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This is to certify that the ' .
thesis entitled

mar CONTROL I! m nun.
ammo: 01' A GROCERY
CHAIN 3m

presented by

”0930' 3. man

has been accepted towards fulfillment

of the requirements for L

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Currimlun in load Distribution

 

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Date 0 3

 

 

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INVENTORY CONTROL IN THE RETAIL OPERATION

OF A GROCERY CHAIN STORE

BY

Woodrow Harrison Joyner

A THESIS
Submitted to the School of Graduate Studies of Michigan
State College of Agriculture and Applied Science
in partial fulfillment of the requirements
for the degree of

MASTER OF ARTS

Department of General Business ‘
Curriculum.in Food Distribution 3 - ‘55

1953 ‘\ xx

 

.I‘llllll‘I‘i! II.|I]J|. ll"

ACKNOWLEDGEMENTS

The author wishes to express his appreciation and
gratitude to Dr. E. A. Brand, Director of the Curriculum
of Food Distribution at Michigan State College, for his
constant supervision, guidance and suggestions contributed
to the completion of this study.

Sincere thanks is due Dr. Kenneth Wilson, Director of
The Division of Business at Michigan State College for his
helpful suggestions and advice.

Grateful appreciation is extended to Colonial Stores,
Incorporated for the opportunity of attending Michigan State
Coilege. The author is also grateful to the many grocery
companies who contributed information which made the com-

pletion of this study possible.

TABLE OF CONTENTS

CHAPTER

I.

II.

III.

IV.

INTRODUCTION. . . . . .

Definition of the Problem

Purpose of the Study.

Importance of the Study .

Limitations of the Study.

Procedure Followed in Obtaining

RECEIVING MERCHANDISE .

Checking Warehouse Shipments.

Checking Drop Shipments

Time of Delivery. . .
Container Returns . .
Case Price-marking. .

/
MARKING MERCHANDISE . .

Information

Results of Illegible Price Marks.

Incorrectly-priced.Merchandise.

Stamping Methods. . .
Price changes. . . .
Price-change Credit .
Authorization Lists .
STOCK CONTROL. . . . .
Definition. . . . . .

Broken-case Merchandise

Customer Breakage . .
Stockroom.Training. .
Stock Rotation . . .

. PAGE

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CHAPTER

V.

VI.

VII.

VIII.

PILFERAGE CONTROL. . . .
Importance . . . . . .
Preventive Measures. .
Handling Offenders . .
Employee Pilferage . .

Salesman Pilferage . .

ACCOUNTING PROCEDURES FOR RECORDING CHARGES

AND CREDITS. O O O O C 0

v .

Charging Merchandise to Store. .

Inventory Loss Allowed

Credit for Uhsalable Merchandise

Approving Credit Memos
Office-fund Audit. . .
CHECKOUT PROCEDURES . . .
Type of Checkstand . .

Losses from.Inaccurate

Checking

Causes for Checkout Errors . . .

Accuracy of Checkers .
Checker Training. . .
Employee Purchases. .
SUPERMARKET PERSONNEL. .
HWPiement. ’. '. °. 3
Employee Carelessness.

Employee Dishonesty. .

iv

. PAGE

28
28
29
31
33
53
35
35
38
38
4O
41
44
44
45
47
48
50
52
53
53
53
56

CHAPTER
IX. PHYSICAL INVENTORY. . . . . . . .

Responsibility for Taking Inventory

Inventory Retakes . . . . . . .
Preparation for Inventory . . .
Procedure for Taking Inventory.

x. SUMMARY AND CONCLUSION. . . . . .
Summary . . . . . . . . . . . .
Conclusion. . . . . . . . . . .
Recommendations (Check list). .
BIBLIOGRAPHY . . . . . . . . . . . . . .
APPENDIX A Questionnaire . . . . . . . .

B Letter. 0 O O O O O O O O O 0

PAGE
58
58
51
62
62
65
65
72
74
79
8O
85

TABLE
1.

2.
3.

4.
5.
6.
7.
8.
99
10.
11.

12.

1:5.
14.

LIST OF TABLES

PAGE

Methods Used to Check Incoming Shipments from
Company Warehouse. . . . . . . . . . . . . . . . . 6
Person Responsible for Checking Drop Shipments. . 8
Period in which Merchandise is Marked During
Receiving Operation. ‘.' . . . . '.' . . . ‘,° . .10
Types of Stamps Used for Marking by Super Markets.l3
Frequency of Regular Price Changes in theSuper' .
Market . . . . . . . . . . . . . . . . . . . . . .15
Methods of Extending Credit for Regular Price.
Changes. . . . . . . . . . . . . . . . . . . . . .18
Equipment and Methods Used to Decrease Customers
Breakage . . . ... . . . . . . . . . . . . . . . .24
Types of Training Programs Used for Stoskroomh
Operations and Stocking. . . . . . . . . . . . . .25
Methods of Rotating Stock. . . . . . . . . . . . .26
Preventive Measures Against Pilferage. . . . . . .3O
Importance of Stock.Arrangement as a Device for
Controlling Pilferage. . . . . . . . . . . . . . .30
Procedure for Handling Pilferage Violators Who 4
Are First Offenders. . . . . . . . . . ._. . . . .31
Methods of Charging Merchandise to the Stores. . .35
Boss‘s? Esquires bv.Msmbess of ths Gracery

InduStry O O O O O o O o o o o o O o o o o o o o 038

vii
TABLE 7 _ PAGE
15. Percent of Companies Giving Credit to Stores.
for Merchandise Losses. . . . . . . . . . . . 39
16. Person Approving Credit Memos . . . . . . . . 41
17. Frequency of Store Office Fund Audits . '.' . 42
18. Types of Checkstands Employed by Companies
. Surveyed. .R. . . . . . . . . . . . . . . . . 44
19. Results of 95 Shopping Tests Made in Nine‘
Chains on Orders Ranging from $1.88 to $8.31. 46
20. Frequency with whichCashiers are Checked for
Accuracy. . . . . . . . . . . . . . . . . . . 49
2l. Length of Initial Training Period for Checkers 51
22. Procedures for Handling Employee Purchases. . 52
23. Person Responsible for KeepingDelivery Door
Closed During the Day . . . ._. . . . ‘.° . . 54
24. Methods of Enforcing a Non-consumption of .
Food Policy in the Supermarket. . . . . . . . 56
25. Persons Responsible for Taking Inventories. . 59
26. Comparison by Departments of the Length of I
InventoryPeriods in FortyGrocery Companies. 60
27. Reasons for Using Inventory Retakes . . . . . 61

 

LIST OF FIGURES
FIGURE - . . PAGE
1. A Form Used by the Accounting_Department of a
Grocery Company. . . . . . . . . . . . . .V. . . 37

2. A Form Used for Taking Inventory in the Store. . 63

CHAPTER I
INTRODUCTION

Definition of Problem

Inventory control, as used by the grocery retailer of
today, includes many phases of the retail operation. The
relation of stock on hand to sales, the amount of inven-
tory required on hand and the efficiency in handling the
physical inventory can all be classified as phases of in-
ventory control. In this study, inventory control is con-
sidered as the control necessary to maintain a balanced
inventory in the grocery department of a retail chain
store. Only that control which is necessary to obtain.
and maintain an inventory with a minimum amount of loss
is included. The problem arises from the inability of
store managers to disclose and control factors which con-

tribute to inventory loss at the store level.

‘Purpose of the Study
The purpose of this study in inventory control is to

consider the factors which cause inventory losses in the
retail storesand to determine the importance of each.
The problem.is to find better methods of control and to

determine the factors to consider when an investigation is
made in the store. It is the author's primary purpose to

present the procedures used today by members of the food

chain industry. Ideas obtained from these operational pro-

cedures may suggest better inventory control methods to
establish. This information was obtained through a ques-
tionnaire which was sent to fifty food chains. The results
of the questionnaire are the basis for this study of inven-
tory control.
Importance of The Study

A need for a study of this nature is evidenced by the
importance of inventory control in the operation of a retail
store. The amount of money lost each year by the grocery in-
dustry through inventory loss is difficult to determine. A
large number of factors which could contribute to an inven-
tory loss accounts primarily for the complexity of the prob-
lem. Since the degree to which each factor is involved is
difficult to measure accurately, grocers find the problem
still more difficult to solve. "Shortage may be caused by
theft, by breakage, by loss, by physical shrinkage, by mis-
measuring and by overselling. There is no way to determine
how much of the physical loss is attributed to each of these
factors."1 It is hoped that this study will make some contri-
bution to the food industry by pointing out methods which may
benefit store managers in their endeavor to obtain better con-

trol over their inventory.

 

1. Jehn W. Wingate and Elmer O. Schaller. Techniques of
Retail Merchandising. New York: Prentice-Hall, Inc.
1950. p. 226.

Limitations

This study is limited to the operation of the grocery
department and all reference, unless otherwise mentioned,
will pertain only to the grocery department operation. The
perishable nature of the items handled by the produce and
meat departments makes necessary a different type of opera-
tion and the problem, as defined in this studyz, does not
consider the operations of these departments. The size of
the store or company is not taken into consideration although
the discussion is concerned mainly with chains having central
accounting departments, company warehouse service and top man-
agement located outside the stores. Self-service stores that
include mainly groceries with a small amount of non-food items
are referred to as average stores. A one-floor Operation is
implied when reference is made to the operational procedure
of a super market. As stated by the definition of inventory
control, only those procedures which deal with maintaining
the correct amount of physical inventory on hand is consid-
ered. When warehouses and delivery equipment are mentioned
in the study, the assumption is made that the grocery com-
panies own and Operate this property.

When "the survey" is mentioned in this study, reference
is made to the contact made by the author with executives in

grocery companies through the questionnaire.

¥

2. See page 1

Procedure Followed in Obtaining Information

A list of fifty grocery chains from every section of the
United States was selected from.the 1951 Directory of Grocery
and Supermarket Chains. No scientific sampling was performed
since the purpose of the list was to include the major food
companies in each section of the country. A questionnaires,
along with a covering letter4, was sent to an executive in
each of these companies. This questionnaire was constructed
to follow the outline of this thesis and included questions

pertaining to various phases of inventory control. In addi-
tion to facts regarding procedures, the questionnaire requested
information regarding methods, policies and opinions of top
management. The questionnaire was sent to fifty companies,

of which forty replied, an excellent return of 80 percent.
Therefore, when reference is made to the survey, it is im-
plied that the number or percent used is based on the forty
returned questionnaires.

