April 28, 2003

Giant Eagle Factoring Shrink into Forecasts
By Michael Garry

PITTSBURGH - Giant Eagle here is well into a chain-wide rollout of a shrink measurement program aimed at identifying "known loss" and using that knowledge in perishable production forecasts.

Giant Eagle is recording instances of shrink - such as damaged goods, discontinued items, out-of-code products and in-store transfers - on Symbol handheld devices equipped with software developed for the chain by SofTechnics, Dallas, explained Robert P. Garrity, the chain's senior vice president, information services.

In perishable departments, such as meat, prepared foods and bakery, the shrink information is being incorporated in sales and production forecasting systems in an effort to "make the right products and avoid shrink" in the future, he said. Giant Eagle uses production planning systems from Eatec, Emeryville, Calif., for prepared foods and bakery, and Invatron, Mississauga, Ontario, for meat.

"If we record shrink as it is occurring and remove the mystery from waiting until a physical inventory is done, we can know the timing and the reason for the shrink," said Garrity. "Then we can [take steps] to avoid it in the future."

According to Erv Jones, director of marketing, SofTechnics, Giant Eagle's known-loss application "is a new area of fresh management" for the grocery industry. He said SofTechnics is now offering the system to other food retailers but "it will be tailored for each application."

Garrity said that the focus on known loss has resulted in improvements in the production planning process. In a pilot of its Eatec application, Giant Eagle achieved a 5% reduction in shrink for a limited number of products, according to Dave McGeary, the chain's retail technology advisor.

Added McGeary, "We have a better handle on the percentage of shrink attributable to in-store transfers vs. the percentage attributable to damaged goods. The better we understand the causes of shrink, the better we can handle it."

The chain has been rolling out the shrink measurement application for about a year exclusively in its 124 corporate stores, reaching about 75% of them so far.

While the application gets the greatest use in perishables departments, it is being employed throughout the store.

Garrity explained that in non-perishable departments the application is used during regular cycle counting in an effort to identify "obvious out-of-stock issues" so that adjustments can be made immediately. In addition, orders can be adjusted to reflect issues like damaged products, he added. McGeary said that 1% of Giant Eagle's non-perishable distribution has been identified as known loss.

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