Variance Worksheet

Mango Report
Help Center

Search:

Contents

IndexBookmarkPrint

Home > PDF Reports > Shrink Report > Variance Worksheet

Shrink Report - Variance Worksheet

The Variance Worksheet highlights top variances from your Shrink Report so that extra research can be performed to find and resolve the root cause. Your Inventory Coordinator should complete the worksheet (he/she should already have knowledge of these variances) and work with his/her manager or owner to resolve personnel, procedural or theft issues.

Selections focus on Hot Shrink (high-shrink SKUs), WD Alerts (theft-for-cash returns), and top dollar shrink/swell for the month. Items on your Variance Worksheet will show on your Adjusted Shrink listing in italics with an asterisk preceding the SKU's description, this lets you know the variance is already being researched when looking at your Adjusted Shrink listing.

Processing the Variance Worksheet is a critical step in controlling your Operational Level 3 - Shrink metric. If you haven't already performed your Operational Level 3 Checklist then we suggest familiarizing yourself with shrinkage and Mango's Level 3 Metric .

Steps to process your Variance Worksheet

Print the variance worksheet (usually page 1 & 2 of your Shrink Report attached to your Review Reports email).
Perform Variance Research - find and resolve the root cause (Inventory Coordinator).
Inventory Coordinator should then meet with manager/owner to resolve root issues.

1. Variance Worksheet - Overview

If you are already in the habit of reviewing variances in PIP before finalizing then processing the Variance Worksheet should be simple because you'll already know the story behind most of the SKU's listed. However, you may elect to spend more time researching Alerts, Hot, or other variances that somehow slipped through the cracks. With a little investigation, many of these variances can be corrected or resolved, and in some cases, the root problem can be permanently fixed.

From time to time, you will see something that doesn't look quite right. Don't be afraid to dig in: look at vendor invoices and packing slips, talk to your staff, and consult video. Theft involving outside vendors, internal staff, customers, and delivery personnel occur regularly. Professional skepticism and gut intuition go a long way! Treat these worksheets as you would a cashier's drawer; if a cashier turned in a drawer $100 short then you'd spend a few minutes of your time investigating the cause, so do the same with shrink!

The Chain Saw shrink (above) has been selected by Mango for extra variance research. One Chain Saw was subtracted from inventory (SHRINK UNITS = -1) with an inventory reduction of $280.96 (SHRINK COST = -$280.96). It was last sold at the beginning of the reported month and there is a Research Hint showing Multi+ which indicates this item may be displayed in multiple locations in the store. You can read more about variance research and research hints in Operational Level 3 - Shrink training -> Variance Research.

Clearly, this variance is not acceptable in any store and theft needs to be ruled out, or the process causing the variance found and fixed.

To help your manager or owner understand what happened with this SKU, you see four checkbox options and space to write in a few notes. An asterisk precedes the SKU's description to denote it's placement in the Variance Worksheet (this will be helpful when looking over your Adjusted Shrink listing in the next help section).

Checkboxes - Select the checkbox that best matches the reason or resolution for the variance.

Theft - check this if you can prove or HIGHLY suspect theft.
Breakage - check this box if the item was broken and vendor credit cannot be obtained.
Corrected - if the variance was reversed after a recount.
Other - the variance's cause is still unknown after reasonable research.

Notes Box

Write a brief description of the variance reason and any possible resolutions.

CS WD Alert - Special Case

When a Count Sheet Watchdog Theft Alert (CS WD Alert) SKU is selected for research, two additional check boxes will appear to help guide your research. This variance fits the signature of a theft-for-cash scheme, which needs to be ruled out.

Defective rung as Return - The item returned was defective but the cashier returned it to stock: selected the R code during the return (which adds 1 to quantity on hand) instead of the D (defective) code. (in this case, sell the item back then ring it through as defective, and then reverse the variance in PIP).

Theft for cash - The item was likely stolen and returned for cash. If the store is employing Eagle's Returns Validation feature then a store policy is likely being violated or there is an internal theft issue.

2. 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?

3. Example

A. Print the Variance Worksheet (printing tip)

Let's take a look at an example from real store (send us your example!)

SKU 58070 (above) had a net variance of -11 in September and a shrink cost of -$72. After completing variance research it was determined the SKU had many up/down adjustments as well as two separate intra-store transfers. It was not possible to identify the exact root cause but it was clear, after interviewing floor staff, nobody was assigned responsibility to the back dock area after Steve retired. Jake was assigned responsibility to maintain the area and shoot outs weekly. This will help catch variances sooner so we can figure out the cause via video.

SKU 7104045 (above). There was a communication issue between Jim and the customer and cashier (Lynn). Jim loaded 8 of the wrong SKU. I reversed the 8 and sold the correct SKU at point-of-sale the remaining -3 bags were unknown (probably previous loading errors or breakage).

SKU 7436728 (above). SKU was shrunk -2 while shooting outs (Lynn). I found them right where they should be after a recount. Is a pattern with Lynn? Talked with her about being more careful.

SKU 1310283 (above) These poles are hard to count because they look different when extended. I was able to find both of them. Talked with Angie about being careful with these when counting.

SKU 1107499 (above). Found right where they should be. Guess who?

SKU 2099190 (above). Talked with Ben, this looks like theft. Put a lock on the hook and moved the camera over the 4' torch section because of high theft in the area.

SKU 834002 (above). The worms die before we sell them. Decided to stop selling them.

SKU 42665 (above). Returned and shrunk after counted, but cashier error and theft-for-cash was ruled out during research. Probably a similar item mix-up with cashiering or previous counting.

SKU 82933 (above). This was an RCIN from a little over a year ago. Probably counted incorrectly back then, finally sold out and went negative.

SKU 46367 (above). Obvious counting error: entered 21 instead of 2. Should have been caught by Mike who finalized RPI that day. Talked with Mike about doing basic variance research before finalizing RPI