The questionnaires received were then edited and tabu-
lated for use as a basis for ideas and conclusions set up in
this study. Particular attention was given to the different
answers submitted by food executives and extreme care was

exercised in their interpretation. A master answer sheet

 

3. Complete questionnaire appears in appendix A.

4. Complete letter appears in appendix B.

was set up to facilitate a more rapid determination of the
results. Although a few sources of information other than
the questionnaire are cited in this report, the results of
this survey are used as the major authority. The responses
by the grocery industry and the information obtained from
food publications made it possible to bring forth methods
that could aid the grocery industry in mastering some of

the problems of inventory control.

CHAPTER II

RECEIVING MERCHANDISE

Checking Warehouse Shipments

A check of merchandise received by the store is con-
sidered in this study to be an important phase in inventory
control. First of all, shipments are received from the comp
pany warehouse which is the store's major supplier. The sur-
vey shows that on the average 20 percent of the incoming mer-
chandise is received at the store through dr0p shipments.
Therefore, 80 percent of the incoming merchandise is received
through warehouse deliveries. Since warehouse shipments con-
stitute such a large portion of the shipments received, it
would seem desirable to establish a reliable method for check-

ing these shipments.

TABLE 1

METHODS USED TO CHECK INCOMING SHIPMENTS
FROM COMPANY WAREHOUSE

 

 

 

Methods USGd Number of Companies
Piece count of merchandise 11
Item count of merchandise 24
Piece count and item count 4
No check 1

 

Total 40

 

7

Table 1 shows that the method most frequently used and
considered the most effective is a check by item against the
warehouse invoice. An item dheck requires the employee to
find the item in question and then check this item off the
warehouse invoice. Twenty-four companies out of forty have
established this method as the one to use in their respec-
tive company. It can be seen that the piece count method
is widely used but not to the extent of the item count
method. The piece count consists of a count of the items
charged the store by number only. Based on the results of
Table l, 11 of the forty companies use the piece count
method. Regardless of the method used, it is desirable that

the grocery manager be positive that he receives all the mer-

chandise with which he is charged.

Checking Drop Shipments

The remainder of the merchandise received by the store
can be placed in the drop shipment category. As stated pre-
‘wbusly, on page six, an average of 20 percent of all merchan-
<iise received by the forty companies is received in this
Iranner. Since 36 companies require a check of the merchan-
<iise against the invoice, it is evident that this smaller
percent of shipments in no way lessens the importance of

(ahecking them. Responsibility for checking drop shipments

varies with different companies.

TABLE 2

PERSON RESPONSIBLE FOR CHECKING
DROP SHIPMENTS

 

 

 

 

Responsible Person Number of Companies
Store Manager 12
Assistant Manager 10
Stock Clerk 10
Either of the three 8
Total 40

 

Table 2 shows much variation as to the persons who are
responsible for checking drop shipments. The answers given
were interpreted, however, to mean that the responsibility
is placed on one person. Efficient performance of this task

is difficult when different employees check drop shipments
and no particular employee assumes the responsibility. The
importance of checking drop shipments to control the elimina-
tion of inventory shortage is indicated by members of the
food industry in their method of checking these shipments
compared to the methods used to check warehouse shipments.
The presence of deliverymen not employeed by the purchasing
company makes control more difficult since it is reasonable
to assume that the suppliers' representatives have less

interest in the grocery company than do the store employees.

Probably the failure to enforce checking methods is the
major cause for difficulties resulting from the receipt

of direct store deliveries.

Time of Delivery

Sometimes deliveries of grocery department merchandise
are made at times other than store hours. Often these de-
liveries are made when no store employees are present to
check and receive this merchandise. This seems to place
an excessive amount of responsibility on the deliveryman.
Such deliveries as this do not seem desirable unless some
responsible person is present to receive the merchandise.
The survey shows that an average of 20.6 percent of the stores
operated by the companies responding engage in night stock-
ing. If night deliveries are to be made it appears that
more control could be exercised if these deliveries were

made in the stores who stock at night.

Container Returns
Associated with the delivery of merchandise is the
receipt and return of permanent packing cases used by
many companies to consolidate small grocery items. In
order to encourage the return of these containers by store
managers, a deposit is charged to the stores by 22.5 percent
of the companies replying. The failure to take credit upon

the return of these containers can very easily cause errors

. 10
which would affect the store inventory. The policies of the
companies determine the procedure to follow but it is impor-
tant that the manager check the store personnel for accurate

performance in recording store credit for returned containers.

Case Price-marking

It is not the purpose of the author to measure in any
way the efficiency of various operational methods used by
food companies, unless it is felt that it directly concerns
the inventory of the store. Methods of unloading and check-
ing merchandise differ greatly because the types of operation
vary. One of the procedures used by the companies in the re-
ceiving operation is marking the unit price on the outside of
each case of merchandise. This practice is used to help re-
duce errors that may occur during the stamping operation and

to speed up the marking operation.

TABLE :5_

PERIOD IN WHICH MERCHANDISE
IS MARKED DURING RECEIVING OPERATION

 

 

 

Period Number of
_ Companies
.At the company warehouse 1
During the unloading operation 9
After storage 14
Price not marked on outside case 15

_

Total 40

k‘

11

Table 3 relates the time during the receiving Operation
at which the unit price is marked on each case. It is inter-
esting to note that 16 companies did not mark the unit price
on each case, even when placed in storage. It is possible
that some methods of stamping and stocking would not warrant
the use of marking the unit price on each case of merchandise.
Since the various types of operations are not given and ex-
plained, a statement that this procedure is the best could
not be substantiated. However, it would seem desirable to
utilize this method when possible to eliminate errors in
marking merchandise. Records have a tendency to become lost
or scattered and when there is no indication of the price at
which the store is charged, only the shelf price can be used.

The type of stockroom Operation employed by each com-
pany would determine the applicability and desirability of
such a procedure. When merchandise is placed in storage for
any length of time, it would seem desirable to mark the case
with the unit price for the purpose of taking inventory and
price-stamping control. Little time is necessary to change
the case price of those items which are included in the reg-
ular price-changes of the store. When price-stamping is done

during business hours and off the selling floor, the time con-
sumed in determining the correct price may be reduced if the

price appears on the case.

CHAPTER III
MARKING MERCHANDISE

Results of Illegible Price Marks

Another control factor in the operation of the super

market is the marking of merchandise with the selling price.

The results of badly—marked merchandise in a super market

operation is as follows:

1.

4.

The customers are not sure the price they are being
charged is the correct price. They may also select
an item.which appears to be one price and be asked
to pay another at the checkout counter. This causes
dissatisfaction and is contrary to good customer re-
lations.

The checker is interrupted, when an illegibly marked
article is received and must take time to determine
the selling price. Therefore, the checkout procedure
is halted which may cause customers to becomeaimpa—
tbnt and dissatisfied.

Often the checker asks someone else in the store to
find the correct price, thus taking the time of two
employees in addition to delaying customers.

There is a possibility that the checker may fail to
determine the correct price and charge the wrong
price for some article. Again there is the danger
of a dissatisfied customer as well as an overage or

shortage in the store's inventory.

13
Incorrectly-priced Merchandise

Similar to illegibly-marked merchandise is the article
which is marked with a wrong price. The result is more damag-
ing to inventory control than the illegible price mark since
it is very probable that the checker will not recognize the
error. At least one super market manager believes that in-
correctly-priced merchandise is one of the most important

factors contributing to inventory loss and customer dissatis-

 

 

 

 

faction.
Stamping Methods
TABLE 4
TYPES OF STAMPS USED FOR MARKING
BY SUPER MARKETS
f St Number or
Type 0 amp Companies
National Cash Register Stamp Set 30
Adjustable band stamp and pad _ 25
Quick Mark Set 1
Carver Set 1
Self-inking hand type 3
Total 60*

 

* Some companies used more than one type
The type of price stamp used in stamping merchandise
is an important factor in obtaining legible prices. Table 4

lists the types of stamps used by the companies surveyed.

14
The adoption of the National Cash Register Stamp Set by
thirty companies indicates their preference for this type
of stamp. It is the opinion of the author that this stamp
set increases the legibility as well as the efficiency of
the stamping operation. There has been some opposition to
this type of stamp because of the cost involved, however,
the benefits derived would seem to Justify its use.

Another factor determining the accuracy of the marking
operation is the human element involved. Company policy
will determine where the responsibility for accurate marking
is placed, however, strict enforcement of this procedure is
necessary to control this phase of grocery operation. The

type of stamp is not as important as prOper use.

Price Changes

An important factor in the management of a super market
and a very important one in inventory control is item price
changes. They are considered by some managers as a burden
to their operation but they seem to be necessary to good
management. Although price changes cannot be made in the
retail store as frequently as wholesale changes occur, it
is necessary to change retail prices before the store supply

has diminished.

15
TABLE 5

FREQUENCY OF REGULAR PRICE CHANGES
IN THE SUPERMARKET

 

 

 

 

Period Number of
Companies
Daily 3
Twice each week 4
Every week 30
When necessary 5
Total 40

 

Table 5 indicates the frequency with which price changes
are sent to the stores by the companies contacted. Since reg-
ular weekly price-change lists are normal in thirty of the for- '
ty companies it can be assumed that such lists are essential
and should be so considered by store managers. The danger
to inventory control, however, is not the frequency of changes
but the negligence in carrying out the change and the follow-
through by managers for proper performance of marking.

One grocery manager has stated that the greatest problem
I he faces in controlling inventory is keeping the correct sell-
ing; price on merchandise, both original marking and subsequent
price changes. Some causes for incorrect shelf prices are as
follows:

1. Failure to make the physical price change as directed

by the price-change letter.

2.

3.

4.

5.

6.

