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Packaging Design forShrinkage Prevention

Packaging Design for Shrinkage

Prevention

DisclaimerThis publication has been compiled by ECR Europe,representatives from their membership and theirnominated consultant (CSR). It has been preparedthrough the active and enthusiastic participation ofa working group. Particular thanks are due to SCAPackaging and P&G for their sponsorship of thepublication and to the two co-chairs of the project.

The participating authors individually or collectivelydo not necessarily endorse all of the views,opinions, techniques, processes or advice given inthis document. The document is intended forgeneral information only and is based primarily onexamples focussed upon health and beautyproducts. Companies or individuals following anyactions described herein do so entirely at their ownrisk. Readers should bear in mind that due to thewide variety of companies and organisationsinvolved in the preparation of this publication andtheir specific requirements the views and opinionsexpressed should not be taken as specific advice.

Companies or organisations making use of thispublication are advised to take professional adviceregarding their specific needs and requirementsprior to taking any actions resulting from anythingcontained in this publication. Companies areresponsible for assuring themselves that theycomply with all relevant laws and regulationsincluding those relating to intellectual propertyrights, data protection and competition laws orregulations.

This publication has been produced by ECR Europewith the assistance of G. Richard Inns, CSR Analyst,and Adrian Beck, Department of Criminology,University of Leicester.

© ECR Europe All rights reserved.

Packaging Design for Shrinkage Prevention Published by:

ECR Europe9 avenue des Gaulois1040 BrusselsBelgium

E-mail: [email protected] Website: www.ecr-all.org

Graphic Design by: AnchorPrint.co.uk

Photography by: Andy Newbold Photographywww.andynewbold.com

ECR Europe is a voluntary and collaborativeretailer-manufacturer platform with a mission to‘fulfil consumer wishes better, faster and at lesscost’. It is a non-profit organisations which aims tohelp retailers and manufacturers in the consumergoods industry to drive supply chain efficienciesand deliver business growth and consumer value.

P A C K A G I N G D E S I G N F O R S H R I N K A G E P R E V E N T I O N

ContentsPreface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Project Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Packaging in Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Complexities and Tensions in Packaging Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Sustainability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Benefits and Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Competing Demands. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Product Protection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Developing Integrated Packaging Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Understanding Shrinkage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Defining the Problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Malicious Shrinkage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Non Malicious Shrinkage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Role of Opportunity and Operational Failures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Scale and Extent of the Problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19Impact of Shrinkage on the Shopper and Retail Profitability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Impact on Shopper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20Impact on Retailer Profitability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Shrinkage and Packaging. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21Damage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21Error . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24Waste . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25Theft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25Difficulties Applying Product Protection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Shrinkage and Packaging. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28Understanding the Problem: Developing a Road Map Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

The Shrinkage Road Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31Minimising Packaging-Related Shrinkage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Importance of Understanding the Retail Landscape. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39Balancing Efficiency and Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40Sustainability and Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41Identifying Products in the Supply Chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41Enabling Product Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42Packaging Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Improving Product Identification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43Reducing the Risk of Damage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43Minimising Theft and Improving the Application of Security Devices . . . . . . . . . . . . . . . . . . 44

Packaging Checklist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45Appendix 1: Further Reading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47



Project ParticipantsRetailersAsda AS WatsonCarrefourICASainsburyTesco

ManufacturersBeiersdorfL’OréalProcter & Gamble

Content co-ordinationSCA PackagingUniversity of Leicester

Packaging Advisor and writerG.R. Inns – PEC Partnership Ltd.

ECR Europe Shrinkage Group Co-Chairs

John Fonteijn Colin Peacock

Royal Ahold Procter & Gamble


PrefaceThe 2003 ECR Europe publication Shrinkage – A Collaborative Approach to Reducing Stock Loss inthe Supply Chain stated that:

‘There is an increasing recognition of the scale and extent of the problem of shrinkage in theFMCG sector. In addition, some of theconsequences of shrinkage, such as out of stocksand restricted product availability, impact directlyupon shopper satisfaction. Reducing shrinkage canalso increase sales’.

That report promoted the adoption of the‘Shrinkage Road Map’ – a simple but effectivemethodology designed to deliver real benefits tothe companies who use it to tackle their shrinkageproblems. The report also set out the importance ofincorporating this approach into a shrinkagereduction strategy that is itself fully integrated intothe overall corporate policy of the company; thusgiving shrinkage management the same weight andimportance as other functions within the businesssuch as sales, distribution and marketing.

In many people’s minds shrinkage is synonymouswith theft and one of the most visiblemanifestations of anti-shrinkage strategies is the useof security systems on and around packaging. Thereare, however, many other sources of shrinkage,

such as damage, wastage, and administrative errorsthat can be directly attributable to the way in whichproducts are packaged.

This Report and Guidelines offers a packagingstrategy built around the Shrinkage Road Map. It sets out the areas in which packaging can beused to attack the broad range of causes ofshrinkage with real examples of how packagingdevelopments can be used to develop and deploytried and tested solutions.

