step 1: Research Hints

If you are researching from your Shrink Report (Variance Worksheet or Adjusted list) then use the table below along with the SKU's Research Hint (if it has one) to help gain insight into the cause of the variance. If you are researching from PIP then skip this step.

Research Hints
Category	Hint
AHCOM	Ace Hardware .com sales and shrink event occurred within 7 days of each other.
BS+	SKUs in a possible back stock position exhibited by a SKU's quanitity-on-hand being greater than shelf quantity entered in Location 3.
CS --	CS stands for Count Sheet, followed by the Count Sheet's two-digit Count Type. This SKU was listed on last month's Mango Count Sheets.
Cashier Error?	SKUs that are commonly rung incorrectly at checkout.
Central RSC	SKUs ordered on your regular order and delivered via UPS from a centrally located warehouse (RSC). These SKUs on your Ace purchase order are received in your computer (RRP) along with your regular order (when delivered by your regular truck) but are physically delivered later via a secondary freight carrier like UPS. Because of this, there is a lag between the SKU's quantity on hand after receipt and the SKU's physical quantity. Because of this, Central RSC SKUs should be recounted if shrinkage is experienced.
Correction	The variance this month reverses the variance from last month.
Defective?	Items that are commonly found to be defective. Perhaps the item was returned using “R” (Return to Stock, quantity on hand increased by one) instead of “D” (quantity on hand not changed).
DISC	The SKU is discontinued from your warehouse. If it was zeroed out, make sure a replacement was investigated.
Dup SKU	This SKU has an exact duplicate that only varies by case. Check your Exception report for the Duplicate SKU section which will show the duplicate SKUs.
High Shrink Rate	These SKUs experience a high shrink rate across all stores.
HOT	This SKU is exhibiting persistent shrink and may be a shoplifting issue or a procedural issue.
ICM	Item was potentially a new/old SKU for an Inventory Change Management (ICM). SKUs may have been confused when counting.
Item Setup	The SKU has a fundamental setup issue with its Order Multiple and/or Unit Multiple that causes persistent shrinkage. Check your Master Exception report Item Setup section for more information on the SKU.
Kit	This SKU has been accidentally set up as a Kit Header. Check your Master Exception report Ket Header section for more information.
Multi+	SKUs in multiple locations exhibited by a floor location in Location 2 field in IMU. Check the other location(s) for inventory.
NoRPH	This SKU does not have a corresponding shrink record (RPH) in your Eagle system which indicates an imbalance in shrinkage. Give us a call if you see many NoRPH's appearing on your shrink report. (734) 301.4510.
Packaging?	SKUs that may have a packaging issue causing breakage.
RCIN	A recent RCIN was performed on the SKU. RCIN SKUs are commonly counted incorrectly because dissimilar-looking items have been combined into the same SKU in the back office but the SKUs have not been combined on the sales floor.
Receive Error?	SKUs commonly received incorrectly. For example, NS (Non Stock) displays and other items received as one package with many different SKUs inside.
Rep. SKU
Store Use?	SKUs which are used commonly throughout the store, e.g. toilet paper, packing tape, snap knife. These items should be charged through the store house account rather than run through your shrink system.
Theft?	Items that are commonly stolen. e.g. candy, snacks, drinks, liquid laundry detergent.
UPC x-link	Items listed on your Master Exception Report with a UPC cross link. These items will exhibit shrinkage until the x-link is fixed via your Master Exception Report.
Zeroed	the SKUs quantity on hand was likely set to zero, usually during your weekly shooting outs process.

Step 2: Historical Transaction Investigation

In this step, you want to follow quantity-on-hand movement in chronological order to try and decipher if a variance was caused by a previous counting error, purchasing error, cashiering error, etc.

Open Eagle Browser
In the Launch Bar, type in ITR and press Enter
Type in the SKU you are researching, press Enter
Change the Starting date to be at least 5 years ago
You now have a historical viewer that shows the detail of every quantity-on-hand change.

Look for these issues as you scroll through the viewer:

Issue Name	Problem	Resolution
Count Correction	Was it miscounted 4, 6, 12 months ago?	Look for a pattern: are a lot of variances caused by one person? Is back stock not labeled, are there a lot of multiple locations? Is one department showing up a lot more?
Return vs. Defective	Did a cashier return this item to inventory "R" when it was actually a defective "D" item?	This is a common variance cause because an R-type return adds one to quantity-on-hand while a D-type return does not. The cashier who carelessly selected "R" for the defective returns is the culprit. See Cashier Testing.
Rung-out multiple times.	Occasionally, a cashier will ring a transaction more than once due to system error or the cashier will start over without voiding the transaction. Look for identical transactions within a short time period.	Resolve the network/system communication error. Cashier training.
RCIN	Is there RCIN activity for this SKU? When SKUs are combined (RCIN) dissimilar looking items (and UPCs) can share the same SKU, make sure all the combined items on the sales floor are being counted together as one SKU.	Look at the UPCs assigned to the SKU and recount the shelf keeping an eye on combined items that may be orphaned on their old SKU'd locations.
Recent Purchase	If the variance exactly offsets a recent purchase then the items may be misplaced in the store or did not get physically received into the store. Consult your video system if you can to see if the product ever made it to the shelf location.	A recount is a good idea when this happenns. If it is a large-ticket item then interview staff and consult video. There is a lot of theft that can happen between the back of the delivery truck and your back door.
Lack of a recent sale	Often, a customer will accidently take a special-order or hard-to-scan item out of the store without being charged. This is an honest mistake. With your knowledge of special order and customer activity, this SKU may trigger your memory.	Call the customer and charge them!
Missing a P.O.	Sometimes a buyer short-cuts the purchasing process by adding inventory on-hands directly in Inventory Maintenance instead of creating a purchase order through MPO.	For shrink tracking and accounting purposes, all purchases need to go through MPO.
Sent back to vendor	In an effort to save time, quantity-on-hand for items returned to the vendor are adjusted in Inventory Maintenance or PIP, rather than through a credit PO (MPO, type C).	If you are receiving credit for the items then a credit PO needs to be made.
Store Use	Regular inventory items used for store operation and maintenance (Store Use) are either logged through Inventory Maintenance or PIP or are not accounted for at all.	Store Use items (regular inventory used for store maintenance) need to be rung at point-of-sale through the store's house account.
Donation	Donations are taken out through Inventory Maintenance/PIP rather than a donations house account.	Donations need to be rung at point-of-sale through the store's donations account.
Owner Use	Owner and family are taking inventory from shelves without checking out.	Owners and family need to check out through point of sale.

If you can't determine the cause of the variance from the historical transaction search than continue on to Module 3.

Module 3 - Floor Work

Module 4 - Video Evidence

I suspect theft, now what?

4. Example A

Research Hints
Category	Hint
AHCOM	Ace Hardware .com sales and shrink event occurred within 7 days of each other.
BS+	SKUs in a possible back stock position exhibited by a SKU's quanitity-on-hand being greater than shelf quantity entered in Location 3.
CS --	CS stands for Count Sheet, followed by the Count Sheet's two-digit Count Type. This SKU was listed on last month's Mango Count Sheets.
Cashier Error?	SKUs that are commonly rung incorrectly at checkout.
Central RSC	SKUs ordered on your regular order and delivered via UPS from a centrally located warehouse (RSC). These SKUs on your Ace purchase order are received in your computer (RRP) along with your regular order (when delivered by your regular truck) but are physically delivered later via a secondary freight carrier like UPS. Because of this, there is a lag between the SKU's quantity on hand after receipt and the SKU's physical quantity. Because of this, Central RSC SKUs should be recounted if shrinkage is experienced.
Correction	The variance this month reverses the variance from last month.
Defective?	Items that are commonly found to be defective. Perhaps the item was returned using “R” (Return to Stock, quantity on hand increased by one) instead of “D” (quantity on hand not changed).
DISC	The SKU is discontinued from your warehouse. If it was zeroed out, make sure a replacement was investigated.
Dup SKU	This SKU has an exact duplicate that only varies by case. Check your Exception report for the Duplicate SKU section which will show the duplicate SKUs.
High Shrink Rate	These SKUs experience a high shrink rate across all stores.
HOT	This SKU is exhibiting persistent shrink and may be a shoplifting issue or a procedural issue.
ICM	Item was potentially a new/old SKU for an Inventory Change Management (ICM). SKUs may have been confused when counting.
Item Setup	The SKU has a fundamental setup issue with its Order Multiple and/or Unit Multiple that causes persistent shrinkage. Check your Master Exception report Item Setup section for more information on the SKU.
Kit	This SKU has been accidentally set up as a Kit Header. Check your Master Exception report Ket Header section for more information.
Multi+	SKUs in multiple locations exhibited by a floor location in Location 2 field in IMU. Check the other location(s) for inventory.
NoRPH	This SKU does not have a corresponding shrink record (RPH) in your Eagle system which indicates an imbalance in shrinkage. Give us a call if you see many NoRPH's appearing on your shrink report. (734) 301.4510.
Packaging?	SKUs that may have a packaging issue causing breakage.
RCIN	A recent RCIN was performed on the SKU. RCIN SKUs are commonly counted incorrectly because dissimilar-looking items have been combined into the same SKU in the back office but the SKUs have not been combined on the sales floor.
Receive Error?	SKUs commonly received incorrectly. For example, NS (Non Stock) displays and other items received as one package with many different SKUs inside.
Rep. SKU
Store Use?	SKUs which are used commonly throughout the store, e.g. toilet paper, packing tape, snap knife. These items should be charged through the store house account rather than run through your shrink system.
Theft?	Items that are commonly stolen. e.g. candy, snacks, drinks, liquid laundry detergent.
UPC x-link	Items listed on your Master Exception Report with a UPC cross link. These items will exhibit shrinkage until the x-link is fixed via your Master Exception Report.
Zeroed	the SKUs quantity on hand was likely set to zero, usually during your weekly shooting outs process.