16
Failure to change the selling price on the entire
shelf stock'when changes occur. Sometimes the front
portion of the shelf stock is changed while the back
portion is left untouched. This is probably due to
inadequate supervision of employees to make certain
an assigned Job is completed.
Incorrect marking of merchandise in the stock room.
This may be caused by the failure to change the case
price of stock on hand when price changes are received.
Failure to change back any special-priced merchandise
on hand after a special feature has expired.
Carelessness Of store personnel in marking merchandise.
Frequently managers will change items that are in-
creased in price but do not change those items which

are decreased.

The causes of incorrect prices are not as important to

inventory control as the results. Incorrect prices result in

a loss to the company wien there is an undercharge and a loss

of customer good will when there is an overcharge. To alle-

viate this problem, the following practices can be followed

in handling price changes:

1.

2.

Make price changes immediately uponzreceipt of
notice or by the time they become effective.
Make price changes on shelf merchandise and on

cases in storage, both regular and special prices.

17

3. Check changed prices against the price change~
lists received to assure accurate performance.

4. Check shelf prices with the authOrized price book
after changes are made and have discrepancies
corrected.

In order to minimize incorrect prices, store managers
must continually check for accuracy in marking, changing
and maintaining correct shelf prices.

When price changes are made in the store, a difference
between the current sellingprice and the price at which
the stere was charged occurs. This difference should be
accounted for through a charge or credit. If this is not
done the store's inventory absorbs the gain or loss. It
is thought by some people in the food industry that when
regular price changes occur, the increases tend tolaalance
the decreases. This could not be true of special price
changes since they are only decreased. However, when mer-
chandise is charged to the store at a special price, the
number of featured items previously maintained in the store
inventory could balance the amount on hand after the special
feature has expired.

Price Change Credit

Table 6 shows the methods used to extend credit to the

stores for regular price changes. Since there were no ans-

18
TABLE 6

METHODS OF EXTENDING CREDIT
FOR REGULAR PRICE CHANGES

 

__

 

 

___ Companies
Charge and credit on inventory 8
Markup and'markdown 3
Test stores 3
Advance and decline sheets 1

No answer 10
Total n 25*

 

*The companies extending credit for regular price changes
were to the question about methods of handling special price
changes, it is assumed that the methods used are the same
for each type of price change. It can be seen in Table 6
that 25 companies give credit to thestores for regular
price changes while 22 give credit for specialprice changes.

Some companies gave credit based on an inventory taken
by store personnel of those items changing in price. This
method was discontinued by many companiesbecause of the
abuse by store managers. .There was'a tendency for managers
to pad the actual inventory to cover losses incurred from
other sources._ The true amount Of inventory loss or gain
could not be audited which is another reason for discontinu-

ing the practice.

19

Test stores are used by some companies to determine the
average amount of inventory loss or gain which stores of each
class should receive for price changes. The test store aver-
age is credited or charged to every store within a certain
category. This method is being regarded with favor by the
companies adopting it and especially those changing from the
store inventory method.

When the manager of a store is required to take a_physi-
cal inventory to determine the credit given for price changes,
a checkup on the validity of the manager's inventory is de-
sirable. The information received from the questionnaire
showed that only seventeen of the companies had such check.
Of these seventeen, 70 percent used only an occasional spot
check forwaccuraqy. These results indicate that a check on
the manager's inventory either holds little importance or
that the checks are too costly to be used frequently.

In the process of marking merchandise, a company or store
may set up certain procedures and policies to follow. Pre-
stamping should be considered when fOrmulating pricing poli-
cies in aly operation. Pre-stamping is referred to in this
study as the procedure of stamping all merchandise when it
is received whether it is needed on the selling floor or not.
This is referred to as complete pro-stamping. It is true that
pre-stanping of fast-moving items is done in the majority Of

stores today but to effectively employ the complete pro-stamping

20
method, the following factors should be considered:

1. Merchandise should be ordered accurately and only
that merchandise which is needed for shelf’stock in
a delivery period should be ordered.

2. Sufficient notice should be given before price
changes become effective. The survey shows an
average of 2.3 days notice is given by companies
replying.

3. Stock turnover should be rapid enough to warrant
the use of pre-stamping.

4. Extreme care should be taken to:reduce price errors
When the merchandise is stamped and sent to the
selling floor.

A complete pro-pricing policy places a heavy burden on
the stock room clerk when price changes occur. Merchandise
in storage.which has previously been marked, must be remarked
when a price change is received. However, 28 of the forty
companies surveyed now employ this method of marking in their

grocery departments.

Authorization Lists
The survey shows that 92.5 parcent of the grocery retail-
ers employ an authorization list for the purchase of merchan-
dise. It is necessary for companies having specialized pur-

chasing departments to exercise some control over outside pur-

21
chases in order to coordinate the efforts of purchasing,
sales, merchandising and other departments which service
the stores. In addition to this, it is also a preventive
measure to keep managers from making "deals" at the expense
of the customer to cover for other losses. ‘When asked if
their managers were able to purchase unauthorized items,
thirty-five answered in the negative. Thirty-five percent
also do not allow managers to purchase items authorized in
their store but out of stock in the company warehouse. The
questionnaire indicates that the grocery industry is in gen-

eral agreement on the subject of product authorization.

CHAPTER IV
STOCK CONTROL

Definition

Unit stock control is sometimes defined as "an organized
method of determining, analyzing and controlling sales and
stocks in terms of units"1. That is, merchandise is thought
of in terms of quantity and.stock turnover instead Of stock
handling. It is true that stock turnover has a direct bear-
ing on inventory control and a slow rate of turnover may
cause some goods to become shopworn or stale. The physical
handling of merchandise in the store is of greater importance
in the reduction of inventory loss than the quantity factor.
The quantity of merchandise is more directly related to sales
whereas the proper handling of store merchandise is related
to the amount of inventory loss incurred through stock dam—
ages. Stock control, therefore, is defined for the purpose
of this study as the control of stock handling in the Opera-

tion of a super market.

Broken-Case Merchaldise
The storage of broken-case merchandise is an important

consideration in the stocking operation. The finding of

 

1. John W. Wingate and Elmer O. Schaller. Techniques 2;
Retail Merchandising. New York: Prentice-Hall, Inc.
I950. p. 405.

23
suitable storage space to properly protect this merchandise
from.damage is more difficult in stores not having storage
space under gondolas. The survey shows that thirteen comp
panies use gondolas which provide storage space for broken-
case merchandise, while the remainder use their stock rooms.
The inventory control problem is to avoid damage to the mer-
chandise in broken cases while they are handled and stored.
Broken-case merchandise should be consolidated into cases
of similar packages and products to conserve on storage
space and for greater efficiency. A practice which may
serve as a partial solution requires the use of all broken-
case merchandise as shelf stock before similar merchandise

should be recognized as an important cause of inventory loss.

Customer Breakage
Another factor which should be considered in controlling
inventory is customer breakage._ This factor can be considered
a problem in the food industry since customers cannot success-
fully be reprimanded for breakage. Grocers feel that the
damage to company goodwill is greater than the amount of

loss prevented by less customer breakage.

24
TABLE 7

EQUIPMENT AND METHODS USED TO
DECREASE CUSTOMER BREAKAGE

 

 

 

 

Method of Number of
Equipment Companies
Use of cardboard between containers 2
Tilt in shelf 5
Caution in stocking 2
Low gondolas 3
Improved shopping cart 2
None 15
No answer 11
Total 40

Since only fourteen companies mentioned in Table 7
employ any method of preventing customer breakage, it is
assumed that little importance is placed on this factor by
the food companies replying._ However, the results of the
questionnaire show that 25 companies did consider breakage
when locating and building store displays. To establish the
importance of customer breakage, the grocery executives were
asked what percent of the inventory loss is caused by customers
breaking itemm. The thirteen companies answering this ques-
tion indicated that on the averags, 4.6 percent of inventory
loss is attributed to this factor._ Since little attention is

given by grocery company executives to methods of reducing

25
customer breakage, it is assumed that the problem is not con-
sidered too important.

Stockroom.Training

It is thought by some companies today that the solumion
to the improper handling of stock by employees is the estab-
lishment of a training program for store personnel. Twenty-
five of the forty companies employ some type of training pro-
gram for their employees.

TABLE 8

TYPES OF TRAINING PROGRAMS USED FOR
STOCKROOM OPERATIONS AND STOCKING

 

 

 

 

Number of

Type of Program. Companies
On-the-job training program. ' 18
Training school with discussion and experience 5
Training by work simplification 2
Total _ 25

Some store executives feel that little training is necessary
to perform the duties of the marking and stocking operations.
Although it may not require the specialized training some of
the other jobs require, instruction in company policy and
methods is desirable. If efficiency is improved in the stock-

ing Operation, less inventory shrinkage will result.

26
Stock Rotation
Another phase of stock handling and important to inven-
tory control is stock rotation. Table 9 shows the methods Of
rotation used by the companies replying.
TABLE 9

METHODS OF ROTATING STOCK

 

 

Methods Number Of
Companies

 

Merchandise is coded
Old merchandise in front 13

 

Store manager checks 2
Rotation chart 1
Turnover takes care 1
Food-o-mat 1
Left to right method 1
NO answer 7
Total 40

 

It can be seen in the above table that coding merchan-
dise for the rotation of stock is the practice used by 14
of the companies. The terminology used in Table 9 is the
same as used by store executives in replying to the ques-
tions regarding stock rotation methods. The purpose of stock
rotation is to place the Oldest merchandise in the front part
of the display to be sold first. Thus the answer "old mer-
chandise in front" is not a method but rather the results of

rotation. Proper rotation of stock decreases spoilage, stales

27
81d package deterioration. It also enhances Shelf appearance
by moving out obsolete package designs and sizes While it
lessens the changes of retaining merchandise until it becomes

damaged or less desirable.

CHAPTER V

PILFERAGE CONTROL

Importance

One of the things which the grocer must consider regard-
ing pilferage is how important this problem.is compared with
the many others which he must face. The definition of pil-
ferage covers not only customer pilferage but employee and
salesmen pilferage as well. The latter types will be dis-
cussed later in this chapter. Customer pilferage is a much
discussed topic with.many disagreements coming from men in
the food industry. To arrive at some conclusion regarding
the importance of customer pilferage, food company executives
were asked the following question; "Approximately wlat per-
cent of the average inventory loss do you think is contributed
by pilferage?". The result was somewhat discouraging since
only 21 answers were received. The variation in theselseplies
is so great that an average would seem to the author as insig-
nificant. It can be said, however, that one-half Of the com-
panies gave percentages varying from 25 to 75 percent of inven-
tory loss while the other half was below 25 percent. This dis-
agreement apparently points out the complexity of the problem I
of customer pilferage and that the dollar vd.ue of pilferage

is unknown.