Because packaging design does not take place in avacuum it sets out collaborative approaches togetting benefits across the total supply chain. Itoutlines the complex challenges and tensionsinherent in designing modern retail packaging, andoffer a series of practical guidelines the industryshould consider when thinking about how tominimise the impact of packaging-related shrinkage.

As with previous ECR publications this Report andGuidelines shows how the application of asystematic coordinated approach to managingshrinkage can bring companies a real opportunityto increase profits and customer satisfaction – awin-win outcome that should make this essentialreading for the FMCG sector!

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Executive Summary


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Executive SummaryThe purpose of this report is to provide guidanceon how retailers and their suppliers can worktogether to identify and minimise the risk ofshrinkage through the better design of productpackaging. The fundamental role of packaging is todeliver every product to the consumer in perfectcondition at minimum cost and environmentalimpact. However, in order to achieve this goal,retailers and manufacturers often face competingchallenges and tensions concerning the way inwhich products should be packaged, not leastrelating to the growing needs for sustainability, thediffering and frequently competing demands ofvarious parts of the supply chain as well as theneed to apply product protection devices.

It is estimated that shrinkage costs the industryglobally as much as €174 billion1, with a further€34.8 billion being spent on trying to respond to it.In addition, the knock-on effect on out of stocksand defensive merchandising could be costinganother €17 billion a year. Taken together, if theaverage retailer could reduce their shrinkage by just25 per cent they could see their profits growthrough reduced costs and increased sales by asmuch as 18 per cent.

Packaging generates shrinkage in a number of ways,not least through products:

• Allowing their contents to become damaged intransit.

• Causing contamination through leakage.

• Contributing to product loss throughmisidentification.

• Losing their contents.

• Become too unsightly to sell.

• Suffering decreased shelf life and consequentreduced sales.

• Being more likely to be stolen.

Where products are subject to the use of additionalsecurity protection, they can suffer from:

• Product information being obscured.

• Stacking and presentational problems.

• Annoyance and frustration to consumers.

• Damage to product packaging.

This reports recommends the use of the ECRShrinkage Road Map to identify the ways in whichpackaging generates shrinkage and can beminimised – it is a tried and tested method tosystemically and systematically respond to thechallenges of all forms of shrinkage.

This report provides practical steps that can betaken to minimise the risk of packaging related-shrinkage focussing upon:

• Improving product identification.

• Reducing the risk of products being damaged.

• Minimising the risk of theft.

• Improving the way security devices are used.

The report concludes with a 20-point checklist that,if used in conjunction with the ECR Shrinkage RoadMap, will significantly help to minimise packaging-related shrinkage and in turn increase retailprofitability and ultimately consumer satisfaction.

1 Some of the estimates for shrinkage and the other related costs have been converted from original numbers published in US Dollars; the exchange rate used was €0.75 to $1.


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Introduction


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IntroductionThe purpose of this report is to provide generalisedguidance on how retailers and their suppliers canwork together to identify and minimise the risk ofshrinkage through the better design of productpackaging. It seeks firstly to introduce the broadercontext of designing packaging and the challenges itrepresents before going on to offer acomprehensive review of the nature, scale andextent of shrinkage and the way in which packagingcan and does act as a causal factor. It then goes onto provide a systemic and systematic methodology– the Shrinkage Road Map – which can be used toquickly and effectively identify packaging-relatedshrinkage problems, as well as design potentialameliorative actions. The final section of the reportprovides guidance on how the risk of packaging-related shrinkage can be minimised, including aquick ‘checklist’ that can be used in conjunctionwith the Shrinkage Road Map.

Packaging in ContextThe fundamental role of packaging is to deliverevery product to the consumer in perfect conditionat minimum cost and environmental impact. Poor

basic packaging design significantly increases therisk of shrinkage. Badly designed packs are morelikely to:

• Allow their contents to become damaged intransit.

• Cause contamination through leakage.

• Experience product spoilage or damage.

• Contribute to product loss throughmisidentification.

• Lose their contents.

• Become too unsightly to sell.

• Suffer decreased shelf life and consequentreduced sales.

• Be more likely to be stolen.

In the specific cases where products are subject tothe use of additional security protection, such assecurity stickers or Electronic Article Surveillance(EAS) tags they can suffer from:

• Product information being obscured.

• Stacking and presentational problems.

• Annoyance and frustration to consumers.

• Damage to the product packaging.

An example of defensive merchandising (product removed from packaging by store staff) and subsequentdamage to the packaging making sales unlikely


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Complexities and Tensions inPackaging DesignDesigning packaging is a complex task andshrinkage protection has to fit within a matrix ofoften conflicting requirements which aresummarised in Table 1 below.

As can been seen from the table below, goodpackaging, in its broadest context, needs to meetmultiple requirements: it needs to ensure that theproduct reaches the consumer in pristine condition,is aesthetically pleasing, provides the consumerwith clear product information, enables efficienthandling throughout the supply chain, and

minimises the risk of shrinkage. This can beextremely challenging, not least because in somecircumstances each and any of these requirementscan often compromise or undermine one or moreof the other elements. For instance, optimisingsupply chain handling can undermine efforts tominimise the risk of shrinkage, and vice versa.Equally, satisfying the requirements of regulatory/governmental bodies can have an affect, as can thepost-production application of security devices to aproduct, such as Electronic Article Security (EAS). It is vitally important, therefore, to reflect uponsome of these tensions and challenges as they relatespecifically to effectively managing shrinkage-related packaging issues.

