Methods to Manage Shrinkage In raising prices of items previously priced lower than competitors, Perdue should perform a thorough data analysis based on information from his comptrollers, competitors, customer surveys and researchers’ feedback on the advantages and disadvantages of raising prices even at a minimum amount. Secondly, clear objectives and standards should be set for the raising of prices. Perdue should itemize the procedure as well as the benefits to be derived from raising the prices. Both profitability and market share standards should be established. Thirdly, Perdue should perhaps test this price increase in one or two selected stores before implementing this change throughout the entire organization.
An analysis of the effect of the price increase and the measurement of standards could guide Perdue’s next steps. A positive impact on the overall performance of the stores may imply that this strategy would result in a favorable outcome for the organization. On the other hand, a negative impact would suggest to Perdue that this process is faulty and needs to be address differently. Lower sales per square foot at larger stores should be seen as both a problem and a symptom.
It is a problem because low sales imply low profits as such the CEO needs to immediately address this problem of lower sales at larger stores. At the same time this occurrence may be a symptom of an underlying and more serious problem. Low sales may be due to mismanagement at these larger stores. Thus, the other three functions of planning, leading and organizing may need to be examined and revamped. Specifically, the CEO may need to implement quality circles at these locations.
In addition, a redefinition of operations management and subsequent refinement of specific objectives and standards must be addressed. In the case it appears that Perdue has already begun to use methods to manage shrinkage. Following his observation of the level of shrinkage, Perdue has decided to overhaul his support functions. Hence, he is using feedback control. Nonetheless, a discount retailer such as Dollar General should use precontrol activities to manage shrinkage. Some items sold at Dollar General are quite small. Thus, it is quite easy for customers as well as employees to remove these small items from the shelves without the observation of the honest employees.
In addition, the size of the stores themselves should allow for easy monitoring of items but when there is a crowd monitoring becomes difficult. Mirrors, electronic doors and security personnel should be implemented at these outlets. What is more, Perdue can use his power to influence his employees about the effect of shrinkage on their salary. This process can be continuous through training of present employees. A culture of honesty among employees can be established by conducting workshops at the recruitment and selection level as well as during the work life of all employees.