29

To further establish the importance of pilferage, recent
food publications wereconsulted on this problem. One article
stated that "four out of five chain stores say shoplifting is
their major problem"1. This could mean that the inability to
cope with shoplifters is as much a problem.as the frequency
Of violation. It seems impossible to establish any meaning-
ful figure on the frequency of pilferage or its importance in
inventory control. The fact that the total value of pilferage
is unknown and unmeasurable has caused some store managers to
use this as an excuse to their superiors for bad management.
Yet it seems reasonable to assume that pilferage is an impor-
tant inventory control factor that seems to be growing in imp
portance in many areas.

Preventive Measures

More attention has been given recently by the grocery
industry to preventive measures-against pilferage than methods
of apprehension and persecution. Table 10 shows the preven-
tive measures used by the grocery companies surveyed. many
Of the measures require adoption by the complete company since

they involve the installation of permanent fixtures.

 

l. Anon. Says 80% of Uhits Call Pilfering Top Problem. Super-
market News. 12 (April 1953).

TABLE 10

PREVENTIVE MEASURES AGAINST PILFERAGE

 

 

Measures Number Of

 

Companies
Limit the height of gondolas . ii
Use regular mirrors 14
Use one-way mirrors 30

Arrangement of stock 25
Elevate office

 

Check articles previously purchased 12
Warning signs from outside agency 2
Use detectives

Total .116*

 

* Some companies use more than one measure

Table 11 discloses the results of the question concerning
the value of stock arrangement in decreasing pilferage.
TABLE 11

IMPORTANCE OF STOCK ARRANGEMENT AS
A DEVICE FOR CONTROLLING PILFERAGE

 

 

 

 

Number Of

Degree of Importance Companies
Very important 13
Important 4
Effective 1
Not very important 10
Not practical 1
Important for some items 6
No answer 5
Total 40

 

31
Table 10 shows that arrangement of stock is used by
thirty companies as a means to discourage shoplifters.
Table 11 shows that about one-half’the companies consider
stock arrangement an effective device for controlling pil-
ferage. Preventive measures are considered by grocery com-
panies today to be more effective than apprehension of'Shop-

lifters.

Handling Offenders
Each company has established definite procedures to be
followed by store personnel in apprehending shoplifters. To
determine the procedures used, a checklist was included in the
questionnaire. Although this checklist is not complete, an
idea can be obtained of the various policies used in handling
first offenders.
TABLE 12

PROCEDURE FOR HANDLING PILFERAGE VIOLATORS
WHO ARE FIRST OFFENDERS

fi'

 

 

 

Procedures Number Of
Companies
Manager talks to them. 36
Charge for the merchandise 23
Call police 10
Ban them from.the store 10
Call detective 2
Return merchandise 1
Total 82*

 

* Some companies used more thal one procedure

32

It can be seen from Table 12 that grocery companies are
trying to avoid prosecution of persons for their first Offense.
There may be a number of reasons for this; first, company good-
will is lost when an individual is prosecuted by a large com-
pany; second, it costs the company in employee time and money
to get a conviction. Store managers and employees are taken
from.their jobs to testify thereby creating a loss in payroll
hours; third, there is a lack of cOOperation by some law en-
forcement officials in pressing charges; fourth, if the shop-
lifter is willing to pay for the merchandise, a second chance
may gain an honest customer for the store.

Some store owners spend money to apprehend pilferers and
then do not persecute them. "Word spreads that Mr. X makes
no arrests of those found stealing and thus encourages shop-
lifting."2. The store manager is likely to be held respon-
sible for the inventory loss even though the company refuses
to prosecute shoplifters. Cooperation with local law enforce-
ment organizations seems desirable in order to keep pilferage
at a minimum in any area. Although it is not desirable for
companies to continuously prosecute pilferers, it is some-

times desirable to establish a positive stand against viola-

tors.

 

33

What can store managers do to combat customer pilferage?
Probably the most mentioned method used by the grocery com- ’
panies is the placement of store personnel so as to keep each
part of the store under observation. It is desirable for the
manager to Observe the selling floor as much as possible and
especially during busy hours. Store personnel should be
trained to be alert to customer actions at all times. It is
important that checkers be trained to observe any suspicious
actions by customers. The success of preventing pilferage
will depend largely on the interest and cooperation of the

store personnel.

Employee Pilferage
The previous discussion has been concerned with cus-

tomer pilferage, however, there are others such as employee
pilferage. Store employees should be reprimanded when there
is some indication of dishonest acts. Destruction and confis-
cation of store property is not considered dishonest by many
employees when the value is reasonably small. Store managers
should stress the importance of honesty and continually ob-

serve employees for violations of company policy.

Salesmen Pilferage
Another type of pilferage is that performed by delivery-
men and salesmen. This has been discussed briefly in Chapter

II but cannot be overemphasized. Persons who have access to

34
the store through the back door, both company and non-company
personnel,can very easily take merchandise if they are not
closely checked. Careless managers who pay little attention
to the back door soon find themselves with a short inventory.
To alkaviate this problem, it is good practice to have a
responsible person accompany these delivery men and salesmen.

Pilferage is rather frustrating for the store manager.
It is not reasonable to‘assume that pilferage accounts for
the entire amount of inventory loss, yet it is impossible to
accurately measure the amount which it does contribute. Thus
pilferage falls in the same category as many other determin-
ing factors in controlling inventory. The loss may be a

reality but the cause may be unknown.

CHAPTER VI
ACCOUNTING PROCEDURE FOR RECORDING
CHARGES AND CREDITS

An important phase in inventory control is maintaining
accurate records for charges and credits, both in the store
and the accounting department. Without accuracy to store
and accounting records, the correct dollar value of the
physical inventory can not be computed. This study will
include only those accountingforms usable by most grocery
companies as an aid to inventory control and taking a
physical inventory.

Charging Merchandise to Store
One of the things to consider in accounting procedure
is the methods by which merchandise is charged to the stores.
TABLE 13

METHODS OF CHARGING MERCHANDISE
TO THE STORES

 

 

 

methods Number of
Companies
Cost 8
Retail 19
Cost and retail 12
NO answer 1

 

Total 40

 

36

It is not known what method of charging merchandise is
the best, although Table 13 does show that the retail price
is more widely used. It does, however, seem.reasonable that
charging at both cost and.retail price will be useful in in-
ventory control and other accounting procedures.

Figure l on the following page illustrates an account-
ing form which charges the store with both cost and retail
price. This form is used by the accounting department to
compile information received from the stores each week.

On this form1!etail charges include all charges made to the
company for merchandise received from all sources. Store
losses include credit given the stores by the company for
losses incurred from price changes. The sales figure is
derived from.the accounting forms sent to the accounting
department by the stores at the end of each week. A book
balance is then determined and when a physical inventory

is taken in the store, an actual inventory overage or short-
age can be determined. It can be seen from.Figure 1 that a
cost figure.must be shown to determine the gross profit of
the store. Through the use of test stores, a permanent
cost figure is determined in the form.of a certain percent
of sales or of the retail price. Thus we have on the one
form a record of the sales at retail, at cost, the actual

inventory and the gross profit of the store.

37

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38
Inventory Loss Allowed

When accounting records show an inventory loss in a
store for any period, there is always the question of how
much loss should the company allow the stores before severe
measures are taken. To arrive at some conclusion concerning
this policy, grocery company executives were asked what per-
cent of sales representing inventory loss was considered low,
average and high.

TABLE 14

AVERAGE PERCENT OF SALES REPRESENTING INVENTORY LOSS
AS REQUIRED BY MEMBERS OF THE GROCERY INDUSTRY

 

 

 

Degree Percent of
sales
10" .29.
Average - .58
High , 1.15

Twenty-one replies were received to this question.
Table 14 indicates the average of the high, average and
low percentage answers. The variation in answers was not
large indicatingahigh degree of uniformity among store

executives regarding inventory loss.

Credit For Unsalable Merchandise
When the condition of merchandise is such that it can-

not be sold to customers at the full retail price, a reduc-

39
tion in price is necessary and sometimes complete loss occurs.
The store should be given credit for such loss to avoid
creating an inventory loss. Variations in the answers tabu-
lated in Table 14 are due in part to difference in company
policies regarding credit for markdowns and loss due to
deterioration of merchandise. The amount of credit given the
stores would be a matter of company policy and would go hand
in hand with the company policy on inventory loss allowed.

Table 15 shows the number of companies out of the forty

replying to the questionnaire giving credit for damagai mer-

 

 

 

chandise.
TABLE 15

PERCENT OF COMPANIES GIVING CREDIT

TO STORES FOR MERCHANDISE LOSSES
Nature of Number of

Loss Companies

Bent cans 25
Swells 29
Breakage 25
Stale: 21

Many manufacturers today are absorbing some of these
losses thereby relieving the grocery retailers of much of
their inventory loss. Manufacturers have special represen-
tatives visiting stores and giving credit for their products

which are unsalable. In other cases the damaged merchandise

40
is returned to manufacturers via company warehouses. It is
advantageous to the grocery manager to take advantage of this
service and make sure the necessary accounting form accompan-
ies the return merchandise. Somegrocery companies have dis-
continued credit to their’stores since, in some cases, credit
claims were padded with fictitious losses to cover other inven-
tory losses. Tabla 15 shows that the majority of grocery com:
panies replying do give credit for various merchandise losses.
It is important for store managers to make certain that the

store is credited for all legitimate inventory losses.

Approving Credit Memos

under ordinary operating conditions a store should and
each accounting period with.an inventory loss since there
will always be losses through pilferage and other causes.
There is; therefore, a tendency on the part of store managers
to manipulate inventory figures so as to keep the loss as low
as possible. The procedure for’receiving credit for unsalable
merchandise should be definitely established and all credit
memos should be authorized by a responsible company represen-
tative. Table 16 indicates the individual responsible for

approving credit memos.