2 Taken from: ECR Europe/EUROPEN (2009) Packaging in the Sustainability Agenda: A Guide for Corporate Decision Makers, www.ecr-all.org; or www.europen.be

Table 1 Functions of Packaging2

Requirements Features

Protection Prevent breakage (mechanical protection)Prevent spoilage (barrier to moisture, gases, light, flavours and aromas)Prevent contamination, tampering and theftIncrease shelf life

Promotion Description of productList of ingredientsProduct features and benefitsPromotional messages and branding

Information Product identificationProduct preparation and usageNutritional and storage dataSafety warningsGovernment/Regulatory requirementsContact informationOpening instructionsEnd of life management

Convenience Product preparation and servingProduct storagePortioning

Unitisation Provision of consumer unitsProvision of retail and transport units

Handling Transport from producer to retailerPoint of sale display

Waste reduction and recycling Enables centralised processing and re-use of by-productsand reuse of by-products Facilitates portioning and storage

Increases shelf lifeReduces transport energy


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Sustainability3

Concerns about sustainability are frequently at thetop of the agenda for consumer groups,environmentalists, governments, trade bodies,manufacturers and retailers. ‘Excessive’ packaging isfrequently highlighted as a growing concern and forsome groups ‘less’ is frequently associated with‘better’ packaging. However, research by bodiessuch as the ECR/EUROPEN working group hasrecognised that it should be more aboutunderstanding how much packaging is necessaryrather than simply minimising the amount ofpackaging used4. If products cannot survive therigours of the supply chain and end up beingthrown away because they are too severelydamaged to be sold to the consumer, then this hasa greater effect on sustainability than adding slightlymore packaging to secure the supply chain journey.

Similarly, having to remanufacture a product toreplace one that has been stolen because thepackaging has not provided sufficient protectionfrom theft, is equally a false economy – theadditional cost of more secure packaging frequentlyoutweighs the cost of replacing the product5. Thesustainability debate needs to, therefore, understandthe broader, more complex environment withinwhich product packaging operates – sometimes,‘more’ may be ‘better’ and this may need to bemore effectively communicated to various groups,not least Government bodies who may notappreciate the complexities of this problem.

Benefits and CostsModern retailing is a highly compartmentalisedindustry with communication between and withinbusinesses often being limited and frequentlyfocussed only upon local needs and priorities – itcan often be less about co-operation and moreabout conflict management.6 Developing packagingthat meets conflicting demands requires genuineco-operation to ensure that local interests do notusurp the ultimate goal of getting the product to theconsumer in saleable condition. In this respect,parts of the retail supply chain may need to absorbcosts that do not necessarily directly address issuesrelating to their particular circumstances. Forinstance, increased manufacturer expenditure onbetter product identification on inner and outercase packaging may not directly help their part ofthe supply chain but could have a considerablepositive improvement further down the process inretail warehouses and stores. In turn this couldsignificantly reduce the problem of out of stocksand ultimately increase customer satisfaction.

3 For a more comprehensive review of this subject see: ECR Europe/EUROPEN (2009) op cit.4 ECR Europe/EUROPEN (2009) op cit.5 European law incorporates significant requirements for packaging, particularly on the amount of packaging used. The need to protect products from pilfering is recognised by the

law but designers must understand how the law is applied and enforced. Potentially the most significant piece of legislation relating to anti shrink packaging is The Packaging &Packaging Waste Directive (94/62/EC) and specifically the Essential Requirements set out legal requirements governing packaging design. The purpose of these can be summarisedas: to keep packaging weight and volume to the minimum amount needed for the safety, hygiene and consumer acceptance of the packed product; to keep noxious or hazardousconstituents to a minimum; to ensure that packaging can be reused and/or recovered once it has been used.

6 Groups like ECR Europe and others have made significant progress in trying to bring together various parts of the retail industry to reduce this lack of co-operation and improveinformation sharing.

Examples of ‘oversized’ packaging

Products with minimal packaging

Examples of the packaging of small products


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The reality is that the outcome will most certainlybenefit the manufacturer who is making the originaladditional expenditure, but it requires a degree of‘joined up thinking’ and recognition of the ultimatediffusion of benefit from the changes made and thecosts incurred – the costs are felt directly but thebenefits may arrive more indirectly. Thisundoubtedly raises issues about whether these costsshould be shared and who benefits the most – it isnot the purpose of this report to resolve this issuebut merely to identify that packaging-relatedshrinkage problems may be best addressed muchfurther down the supply chain than where theyoccur and that the ultimate goal of satisfying theconsumer should dominate the agenda.

