Page 208 - DMGT553_RETAIL_STORE_MANAGEMENT

Unit 11: Loss Prevention and Shrinkage Control

Self Assessment Notes

Fill in the blanks:
9. The Retail Inventory Method can help keep losses .................................
10. Shrinkage ................................. when it is measured.

11. ................................. can be controlled by use of a good, well-documented system containing
built-in checks and balances.
12. It is the responsibility of managers to remove as many temptations as possible thereby
helping to keep employees.................................

11.4 Scrap and Surplus Management

Scrap materials are those that are not usable in their present form, but that still have value.

Examples are residual pieces left from operations or other recyclable materials, such as paper.
These are not to be confused with trash, which has no value.

Surplus materials are those that, while still in good condition and usable, have no foreseeable
use within specified operations during the next 12 months.
Examples include such things as regular Inventoried items that, because of reduction in
consumption, are now overstocked, or items that are still produced but no longer used.
Scraps are recyclable and other materials left over from product consumption, such as parts of
vehicles, building supplies, and surplus materials. Unlike waste, scrap has significant monetary
value.

The salient aspect in management of scrap and surplus items is that it is buyer who is more well-
versed and informed regarding the items than the seller. But on the other hand, though revenue
received of scrap and surpluses is a sizable sum, it is quite negligible in comparison with that of
the company’s regular product line. Further the varieties of surplus are so diversified in grades
and kinds that it is practically difficult, though not (totally) absolutely impossible for any
concern to deal with them.
As a solution to this, the services of scrap consultants come as a rescue. The scrap consultant
renders the services of his preliminary survey or scrap and surplus items and their handling
procedures. On the basis of his wide experience in the profession, recommends in his report for
segregating, grading, handling, weighting and accounting for the company’s accumulated surplus
stock. The program is implemented under direct audit and periodic survey of the consultant by
the supervisor (the person in charge) of its scrap and surplus program. The negotiations from
time to time with suitable parties bring a ready disposal of the company’s surplus. In return, the
consultant is paid a commission on sales of scrap and surpluses.

Some scrap items or scrap items at times, are sold to the employees. If surplus is the result of
overstocking or technical obsolescence and the materials are in new or good condition, or if
they are odds and ends of scrap described by employees, this can be a satisfactory method of
disposal of surplus stock. On the other hand, if the surplus is not in fully satisfactory condition,
such sales, regardless of their attractive price, can be a source of resentment on the part of
employees towards the employer.

LOVELY PROFESSIONAL UNIVERSITY 203