41
TABLE 16
PERSON APPROVING CREDTT MEMOS

 

 

 

 

Companies
Manager 32.5
Supervisor 42.5
Both manager and supervisor 12.5
Accounting department 2.5
Grocery buyer 2.5
No answer 7.5
Total 100.0

 

- In about one-third of the stores reporting the manager
authorized credit memos.‘ In the rest of the companies higher
echelon personnel authorized credit memos largely on the basis

of reasonableness or average losses.

Office Fund Audit

The majority of grocery companies furnidh their store
managers with office funds necessary to Operate their stores
efficiently. Although it is usually the responsibility of
the manager to keep this fund intact, an audit is frequently
necessary as a protective measure. The frequency of this
audit by the forty grocery companies replying can be seen
from.the following table.

42
TABLE 17
FREQUENCY OF STORE OFFICE FUND AUDITS

 

 

 

 

Frequency of Number of

Audit Companies
Twice each week 1
Weekly 2
Monthly 21
Every six weeks 2
Every two months 2
Every three months 5
Yearly 1
Irregularly 2
No store funds 5
No answer 1
Total 40

It can be noted that a monthly check of offioefunds is
the procedure used more often by the grocery companies. The
assumption is also made, based on Table 17, that the majority
of companies feel that some check is necessary for better con-
trol of funds and records.

The forms used by each company in their accounting systems
have not been explained. As previously mentioned, the number
of forms and systems are too numerous tociescribe, however,
something should be said about the manner in which records
are regarded and handled in the stores. According to the
survey, the average accounting period in the stores consist

of one week. It is necessary to the accounting operation and

45
to inventory control that the accounting records be accurate
and complete. Store managers contribute to their own mds-
fortunes when accounting forms are not properly completed
and promptly submitted at the end of the accounting period.
The store manager should realize that if accurate records
are not sent to the accounting office, the amount of store

inventory loss can not be accurately determined.

CHAPTER VII
CHECKOUT PROCEDURES

Type of Checkstand

The checkout procedure of supermarkets presents another
factor for consideration in inventory control. One of the
first things to consider in the checkout operation is the
type of checkstand to employ. Since this study will be con-
cerned primarily with the accuracy and not the efficiency of
the checkout operation, a description and comparison Of the
many types will not be given. It may be interesting to note,
Chowever, the types used by companies included in the survey.

TABLE 18

TYPES OF CHECKSTANDS EMPLOYED
BY COMPANIES SURVEYED

 

 

 

 

Type a Numb 61‘ Of
Companies
Straight manual 23
Conveyor belt (motor) 19
Speed-Dee . 3
Split-type stand 4
Miscellaneous 8
Total 57*

 

igome companies used more tEan onefitype

45
The practice of segregating items by departments before
, checking is not readily adaptable to some types of Check-
stands. It is felt by some grocery companies that there is
much more accuracy atthe checkstand when merchandise is seg-
regated because everytime the register department keys are
changed, there is a chance for error.1 This is assuming that
the regular register with non-motorized department keys are
used. A new type of register has been designed by the Nation-
al Cash.Register Company which is agiipped with electrified
department keys. This type of registerwas designed for
checkstands that require no sorting of itemslaefore check-
ing. The material presented furnishes little basis for an
accurate conclusion regarding the type Of checkstand to use
in the checkout operation. However, the decision probably
should be made by management on the basis of the checkstand‘s
applicability or other determining factors.

Losses From Inaccurate Checking
There is much inventory loss resulting from.inaccurate
Checking in supermarkets.

 

1. 'National Association of Food Chains. Checkout Clinic.
Chicago: February, 1950. p. 5.

46
TABLE 19

RESULTS OF 95 SHOPPING TESTS MADE IN NINE
CHAINS ON ORDERS RANGING FROM $1.88 TO $8.512

 

Results Number of Cashiers
(basis of 100)

 

 

Charged the correct price 15
Overcharged the customer 50
Uhdercharged the customer 57
Total 100

.—

The shortages less the overcharges gave a net loss of
1.4 percent of total sales or eleven cents on an eight
dollar order. These tests show that the checker is inclined
to undercharge the customer when the price is not know:. An
undercharge is not likely to<3ause loss of customer good will
but w111.result in an inventory loss. When an overcharge is
made a loss of customers, good will and consequently sales
results. Even though overoharges offset inventory losses
the resultant loss of customers outweighs the gahn. It is
important for store managers to make certain their Checkers

are being as accurate as possible.

 

2. The Market Basket Corporation. Cashier's Manual. Geneva
New'Xork: 1951, p. 2. ,

47

Causes for Checkout Errors

Some of the causes for errors made by checkers in the

checkout procedure are :

1.

2.

5.

4.
5.

Fractions are computed incorrectly. Some grocery
company representatives feel that this may be
caused by public school teaching practices which
instructs pupils to drop fractions when the amount
is less than one-half cent and add only when the
fraction is more than one-half cent.3

Incapable mental facilities for accurate addition.
This condition can sometimes be discovered during
employment interviews.

Complete omission of items during checkout proce-
dure. This can be done when checkers attempt to
Check too rapidly. Also the checker may have
little interest in the job or may be grossly in-
competent.

Errors caused by illegible or wrong price-marking.
Mistakes in making change. Frequently a Checker
will make costly mistakes in making change or in
cashing Checks.

 

5. Nationa1.Association of Food Chains. Checkout Clinic.
Chicago: February, 1950. p. 5.

6.

7.

8.

9.

48
Failure to punch the correct keys on the cash.reg-
ister. The tendency to reverse figures, such as
14 for 41 is one of the most frequent mistakes in
the incorrect recording of prices.
Failure to record the sale of an item in the right
department.
Lack Of concentration by conversing with persons
other than the customer. Many customers resent
this conversation since it delays their checking
operation and may cause them to lose confidence
in.the checker's ability.
Failure to post price list on Checkstand for items
not marked. This, as well as outdated price lists,
encourages mistakes and inconveniences in the check-

out Operation.

Accuracy Of Checkers

The accuracy of‘checkers seems to be one of the most

important checkout factors affecting inventory control.

The problem for the super market manager is how often and

in that manner should a checker's accuracy be verified?

What factors should be considered in selecting a procedure

for checking cashiers?

49
TABLE 20

FREQUENCY WITH WHICH CASHIERS ARE
CHECKED FOR ACCURACY

 

 

 

 

Companies

Daily 2.5
Weekly 22.5
Every two weeks 2.5
Monthly 50 .0
Every two months 2.5
Every three months 7.5
When necessary 15.0
Seldom spot Check 15.0
No answer

Total 100 .0

 

Table 20 shows that the majority of companies included
in the survey check on the accuracy of their cashiers at
least once each month. It is the Opinion of the author and
22.5 percent of the companies that cashiers should.be Checked
at least once every week to insure alertness.

There are many variations in methods used today by groc-

4 Many companies

ery companies for checking cashier accuracy.
use shoppers, some their own employees and other commercial

agencies. The usual procedure is to use test baskets of mer-

4. Ibid. page 9

50
chandise for the check. When a shopper is not used for the
test, the merchandise is returned to the selling floor and
the amount recorded on the cash register is voided. A check
by the manager on the cashier in the presence of a shopper
may sometimes be embarrassing for everyone. The survey
indicates that 45 percent of the companies use an outside
agency for checking cashiers.’ This company sends representa-
tives to the stores periodically to shop and grade the check-
er' performances. A test basket of merchandise is used by the
agency's representative and then returned to the store mana-
ger. The report of the checker's performance is sent to the
company's headquarters and then forwarded through channels to
the store.

Checker Training

It is interesting to note that 95 percent of the comp
panies included in the survey have some type of checker train-
ing program. This extensive use of checker training programs
is evidence that management is convinced that training is an
effective means of increasing checker accuracy. Even though
Checker training is used by such a large number of companies
the length Of the training period is difficult to establish
since the variations in time consumed are great and the time

spent for refresher training differs in each company.

51
TABLE 21

LENGTH OF INITIAL TRAINING PERIOD
FOR CHECKERS

 

Length of Number of
Period Companies

Three dq s 1
Four days

Five days

One week

Two weeks

Three weeks

One month

Six weeks

Indefinite

NO answer

NIhHrhNU'ICOI-JNO

 

Total 40

Table 21 shows that the majority of companies in the
survey have checker training periods from three days to one
week. It is difficult to determine the exact length Of a
checkerHtraining program since each company requires specific
instruction necessary to their operation. The general objec-
tive of checker training is probably considered by most com-
panies to increase checker accuracy and efficiency.

Training checkers in the prOper approach to customers
is considered as important as the mechanical Operations
necessary. The attitude of the checker and a consciousness

of the importance of an accurate performance can be favorably

52
enhanced through proper training. Interest, initiative and

a devotion to the job will improve the accuracy of checkers.

Employee Purchases
Many grocery companies have found it necessary tomestab-
lish policies governing employee purchases in their stores.
TABLE 22
PROCEDURES FOR HANDLING EMPLOYEE PURCHASES

 

 

 

 

Procedure Percent of
Companies
PurChases Checked out by manager 40.0
Purchases checked out by another employee 22.5
Handled as customers 22.5
Place slips in drawer 5.0
No answer 10.0
Total 100.0

 

It can be seen from.Table 22 that 85 percent of grocery
Companies surveyed require employees to have their purChases
Checked out by the manager or some other checker. Contrary
'to the procedure followed by the department and specialty
stores, only 5 percent of the grocery companies give dis-
counts to employees on purchases. When a discount is given
the store should receive credit for the amount of the dis-

count so as to keep the inventory records accurate.

CHAPTER VIII
SUPERMARKET PERSONNEL

Human Element

The human element involved resulting from.the actions
of store personnel is very important to inventory control.
The effectiveness of each phase of inventory control is
dependent upon the employees' actions and the manner in
which the established policy is followed. The responsibi-
lity for each procedure in the store operation should be
assigned to as well as assumed by someone if effective con-
trol over store inventory is to be maintained. This study
has mentioned procedures desirable for store personnel to
follow in applying the policies thought necessary for
better inventory control. The unpredictable human element
is an important contributing factor to successful applica-

tion of procedures giving better control over inventories.