Competing DemandsTensions in packaging design are also apparent ininnovations to improve the ‘ease’ with whichcustomers can open products, such as the increasinguse of perforated edges on some items. Similarly,the move toward greater shelf-ready packaging toimprove the speed with which store replenishmenttakes place is another example of a tension betweencompeting packaging demands7. Both of theseinnovations can lead to a greater risk of productsbeing damaged as they move through the supply

chain and in some circumstances provide greateropportunities for employees to steal stock.

Equally, because retail supply chains are frequentlylong and complex with different handlingrequirements at different stages, this can createcompeting demands upon packaging. Informationdemands will and do vary depending on where theproduct is and who is handling it. For instance, whilesome consider more product visibility as a goodthing (reducing confusion) others might consider thisas less than ideal and likely to generate shrinkage –product theft by employees may increase in thesupply chain if high value items are more easilyrecognised. Again, the solution is not easy, butundoubtedly resides in recognising the competingdemands of packaging and how a development inone area may lead to problems arising elsewhere. Byunderstanding the specific requirements of particularproducts moving through any given retail supplychain a suitable compromise may be achievable.

There are also tensions generated by some parts ofthe retail industry wanting to adopt globalisedstandards for their packaging (ultimately to reducecosts), for instance in the language used onpackaging. As highlighted earlier, while this mayhave obvious benefits for one organisation, the

7 For more detailed information on this subject, see: ECR Europe (2006) Shelf Ready Packaging (Retail Ready Packaging) Addressing the challenge: a comprehensive guide for acollaborative approach, www.ecr-all.org.

Product information covered by security tag

Example of unclear product differentiation


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knock on effect may be profound for other parts ofthe retail industry, such as causing localisedconsumer confusion leading to packs being morelikely to be opened to examine contents andultimately leading to shrinkage (such as damage).

Product ProtectionFinally, there are numerous tensions generated bythe desire by some retailers and manufacturers toapply security-related devices to products toreduce the risk of theft. Many of these are appliedpost manufacture and can cause a host ofproblems, including damage, product informationbeing obscured, reducing the aesthetic appeal ofthe product and increased handling costs. Theapplication of EAS tags is a good example of thisproblem and is compounded by a lack of a globalstandard relating to these products. The way theywork, their size and application vary enormouslydepending upon the supplier, and this can causemajor challenges to the retail sector and the way inwhich packaging is designed. As with some of theother tensions highlighted above, a betterunderstanding of the impact of security devices onpackaging requirements and improved dialogue

between those determining what security will beapplied to any given product and those taskedwith the design of the packaging will help toreduce this problem.

Developing IntegratedPackaging SolutionsWhat seems clear is that the demands uponpackaging are many and varied and frequentlycome into conflict with each other – what is goodfor one part of the supply chain may not be goodfor another part. Equally, some of the costs ofresolving these issues may have to be borne byboth retailers and manufacturers. But ultimately,getting packaging ‘right’ is critical if the ultimate‘boss’ – the consumer – is going to see the benefits.In this respect it is in the interests of all parts of theretail supply chain to collaborate to begin to resolvemany of the packaging tensions highlighted above.Not all are easy to address and some may simplybe the inevitable cost of irresolvable priorities.However, to date there has been insufficient cross-functional thinking on this issue and there isundoubtedly much that can be done in the future.Packaging-related shrinkage has to date been anunderexplored area, mainly because the scale,nature and extent of the problem has not been wellunderstood. It is to this subject that the next part ofthis report moves – understanding the enormousfinancial cost of shrinkage and the significant profitimprovement opportunities available to thoseorganisations that begin to address this issue.

Protected product on the move

Product obscured by security sticker


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Understanding Shrinkage


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UnderstandingShrinkageIn order to comprehend the inter-relationshipbetween shrinkage and packaging it is important tofirst of all briefly review the overall context: what weunderstand the term ‘shrinkage’ to mean, what isknown about its scale and extent, how problemswith packaging can generate shrinkage, and theoverall affect shrinkage can have upon the shopperexperience and retail profitability. We think thissection is important for those who are relativelyunfamiliar with the nature and extent of shrinkage inthe retail sector and for those who have traditionallyviewed shrinkage as a problem exclusively focusedprimarily on external theft issues.

Defining the ProblemConsensus is hard to find on what the term‘shrinkage’8 means and what should be includedand excluded when this word is used within a retailcontext. For example, some use it to refer only tothose losses that are unknown in the business,while others suggest it should be focussedexclusively upon losses generated by theft. How itis defined within any business, but especially thosethat sell food, can have a profound impact uponhow much it is perceived to cost (such as includingor excluding the costs of wastage and product markdowns). It can also significantly affect the scope andresponsibilities of differing parts of a retailorganisation, with the function of loss preventionexpanding and contracting in direct relation to thenarrowness or breadth of the way in whichshrinkage is defined. Indeed, this lack of an agreeddefinition has made benchmarking within theindustry all but impossible with retail companiesacross the globe adopting a myriad of differentinterpretations, which in turn make any meaningfulcomparisons highly problematic.

Within the ECR Europe community efforts havebeen made to try and establish some consensus onhow shrinkage should be viewed including whatthe term ‘shrinkage’ means. They have developed aworking definition that suggests that shrinkage

should be viewed as: ‘intended sales income thatwas not and cannot be realised’9. This is apurposefully broad definition intended toincorporate as wide a spectrum of losses as possibleto ensure that all the possible causes of shrinkageare considered. Moreover, the ECR EuropeShrinkage Group now endorse the model outlinedbelow, which views operational failures as the rootcause of most forms of shrinkage.

Figure 1: Causes of Shrinkage10

This model views shrinkage as made up ofmalicious and non-malicious forms of shrinkage.Malicious events represent those activities that arecarried out to purposefully steal goods, services andultimately profit from an organisation. Non-malicious events occur within and betweenorganisations that unintentionally cause loss,through poor processes, mistakes, bad design andso on. The importance of understanding theintentionality of a shrinkage occurrence is theimpact it has upon the approach taken to tackle itand the expected longevity of the results of anintervention. For example, malicious losses areintentional and occur deliberately, usually with adegree of forethought, such as incidents ofcustomer theft from the retail store where thieveswill constantly seek ways to circumvent currentapproaches designed to protect the product. Incontrast, unintentional or non-malicious shrinkagesuch as products being damaged in the supplychain because of poor quality packaging, is notplanned and hence solutions are more likely to lastlonger as they are not subjected to the attention of

8 Some commentators and practitioners use alternative terms, including: ‘shortages’, ‘inventory shrink’; ‘inventory shortage’; ‘retail inventory loss’ or simply ‘loss’, (Beck, A. withPeacock, C. (2009) New Loss Prevention: Redefining Shrinkage Management, Palgrave Macmillan: Basingstoke).

9 Chapman, P., & Templar, S. (20 06) Scoping the Contextual Issues That Influence Shrinkage Measurement. International Journal of Retail and Distribution Management, 34 (11): 860-972.

10 Beck with Peacock (2009) op cit.

ExternalTheft

InternalTheft

Inter-company

Fraud

Spoilage Damage Data Errors

PricingErrors

DeliveryErrors

ScanningErrors

SHRINKAGE

OPERATIONAL FAILURES

Non MaliciousMalicious

Opportunity


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criminal creativity. While solutions to the latter mayrequire similar levels of vigilance (for instance tomake sure staff are continuing to follow procedures)they are less likely to be anything like as vulnerableto redundancy.

Malicious ShrinkageThis type of loss is traditionally viewed as beingmade up of three factors: internal and externaltheft and inter-company fraud.

Internal theft: the loss of goods through incidentswhere the theft of products takes place bysomebody directly employed by the business(including those carried out by staff contracted withanother company but who are working almostexclusively for the host business, such as contractguards or cleaners), including incidents where theyhave colluded with outsiders to enable them tosteal. This includes the direct removal of productsfrom the store, eating stock while at work (which istermed grazing) or using other products while atwork for personal gratification, such as health andbeauty items.

External Theft: the unauthorised taking of goodsfrom a store at any time of the day or night bycustomers or other non-company employees. Thisincludes: incidents of goods being stolen while thestore is open (commonly called shoplifting), such asthe direct removal of products from the store,eating stock while in the store (grazing) or the useof products in the store, such as administeringpregnancy tests in the retailers’ toilets; thefraudulent return of goods (such as removing anitem from the shelf and then taking it to the returnsdesk and demanding a refund) and burglary(breaking and entering a store whilst it is closed)and stealing stock.

Inter-company Fraud: seen as losses due tosuppliers or their agents deliberately delivering lessgoods than retailers are eventually charged for bythem or delivering products of a lower quality thanoriginally agreed. It also includes those lossessuffered by the supplier when retailers themselvesdecide to deliberately return fewer goods tomanufacturers/suppliers than agreed/specified.

Non Malicious ShrinkageThis type of shrinkage is made up of a myriad offactors that are often described as process failuresor administrative losses and include the following(and other) factors:

Damage: goods that have been damaged during theprocess of delivery, storage and merchandising ofthe goods which means they cannot be sold for anyvalue. Examples would include: a pallet of sugarthat is left outside in bad weather; cartons ofwashing powder crushed by a forklift truck;pears/bananas that have been badly bruised; orbottles of wine that have been smashed.

Wastage/Spoilage: products that have reached theirexpiry date or gone beyond agreed temperatureparameters and are no longer safe to sell toconsumers or staff. Examples would include: freshmeat and vegetables, fish, ready-made meals, frozenfoods, dairy produce, bread, flowers and so on.

Pricing: losses caused by errors in the way in whichgoods are priced and sold in the business. Exampleswould include: head office setting up a promotionincorrectly but advertising it nationally meaning thestores have to discount locally; goods codedincorrectly on the store inventory system; staffincorrectly pricing product in the back room areasor on the shelf; a mismatch between agreed andactual selling price; or a member of staff enteringthe wrong price at the till.