Employee Carelessness
Factors relating to employees may be divided into two
separate parts: (a) employee carelessness and (b) employee
dishonesty.1 Employee carelessness includes the failure of

an employee to assume the responsibility for the performance

 

1. Controllers' Congress National Retail Dry Goods Associa-
tion. Stock Shortage Control Manual. New York: 1951.
p. 55

54
the phases of store operation assigned to him. The careless-
ness of workers has led to the establishment of procedures
which place more responsibility on managers and higher super-
visors for employee task performance.

TABLE 25

PERSON RESPONSIBLE FOR KEEPING
DELIVERY DOOR CLOSED DURING THE DAY

 

 

 

 

Person Percent of

Responsible Companies
Store manager 60.0
Stock room clerk 55.0
Assistant manager 7.5
All personnel 2.5
No answer 5.0
Total 110.0%

 

*Some companies gave more than one answer

As was stated in Chapter II, an open back door consti-
tutes an excellent Opportunity for getting merChandise out
of the store illegally. Table 25 shows that the responsibi-
lity for keeping the back door locked is assigned to the
store manager in the majority of companies, however, it is
Often necessary to delegate this task to someone else.
Regardless of the person inc performs this job, a constant
Check by store supervisors is necessary to provide an increas-

ing amount of control over this factor in order to decrease

55
inventory losses.

The consideration of responsibility raises the question
of the desirability of single supervision and dual supervi-
sion in the supermarket. The survey shows that 45 percent
of the companies assigned the responsibility of the entire
store Operation to the grocery manager. It is the author's
opinion that better control over inventories can probably
be achieved when there is a single line of authority since
there is less likelihood of confusion and misunderstanding
concerning responsibility.

Some grocery companies use a double lock system.on their
stores for the purpose of providing a check on employees re-
sponsible for Opening the store. This makes it impossible
for one person to open the store without the other person
being present. Forty percent of the companies surveyed use
this method. This procedure relieves the store manager of a
tremendous amount of responsibility when the store is closed
and furnishes a barrier to dishonest persons holding;store
keys.

Time recording locks are used by 22.5 percent of the
companies for the same purpose. This policy seems effective
since it provides a check on the store manager as to the
hours at which the door was locked or unlocked.

”Employee carelessness is not so muCh a case of ineffi-

56
dbnt employees as it is a care of poorly-trained employees"2
Adequate training and instruction will increase employee
efficiency and decrease inventory losses through the estab-
lishment of favorable work attitudes and job initiative.

Employee Dishonesty

Employee dishonesty can be considered a part Of the
human element involved in inventory control. One of the
things to consider is the consumption of food by employees
Chile working in the stores. Over 90 percent of the compan-
ies surveyed have established a non-consumption Of food pol-
icy by their employees.

TABLE 24

METHODS OF ENFORCING A NON-CONSUMPTION OF
FOOD POLICY IN THE SUPERMARKET

 

__ ——-—

 

 

Method Number of
Companies
Require register receipt on article 11
Manager observe and take action 7
Manager's responsibility 2
No answer 17
Total 57*

 

*Constitutes 92.5 percent OPIaIl companies in the survey

 

2. Ibid. p. 35

57

Table 24 shows the methods used by the grocery companies
in the survey for enforcing a non-consumption of food policy
in the store. The amount Of loss occurring from merchandise
consumed in the store can become damaging to inventory con-
trol as well as to store profits. Consuming merchandise
owned by the company is not considered dishonest by many
employees since they feel the amount is so small. When
violators are not corrected by managers, food consumption
in the stores tends to increase. New employees should be
properly notified that this practice is not tolerated.

Store managers should Observe store personnel and discour-
age consumption of food by employees.

It may be interesting to note that 50 percent of the
companies surveyed furnish delivery-door keys to night deliv-
ery drivers. Twenty—five percent of this number have no de-
livery cage or partition separating the storage area from the
selling floor. This practice seems to increase the opportu-
nith for dishonesty, offers little control over the actions
Of disreputable persons and complicates the checking Of mer-

chandise delivered to the store.

CHAPTER IX
PHYSICAL INVENTORY

The counting and recording Of the amount of stock on
hand at a given time is an essential part of retailing.
The total value of the stock on hand is needed to enable
the accountants to prepare the balance sheet and departmen-
tal, store-wide and company-wide profit-and-loss statements.1
An accurate inventory is important since the difference be-
tween the physical inventory and the book value determine
the inventory loss or gain. The procedures used by grocery
companies in taking the physical inventory are important Ln
that they affect its accuracy.

Responsibility for Taking Inventory

One of the important considerations is woo should take
the inventory. The questionnaire shows that 65 percent of
the companies surveyed employ full-time inventory teams con-
sisting of two persons. One of the two persons on the team
is frequently given the title of inventory superintendent
and is responsible for the efficiency and accuracy of the
inventory. These teams canggive valuable assistance to the

store managers by informing him of incorrect prices and other

1. John W. Wingate and Elmer O. Schaller. Techniques 2;
Retail Merchandising. New York: Prentice-Hall, Inc.
1950. p. 195

 

59
factors which may cause inventory losses in the stores. The
two persons may work together, one counting and one recording:
or they may work separately. Their training and experience
in inventory taking is usually sufficiently extensive to in-
sure accuracy. Thirty-five percent of companies do not employ
inventory teams. Table 25 provides information indicating

persons who are responsible for taking the physical inventor-

 

 

 

 

198 e
TABLE 25
PERSONS RESPONSIBLEIFOR TAKING INVENTORIES
(Other than inventory teams) .
Companies

District Superintendent 4
Store personnel 9
Contracted inventory crew 1
Total 14*

 

«Number OTFEOmpanIes notusIng‘Inventory teams

It is sometimes necessary for companies employing inven-
tory teams to resort to other personnel for taking inventor-
ies, when the teams are not available. Frequently a store
superintendent may be required to direct store personnel in
taking inventory, a Check of their qualifications is impor-
tant since nothing is gained when accuracy is sacrificed to

gain speed or reduce cost.

60
Another important consideration is how often should
inventories be taken?
I TABLE 26

COMPARISON BY DEPARTMENTS OF THE LENGTH OF I
INVENTORY PERIODS IN FORTY GROCERY COMPANIES

 

 

 

 

Inventory Percent Of Companies by Department
Period .
Grocery Meat Produce
Department Department Department
One week 55.0 22.5
Two weeks 12.5 10.0
One month 45 e0 47 e 5 52 e5
Six weeks 15.0
Two months 10.0
Three months 50 .0 2 e 5 5 00
NO answer 2.5 10.0
Total 100.0 100.0 100.0

 

Table 26 shows that the inventory period of one month,
sometimes referred to as a four-week period, is used by the
majority of companies. Some companies shorten the inventory
period for the meat and produce departments due to the perish-
able nature of their merchandise.

Taking inventories is a costly operation but determining
the length of the inventory period should be influenced by

the accounting requirements of the company and the desired

frequency of Checking store managers.

61
The companies were asked to estimate the average cost
of taking inventory. There was suCh a great variation in
the answers received that the average of $81.74 is not

'very useful.

Inventory Retakes
Table 27 gives reasons given by 77.5 percent of the
companies returning the questionnaire for using inventory
retakes.
TABLE 27
REASONS FOR .USING-INVENTORY REPAKES '

 

 

Reasons Percent of Companies
(Based on 51)

To check accuracy of

 

previous inventories 55.5
Bad intentories 58.7
To change managers 5.2
Inconsistent result a 9.7
No answer 12.9
Total 100.0

When inventory shortages occur, it is sometimes neces-
sary to use retakes to establish a control period to use in
the investigation. It can be said that the major reason for
the use of inventory retakes is to check the accuracy of a
physical inventory when there is a great difference between

the book inventory and the physical inventory.

62
Preparation for Inventory

It is desirable to make some preparation for the physi-
cal inventory that will help increase the accuracy and effic-
iency of this task. If adequate notice is given store mana-
gers the store personnel can prepare the stock on the selling
floor and in the back room by placing price marks for easy
visibility. As previously mentioned, the majority of compan-
ies use inventory teams of two persons, one a caller and one
a recorder. Figure 2 on page 65 illustrates a form used to

record inventories.

Procedure for Taking Inventory

The first step in taking inventory is to record the
cash register sales to establish the amount of sales in the
current accounting period. The caller then "blocks" the
shelves to facilitate easier counting and calls the number
and price of articles to his assistant filo repeats and records
the data. This procedure is followed throughout the store
until the entire inventory is completed. It is necessary, as
shown by Figure 2, to record the invoices for all merchandise
received during the accounting period. Transfers, price changes
and any other factors iiich would affect charges and credits
are also recorded. When the data are compiled, the form is

sent to the company accounting office.

63

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35.....8'8fl'8

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64

Regardless of the method used in taking inventory, it
is necessary to instruct all personnel involved, in the pro-
cedures and policies to follow. Greater control can be exer-
cised if emphasis is placed on accuracy instead of speed dur-
ing the process of taking inventory. It has been said that
the persons selected for inventory.jobs should not always be
the most capable person in regular grocery operations since
the person must be suited to perform the detailed and repeti-
tive routines involved in taking an inventory. Often initia-
tive causes persons to invent short-cut methods or procedures
which reduce the accuracy of the inventory.2 Although mana-
gers usually take little part in taking inventories, it is
important that a check be made by him.on the factors contri-

buting to its accuracy.

 

2. Neuschel, R. F. How to Take Inventory. McGraw-Hill Book

Company, New York: . 55.

CHAPTER X
SUMMARY AND CONCLUSION

Summary

The purpose of this study is to consider factors which
cause inventory losses in retail stores and to determine the
importance of each factor. The information for the study was
Obtained from.a questionnaire which was sent to fifty grocery
companies in all sections of the United States. The question-
naire contained information relating to the methods, policies
and Opinions of top management regarding inventory control.

It is hoped that the results Of this study will be an aid to
the food industry in mastering some of the problems of inven-
tory control.

The method of Checking warehouse shipments most frequently
used by the companies in the survey is a check by item.of mer-
chandise received. This method is used by 90 percent of the
companies for checking drOp shipment. An average of 20 per-
cent of all merchandise received consist of drop shipments
whereas 80 percent constitutes warehouse shipments. There
are differences of Opinion.regarding the responsibility for
checking drop shipments, however, a greater number of companies
surveyed assign this responsibility to the store manager. The
large number of companies using the item count method for
checking drop shipments indicates the importance to inventory

control of a check on these shipments.

66

The survey indicates that an average of 20.6 percent of
the stores operated by the companies engage in night stocking.
Deliveries are sometimes made during the night to stores that
do not engage in night stocking, however, more control could
be exercised if night deliveries were made at the storOS'thiCh
stocked at this time. Only 22.5 percent of the companies use
a deposit on permanent packing cases sent to the store. Fail-
ure to receive credit for returned cases causes inventory
error.

The procedure for marking the selling price of articles
on the outside of each case is practiced by 55 percent of the
companies surveyed while merChandise is marked after storage
in 14 of the forty companies.

The type of price stamp used most frequently for mark- '
ing merchandise in the stores is the National Cash Register
Stamp Set. The type of stamp used combined with the human
element involved are the determining factors in maintaining
accuracy in marking merchandise. Price changes are sent to
75 percent of the stores each week. Incorrect prices on
shelf stock is attributed to the failure Of personnel to
change all merchandise as directed.

The method used most frequently for extending credit to
the stores for regular price Changes is based on a charge
and credit inventory taken in the store. Padding the inven-

tory by store managers caused some companies to discontinue

67
credit or give it based on averages determined by test stores.
When an inventory Of items on which the price has changed is
required of the store manager, only 17 of the companies reply-
ing have a1y check on the validity Of the inventory. Of this
number, 70 percent used only an occasional spot check for
accuracy. Twenty-eight companies employ the method of pre-
stamping merchandise in the stores and 92.5 percent of the
companies require managers to follow an authorization list
for the merchandise stocked in the store.

Stock control is defined in this study as the control
of stock handling in the Operation Of a super market. The
survey shows that 15 out of forty companies use space under
their gondolas for the storage of broken-case merchandise,
while the remainder use their stock rooms. The consolidation
of related merchandise into cases reduces the possibility of
damage by crushing or falling.

Only 55 percent of the companies use any equipment or
method to decrease customer breakage. However, 25 companies
did consider breakage in locating and building displays. The
average estimated percent of inventory loss contributed by
breakage was given by groceryicompany executives as a mere
4.6 percent average.

Twenty—five companies employ a training program for
employees working in the stockroom. Eighteen of these com:-

panies use an on-the-job training program. Associated with

68
the stocking operation is the method of stock rotation used
by the companies surveyed. The coding of merchandise to
facilitate adequate rotation is the most frequently used
method.
The variation of replies received from 21 grocery comp
panies concerning the importance of pilferage is so great
that the average is considered insignificant. A study shows
that pilferage is considered by 80 percent Of grocery mans?
gers as their tOp problem, however, it would seem almost
impossible to establish any meaiingful figure on the frequency
of pilferage or its importance in inventory control. The
arrangement of equipment and the location of stock was used
by 52.5 percent of the companies as a preventive measure
against pilferage. Grocery companies today are trying to
avoid prosecution of pilferers for the following reasons:
1. Company goodwill is lost when an individual is
prosecuted by a large company.
2. It cost the company in employee time and money to
get a conviction.
5. Lack of cooperation by some law enforcement officials
in pressing charges.
4. If the shoplifter is willing to pay for the merchan-
dise, a second chance may be given ihiCh might obtain

a good customer for the store.

69
The procedure for handling first offenders in most cases
consists of a demand by the manager to pay for the merchan-
dise with no further action.

Store owners today spend money to apprehend pilferers
but do not wish to prosecute them. This practice encourages
shoplifting. Employee pilferage along with salesman pilferage
cause store managers difficulty when strict pilferage control
is not exercised. Managers who pay little attention to em,
ployees and salesmen are soon confronted with a short inven-
tory.

The method used most frequently for Charging merChan-
dise to the stores is to charge retail prices. The average
percent of sales representing inventory loss as stated by
the companies in the survey consist of .29 percent for low,
.58 percent for average and 1.15 percent for'high. Although
only 21 replies were-received the distribution Of percentage
points was not too great.

The responsibility for approving credit memos is assumed
by supervisors in 42.5 percent of the companies with 52.5
percent placing this reSponsibility on the store managers.
Therefore the majority of companies do require some type of
Check on credit memos before they become effective. A Check
on the store office fund is a necessary protective measure
as indicated by over 50 percent of the companies surveyed.

Straight manual types of Checkstands are used by 40 per-

cent of the companies returning questionnaires and the con-

70
veyor belt (motor) is used by 55.5 percent of the companies.
The results of 95 shopping tests made in nine chains on
orders ranging from $1.88 to $8.51 show an average net loss
of 1.4 percent Of total sales or eleven cents on an eight
dollar order. IThis test shows that a checker is inclined
to undercharge the customer when the price is not known.
Only 15 percent of the checkers charged the correct
price indicating the importance of training checkers.

The frequency with which cashiers are checked for
accuracy is shown to be monthly by 50 percent of the res-
pondents While 22.5 percent check their cashiers every week.
Forty-five percent of the companies use some_kind of agency
such as Willmark Service System, Inc. for the purpose of
checking cashiers.’ The use of test baskets of groceries
constitutes the most frequently used method of checking on
the accuracy of cashiers. Ninety-five percent of the come
panies in the survey had some type of checker'training pro-
gram but the length of the period varied greatly among the
companies, however, the most frequently used period extended
from.three days to one week.

Factors relating to employees in the supermarket Opera-
tion may be divided into two separate parts: (a) employee

carelessness and (b) employee dishonesty. The store mana-
ger is given the responsibility for keeping delivery doors
closed during the day by 60 percent of the companies. Forty

71
percent Of the companies replying use double locks on their
store doors while 22.5 percent use time recording locks.
Employee carelessness is said to be caused by poorly trained
employees. The method most frequently used in enforcing a
non-consumption of food policy is the requirement of the
register receipt indicating the article has been purchased
by the employee.

The basic function of a physical inventory is to deter-
ndne the total value of the stock on hand so that the balance
sheet and departmental, store-wide, and company-wide profit-
and-loss statements may be prepared. Sixty-five percent of
the companies replying employ full-time inventory teams,
which usually consist of two persons. The 55 percent of
companies who do not employ inventory teams use store per-
sonnel for taking inventories. Over 90 percent of the com-
panies take their inventories on a retail price basis.

A comparison by departments of the length of inventory
periods in the forty grocery companies shows that once a month
is the inventory period used most frequently. The period
is, however, shorter in the meat and produce departments
than in the grocery department._ Inventory retakes are used
by 77.5 percent of the companies returning the questionnaire
with the major reason for its use resulting from an excessive
inventory loss. (When adequate notice is given store mana-

gers, inventories may be completed in a shorter period since

72
store personnel can check the merchandise for prices and
neatness. The steps to follow vary between companies but
usually include a reading of the Checkout register sales to
obtain the amount of sales for the period, a recording of the
“store inventory on the sales floor and the back room.and a
check on all invoices of merchandisezceceived during the
current accounting period. The person selected for the job
should be suited to perform.the detailed and repetitive
routines involved in taking an inventory without attempt-

ing to revise the procedures set up.

Conclusion

Inventory control has been a major problem.in the food
industry for many years and although much progress has been
made in control methods, the food industry has much to do be-
fore this problem.becomes insignificant. The results of the
survey made in this study bring out the many policies and pro-
cedures of grocery companies pertaining to inventory control.
Causes of inventory loss were derived from the procedures
used by the grocery companies surveyed for the purpose of
establishing better control methods. Needless to say, the
importance of inventory control to a retail operation is not
to be overlooked as has been pointed out in this study.

The many procedures necessary to perform the receiving
operation Of a retail store is not as important as the human

element involved in performing these procedures. When.mer-

75
chandise is charged to the store, it is necessary that the
manager be positive the store received the merchandise with
whiCh it was charged. The type of price stamp used in the
stamping operation is an important determining factor in the
accuracy and legibility of price marking, yet without the
proper performance of store personnel, success would not be
possible.

Customer breakage is considered by the members of the
grocery companies responding to be relatively unimportant,
however, employee breakage of merChandise was considered more
important. The number of training programs for the opera-
tors Of stock rooms indicates that training is being used as
a means of reducing loss through damage and breakage.

Even though the replies received in this survey show
pilferage to be of little importance, the amount of atten-
tion given it in food publications today indicates that it
is still a top problem in the food industry. The advice
given by most companies to managers in regard to combating
pilferage is to maintain employees on the selling floor as
muCh as possible and then make it known to the public that
the company will not hesitate to prosecute when it seems
necessary.

The accounting procedures in the store should be per-
formed accurately to establish a correct basis for determin-

ing inventory loss or gain. Responsibility for various

74
checks on employee performance should be well defined and
readily assumed. The accuracy of the checkout procedure is
determined largely by the ability and attitude of the Checker.
Since the performance of the Checkout Operation depends greatly
on the human element, frequent Checks should be made on the
cashier's accuracy. Employee carelessness and employee dis-
honesty is said tO be the main causes Of undesirable perform,
ance by store personnel. Thus,it is evident that the human
element is an important factor in inventory control and is
probably one of the greatest causes of inventory losses.
Strict supervision combined with proper and adequate train-
ing are essential in the store for effective inventory con-

tra]. e

Recommendations

ThroughOut the study recommendations have been given
which would make possible better control over inventories.
They may be more clearly understood in the form of a Check-
list of procedures to follow in controlling inventories or
investigating factors leading to inventory losses. Although
this check-list may not be complete, it will give the reader
many important factors to consider and some procedures to
follow in combating inventory loss.

1. Check incoming warehouse shipments by item.against

the warehouse invoice..

2.

5.

4.
5.

6.

8.
9.

10.
ll.

12.

15.

75
Check incoming drop shipments by item against the
invoice received.
Place the responsibility for checking shipments on
one person if adaptable to the type of operation.
Check for damaged merChandise in all shipments.
Make grocery deliveries when some responsible per-
son is present to receive them.
Empty containers should be returned promptly and re-
corded on the correct form for credit before they
leave the store.
The unit price should be marked on each case of
merChandise when such merchandise is placed in
storage.
Mark.§11 prices on merchandise legibly.
Perform price changes as soon as possible and Check
for accurate performance by the markers.
Keep the authorized price book up-to-date.
Assign the responsibility for accurate and legible
price marks to one employee, probably the senior
stock room clerk.
Remove special prices from.merchandise taken off
diSplay before it is stored.
Change entire shelf stock when price changes are

completed.