At the checkout: errors occurring at the point ofsale that lead to a positive or negative discrepancyin the store book stock. Examples would include: atill operator entering the wrong code for a product;entering a single code for multiple varieties of aproduct such as tinned pet food; not scanning freeproducts as part of a promotion such as buy oneget one free offers; a till operator forgetting to scangoods such as items at the bottom of a trolley orthose removed from keepers/safer cases; or a tilloperator using a ‘dump’ code to sell items that arenot easily scanned/identified.

Delivery Errors: errors generated by the movement ofgoods within the business. Key areas of vulnerabilitywould include mistakes made in the receiving ofgoods, the transfer of goods and returns/refunds.Examples would include: shortages in deliveries to astore directly from a manufacturer or a distributioncentre; transfers to others stores incorrectly recorded;products for use within the store not recordedproperly; goods returned to the store by theconsumer that are not entered back onto the system,or cannot be returned to the supplier.

Data errors: errors in the recording of stock oncompany systems. Examples would include: retailbuyers/suppliers incorrectly inputting item set updetails that lead to stores receiving less items than


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identified on the system; items that are notcorrectly associated with the book stock database,such as promotional items not linked with items inthe main assortment; and products registered onthe store inventory that have not been delivered.

Role of Opportunity and OperationalFailuresWhile the various forms of shrinkage defined undermalicious and non-malicious shrinkage offer arelatively comprehensive overview of the varioustypes of loss that can be used to categoriseshrinkage, they do not offer a way of understandingwhat the root causes of these problems are – theyare descriptive but not explanatory. This modelsuggests that the root cause of the majority of lossesis due to operational failures within a retail business.The ECR Shrinkage Group adopts a relatively broaddefinition that sees operational failures as any faultin the design, implementation, operation,monitoring and control, and review of processesand procedures used within the retail environment.Operational failures can occur at any point in thesupply chain from point of manufacture through tothe eventual sale of goods to the customer (andbeyond in respect of product returns). In the contextof this report, the way in which packaging cangenerate shrinkage would be viewed as anoperational failure (the design of the packaging isthe root cause of why the shrinkage happens).

Scale and Extent of the ProblemBecause of the tremendous variance in the way inwhich different organisations define shrinkage, it isless than easy to get an accurate overview of thescale and extent of the problem. Numerous surveyshave been undertaken over the past 20 years or sotrying to gather information from retailers on theway in which they are affected by shrinkage. Themost recent effort to do this was the Global RetailTheft Barometer undertaken by the Centre forRetail Research in the UK in 2009. This concludedthat shrinkage in the 41 countries taking partaccounted for 1.4 per cent of retail sales amountingto €86 billion11. Another study has concluded thatglobally shrinkage could amount to as much as€208 billion (including €34.8 billion spent onresponding to the problem)12.

All of the surveys on shrinkage generally offerestimates of the extent to which the different typesof shrinkage (external theft, internal theft, inter-company fraud and process failures) account forloss. Detailed in Table 2 below is a composite list ofthe most recent surveys and the proportion of lossassigned to the four types of shrinkage.

Making sense of the considerable fluctuations inthis data is not easy although the underlyingproblem that these are only ever ‘guesstimates’ byrespondents probably explains why there is verylittle consensus across the various surveys.

11 Bamfield, J. (2009). Global Retail Theft Barometer 2009. Nottingham: Centre for Retail Research.12 Beck with Peacock (2009) op cit.

Table 2 Estimated Causes of Shrinkage from Nine Recent SurveysSource Malicious Non-Malicious

External Internal Inter-company Process failure

Per cent

National Retail Security Survey (US) 2008 34 44 4 15

Global Retail Theft Barometer 2009 42 36 6 16

Food Marketing Institute (US) 2007 32 39 9 21

ABRAS Supermarket Shrinkage Survey (Brazil) 2005 12 16 8 65

ECR Europe Shrinkage Survey 2004 38 28 7 27

Retail Council of Canada 2003 35 40 7 18

New Zealand Survey of Retail Theft & Security 2003 68 12 3 20

National Supermarket Research Group (US) 2002 20 57 - -

ECR Australia 2002 35 25 11 29

Average 35 33 7 26


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However, if a crude overall average is taken then itcan be seen that internal and external theft areeach seen to be responsible for about one-third ofall losses, while process failures account for afurther one-quarter, with the remaining 7 per centbeing seen as the responsibility of inter-companyfraud. However, it needs to be remembered thatultimately these estimates tell us more about howretailers are thinking about the problem than itdoes the actual extent to which different types ofshrinkage are responsible for loss.

Impact of Shrinkage on theShopper and Retail Profitability

Impact on ShopperAs indicated earlier, the direct cost of shrinkage toretailing is considerable, but there are alsoadditional consequential costs that are notaccounted for in the estimates presented above.These include the impact of shrinkage on theshopper, which can take the form of out of stocksand/or defensive merchandising strategies.

Out of Stocks: Shrinkage corrupts inventory recordsmeaning that the book stock levels shown on thesystem will be inaccurate. The system willaccordingly either not replenish those items wherethe book stock is overstated or place additionalorders where the stock is understated. Either way,the shopper may not find the product that theywant on the shelf and the retailer and themanufacturer may lose that sale.