14.

15.

16.

17.

18.

19.

20.

21.

22.
23.

24.
25.

26.

76
Change all case prices in stock room when price
Changes are received.
Change all decreases as well as increases that
appear on the price-change letter.
Audit manager's inventory frequently when it is
used to give credit for price Changes.
When pre-stamping is done, order merChandise .
accurately and only that needed for shelf stock.
Restrict managerb authority to purchase items not
authorized for the store.
Store broken-case merChandise in one place and
check frequently.
Eliminate customer breakage by proper stacking of
displays.
See that every employee is prOperly instructed and
trained for the job he is assigned.
Rotate stock to eliminate Spoilage and stales.
Keep employees alerted to observe all parts of the
store for shoplifters.
Check customer packages before they leave the store.
The store manager should spend as muCh time on the
floor as possible during rush hours.
Arrange equipment and locate stock to help decrease

pilferage.

27.
28.

29.

30.

31.

32.

33.

34.

35.

36.

37.
38.

39.

40.

41.

42.

77
USe caution when apprehending pilferers.
Set up Checks in store to discourage employee pil-
ferage.
Keep delivery doors locked except when in use.
Check salesmen and delivery men in and out of store.
Check invoices for quantity and price.
Check to see that damaged merchandise is recorded
for credit.
Set up an established procedure for the approval of
credit memos.
Audit Office funds at least once per month.
Lock cash.registers when not in use.
USe an established procedure for Checkers to obtain
Change, preferably from the store manager.
Train Checkers to use correct price -- never guess.
Allow checkers to converse with no one but the cus-
tomer when checking.
Checkers should touch and slide every item.ihen
Checking.
Check all cashiers for accuracy at least once per
week.
Voids are authorized by the manager or assistant
manager.

NO employee will Check his own grocery purchases.

43.

44.

45.

46.

47.

48.

78
Dee a checkers training program -- initial and
follow-up.
Place store keys in the hands of responsible
employees only.
Restrict employee food consumption during work-
ing hours.
Take inventories regularly, at least every four
weeks.
Permdt only company authorized and experienced
personnel to take a physical inventory.

Take nothing for granted.

BIBLIOGRAPHY

A. BOOKS

Neuschel, R. F. and Johnson, H. T. How to Takem misiCal
Inventory. New York: MCGraw-Hill Book_ Company, Inc.

Wingate, John W. and Schaller, Elmer 0. Techniques of
Retail Merchandising. New York: Prentice-Hall, Inc.

B. PERIODICALS

Anon. Says 80% of units Call Pilfering Top Problem.
Supermarket News. 12 (April 1955)

C. BOOKLETS

The Market Basket CorpOration. Cashiers' Manual. Geneva,
New York: 1951.25 pp.

Controllers' Congress National Retail Dry Goods Association
Stock Shortage Control Manual. New York: 1951. 111 pp.

D. BULLETINS ,

National Association of Food Chains. Checkout Clinic.
Chicago: February, 1950. 10 pp.

CO

0
APPENDEX A
QUESTIONNAIRE ON INVENTORY CONTROL

This questionnaire deals with inventory control in the

grocery department of the retail store although the other de-
partments may be mentioned briefly. Unless otherwise stated,
questions will pertain to the operation of the grocery de-
partment e

Are the following items included in the grocery, meat, pro-
duce or other departments in recording sales?

Bakery: Grocery Meat Produce Others

Dairy: Grocery Meat Produce Others .
Delicatessen: Grocery Meat Produce Others .
Frozen Foods: Grocery Meat Produce Others .
Ice Cream: Grocery Meat Produce Others .

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RECEIVING MERCHANDISE:

1.

2.

3.

4.

5.

8.

Are your stores serviced by a company owned warehouse?
Yes No -

Do you own your delivery trucks?
Yes No

What methods do you use at the store to Check incoming
shipments from.your warehouse?

.Approximately what percent of your purchases are received
in drop shipments by outside vendors?

 

What is the procedure for checking drop shipments and who
does it?

Are grocery shipments received in the majority of your
stores during: Day Night ?

What percent of your stores engage in night stocking
?

 

Are the stores Charged for returnable packing cases in
which small items are received 'Yes No
If yes, what kind?

 

9.

10.

81

Are these empties returned by the transportation facili-
ties that deliver the merChandise? 'Yes No

Is the price marked on the outside of eaCh case of mer-
chandise: At warehouse On truck before unloading—
During unloading _After storage_ Not marked _?

MARKING:

1.

2.

3.

5.

6.

7.

8.

The type Of price stamp used for marking groceries is:
NCR set Band stamp Others ?

How often are regular price Changes sent to the store?
Every week Two weeks Others -

 

Are the stores given credit for price increases or decreases?
Regular price changes: Yes NO Special Changes:
Yes No If yes, HO w? Reg'GJEr

 

Special

 

If a physical inventory of items having price Changes is
taken by the manager, is there any audit or checkup on the
validity of the manager's inventory? Yes _NO ___. If yes,
by whom? How often?*

 

Do you follow the policy of complete pre-stanping Of merchan-
dise? Yes No If yes, how many days notice is given
before the pr rIce Change becomes effective?

 

DO you issue an authorization list of items carried by the
stores? Yes NO

May the managers purchase items not on the authorization list?
Yes No If yes, how are these items priced? Estab-
lished Markup ' Others

 

May the managers purchase itemm which are authorized but out
of warehouse stock? ‘Yes _NO If yes, how controlled?

STOCK CONTROL:

1.

2.

Where are broken cases of grocery merChandise stored?
Back room Basement Under gondolas Other

What type of equipment and/or specially designed shelves do
you use to decrease customer breakage?

5.

4.

5.

6.

82

Is breakage a consideration in locating and building dis-
plays? Yes No

Approximately What percentage of inventory loss is due to
breakage?

Do you.have a training program for backroom.operation and
stocking? Yes No If yes, what type?

 

What methods are used for rotating shelf stock?

PILFERAGE CONTROL:

1.

3.

7.

Check the preventive measures against pilferage used in
your stores.

Limit the height of gondolas for view of store
Regular mirrors

One-way vision mirrors

Arrangement of stock easIIy pilfered

Elevated office

Check articles not purchased in the store
Others

 

Are stores given varying pilferage allowances? Yes No
If yes, what is the basis for this variation?-

Do you consider mirrors an effective psychological preventive
measure in pilferage control? Yes No

How important is stock arrangement as a device for control-
ling pilferage?

Approximately what percent of the average inventory loss do
you think is contributed by pilferage?

 

Are you serviced by Willmark? ‘Yes No Other similar
service? Yes No If yes, name

ACCOUNTING PROCEDURE FOR RECORDING CHARGES AND CREDITS:

1. What percent of inventory loss is considered:

2.

Low Average High ?

Is the merchandise charged to the store at: Cost
Retail Cost & Retail

6.

83

Is credit given the store for: Bent cans Swells
Breakage Stales

Credit memos for groceries charged to the store are approved
by: Manager Supervisor Others

 

How often is an audit or check made of the store's office
funds?

 

Are store reports sent to the accounting office weekly
Two weeks Others

 

If possible, I would like to have a sample copy of the

accounting forms used to record charges and credits in the store,
the accounting department and the forms used for taking a physi-
cal inventory.

CHECKOUT PROCEDURES:

1.

29
3.

4.
59
6.
7.

8.

Are the checkers required to separate items by departments
before Checking the order? Yes No

How long is your initial training period for Checkers?

What type of checkout stand do you employ? Describe.

 

How often are cashiers checked for accuracy in ringing up
groceries?

Who checks the register at the end of the day?

 

What restrictions are placed on employee purchases and pay-
ment?

Do you give employees discounts on their purchases? Yes
No . ""

 

How long is the cash register detail tape kept?

STORE PERSONNEL:

l.

2.

Who is responsible for keeping the back door locked during
the day?

 

Are two locks used on the front door? Yes No

5.
4.

5.

6.

84

Do you use time recording locks? Yes No

Is the grocery manager responsible for all departments?
Yes ”No If no, what other managers?

 

Do you require employees to pay for merchandise consumed
in the store? Yes No If yes, how enforced?

 

Are keys to the back door furnished night delivery drivers?
Yes ‘ No If yes, is a delivery cage used around the
backn door? Yes No If no, is there 31y partition
limiting the area the deIIvery man may enter? Yes _No ___.

PHYSICAL INVENTORY

1.
2.
e.
4.
5:
6.

7.

8.

Do you employ full-time inventory teams? Yes No
If not, who takes the physical inventory?

 

Are the inventories taken at Cost 'Retail ?

How often is the inventory taken in grocery meat
and produce departments?

Do you use inventory retakes? Yes No

 

If yes, what are your reasons?

 

If yes, how long after the regular inventory is the retake
made? ,_

How much does taking a physical inventory cost for the
average store?

 

COMMENTS: Any comments which you may wish to make about the

questions or the study will be welcomed.

85
APPENDIX B

Date

Name
Title
Company
Address

Dear Sir:

I am a graduate student at Michigan State College
with a major in Food Distribution and have undertaken a
study of Inventory Control in the Retail Operation of
a Grocery Chain Store . This study is limited to the
control of inventory in the grocery department. The
results of this study will be presented in a thesis
which will be completed in June, 1955. It is felt
that a need fer research on this problem.exists in
the food industry today and that the conclusions
reaChed will be of interest and value to the food
retailer.

Will you be so generous as to complete the en-
closed questiennaire? ‘It has been prepared to obtain'
a survey of the various practices of food Chain stores
and is designed to require as little of your time as
possible. Your company name will not be mentioned in
any reference to the data received.

Any additional informatibn whiCh you may have an
the subject will be gratefully accepted.' The success
of this study willciepend on the assistance given by
members of the feed industry. Your c00peration in
completing the enclosed questionnaire is greatly
appreciated.

Very truly yours, .
\\.

Woodrow H. bener

L

__V

 

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