Defensive Merchandising: Much accountability formanaging shrinkage on a day-to-day basis often liessolely with store managers who are frequentlyincentivised to deliver low shrinkage and are givensignificant autonomy in adopting localised solutionsto achieve this goal. For high risk products, especiallyhealth & beauty, where there is a perception that thecause is usually external theft, store managers mayremove the products from self selection, placingthem either in locked glass cabinets or behind thecustomer service desk or pharmacy counter. This canhave a detrimental effect on sales as customers aremuch more likely not to purchase goods that are noton open display13.

While accurate estimates of the financial cost of out ofstocks caused by shrinkage and defensivemerchandising are not available, a study by Corstenand Gruen estimated that out of stocks could becausing retailers to lose the equivalent of 3.9% ofannual sales14. Globally this could be worth $586billion a year. Estimates by Beck and Peacock havesuggested that globally shrinkage-caused out of stockscould be worth as much as $92 billion a year15.

Impact on Retailer Profitability

Figure 2: Shrinkage and Profit Opportunity

Traditionally, shrinkage has been measured as totallosses as a percentage of retail turnover, focusing onthe absolute cost to the business. However, recentthinking has begun to represent shrinkage more asa significant opportunity for increased profitability.For example, an estimate of the average retailprofitability within the European Fast MovingConsumer Goods sector concluded it was 3 percent16. If the recent global estimate of the cost ofactual shrinkage suggested by Beck and Peacock of1.65 per cent of sales is used, and this is combinedwith their estimate of the average amount spent onmanaging shrinkage (0.3%) and the estimated lostprofit from sales caused by shrinkage-induced outof stocks (0.2%), then the elimination of allshrinkage would grow average sales by as much as72 per cent17. Even if a more realistic target ofreducing the overall cost of shrinkage by just 25 percent is used, this would still provide most retailerswith a sales growth opportunity of about 18 percent – a considerable uplift in profitability.

13 For instance, a pilot study carried out in Hungary by Tesco and Gillette found that going to open display (combined with a series of other steps to reduce the risk of shrinkage)increased sales by 288%; see Beck, A., Chapman, P. and Peacock, C. (2003) Shrinkage: A Collaborative Approach to Reducing Stock Loss in the Supply Chain, Brussels: ECR Europe.

14 Corsten, D., & Gruen, T. (2003). Desperately Seeking Shelf Availability: An Examination of the Causes, Extent and the Efforts to Address Retail Out-of-stocks. International Journal ofRetail & Distribution Management, 31 (12), 605-617.

15 Beck with Peacock (2009) op cit.16 Beck, Chapman and Peacock (2003) op cit.17 These estimates derive from the work of Beck and Peacock (2009) op cit, and assume a gross margin of 25%.

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Shrinkage and PackagingAs detailed earlier, the root cause of most forms ofshrinkage is operational failures and packaging has adirect role in generating these failures. Detailedbelow are some of the main ways in whichpackaging can generate shrinkage, organised aroundfour key areas: Damage; Error; Waste; and Theft. Itis also important to reflect upon the way in whichpackaging design can compromise efforts to try andprotect products from shrinkage, in particular, butnot exclusively relating to the application ofElectronic Article Surveillance (EAS) tags.

DamageProducts that are damaged in some way as theymove through the supply chain are a perennialsource of shrinkage for retailers. Depending uponthe level of damage and type of product involved,it can lead to stock having to be returned to themanufacturer, sold at a lower price than originallyenvisaged or simply written off by the retailer. Inany event, products that become damaged areundoubtedly a major source of loss for the retailsector and can also contribute to out of stocks – thedamaged item will still be considered ‘in stock’ byautomated ordering systems until the inventoryrecord is manually adjusted.

Products can become damaged for a number ofreasons, only some of which may necessarily bereduced or eliminated through better packaging.

But, it is important to understand the operatinglandscape within which products will be moving –it is no use creating packaging which simplycannot adequately survive the environment withinwhich it will reside. Indeed, the degree ofprotection afforded by packaging may need tochange as the environment changes – for instanceas the product gets closer to the shelf, then it is farmore likely to receive less robust handlingtechniques (although customer handling at theshelf may be relatively robust!).

For example, products that are moved on pallets orin cages will experience higher degrees of robusthandling than those which are being moved byhand, say from the back of the store to the shelf.Therefore, the range of packaging used for products(outer, inner and around the product itself) needs tobe designed for the environment within which it willoperate and be prepared for the degree ofrobustness that it is likely to encounter. For instance,the three examples below show how products beingtransported in a cage are experiencing damagebecause of the nature of the packaging and theenvironment within which it is moving – the firstshows how stacking is causing damage, the secondhow irregular product shape is causing problems,while the third highlights how relatively delicate andunprotected cartons can be damaged.


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Packaging not surviving the supply chain journey

Irregular-shaped packaging vulnerable to damage

Delicate cartons at risk of damage


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Products can also be damaged by the way in whichpallet shrink wrapping is utilised to facilitate thetransportation process – too severe and it leads tocrushing, too slack and it can lead to productsspillage and consequent damage. Below are twoexamples of this problem:

While some will argue that these issues go beyondthat of packaging and enter the realm of staff(in)competence and procedural compliance, thereality is that such instances are likely to occurwithin the retail environment and therefore need tobe considered as a packaging-related issue whichcould be resolved through more thoughtful design(such as outer pack resilience).

Packaging designed to help the customer moreeasily open the product, such as the use ofperforated edges, (see the example below) cancompromise the integrity of packaging prior toreaching its final destination and lead to itbecoming damaged and unsellable.

Similarly, shelf-ready packaging can also contributeto products becoming damaged as they movethrough the supply chain due to the way in whichit has been designed to facilitate quick and easydisplay on retail shelving. As detailed earlier, this isa good example of one of the inherent tensions inproduct packaging design – changes to benefit onepart of the retail operation can have negativeconsequences for another part of the business.

Both of these examples highlight the delicate balancethat needs to be struck between the desire forpackaging that delivers convenience, efficiency andreduced employee handling time with a need toensure it is sufficiently protected as it moves throughthe entire supply chain – too much or too little ofone can in some instances can severely compromisethe other. As will be discussed later, by using the ECRRoad Map, achieving this balance is possible throughcareful analysis and observation of the processesproducts move through in the retail supply chain.

Damage due to overtight pallet shrink wrapping

Damage due to overly loose pallet shrink wrapping

Example of damaged perforated packaging


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Products can also generate shrinkage throughdamage in the way in which they are stacked. The example below graphically shows how aproduct has not survived well the supply chainjourney because of the way in which otherproducts have been stacked on top of it. Again, thishighlights the importance of understanding thenature of the landscape through which the productwill journey and the extent to which the packagingcan endure the associated robustness of handling.In this case, irregular stacking (a not uncommonphenomena within retail supply chains!) has led tothe crushing and buckling of a box of wine which,given the nature of the product will probably notnow be saleable.

Finally, products can be damaged when customerswant to ‘test’ the product prior to purchase. This isparticularly the case for health and beauty productssuch as skin care and cosmetics. The examplesbelow show how the lack of available testers meansthat products are opened and partially used leadingto them to becoming essentially damaged andunlikely to be sold. This highlights the need foraccessible and useable tester display products andthe need to secure such products through betterpackaging to reduce the likelihood that they can beopened in the event of a tester not being available.

Packaging damaged due to inappropriate stacking

Packaging damaged by customer opening box

Product used as ‘tester’ by customer

Product compromised by customer use


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ErrorThe second area of where packaging can produceshrinkage is through the generation of errors in theretail process relating to the identification ofproducts, the incorrect registration of products oninventory systems and when products are eventuallysold to the consumer. This problem manifests itselfin at least three ways. First, insufficient or unclearproduct descriptions on outer packaging can makethe task of product pickers in the distribution systemmore error prone. For instance, employees taskedwith selecting products in the warehouse prior todistribution to retail stores frequently work underconsiderable time pressures (such as a requirementto pick a certain number of products per hour inorder to achieve certain levels of pay) – they needto be able to quickly identify the products they arerequired to select. They also need to know how arequired quantity relates to the volume of items in agiven inner or outer – does an order of ‘one’ meanone outer, one inner or one item?

The two examples below show how outer packaginghas made it difficult (if not impossible) to identitywhat is contained in the outer boxes. This can thenlead to products not being picked at all (the pickersimply moves on to easier to identify products) or thewrong products being picked, both of which can leadto a subsequent out of stock situation on the shelf.

Secondly, the use of multiple barcodes on outerpackaging can cause error when goods are beingchecked into a retail store. The example belowshows a delivery cage that has several bar codesthat could easily lead to confusion on the part ofthe goods receiving team. If a retailer uses thesebarcodes to ‘book’ stock onto their store inventorythen depending upon which barcode is scanned,this could lead to the wrong amount of stock beingallocated. Shrinkage could then be generated byunallocated stock either being stolen (staff realisingthat it is not on the system and hence perceiving itis easier to steal) or lead to further stock beingordered which in turn could lead to an increasedchance of damage as the backroom area becomesoverstocked.

Multiple bar codes on products can also lead toproblems at the till. This is particularly the case withmulti packs where there may be a barcode on eachproduct as well as on the packaging for the set ofitems. Depending upon which barcode is scannedby the till operator (or in the case of self scancheckouts, the customer) the eventual pricecharged could be considerably lower than theactual price. This can cause considerable amountsof shrinkage as customers are effectively beinggiven free products simply because of the confusioncaused by multiple barcodes on different parts ofthe packaging.

Barcodes that are poorly located on products or aredifficult to read by scanners can also causesignificant problems, sometimes leading tocheckout employees using generic ‘dump codes’ tospeed up the scanning process. The use of thesecodes can severely compromise the inventoryrecords of stores, particularly where automated

Outer packaging making identification difficult

Outer packaging making identification impossible

Multiple barcodes causing potential data errors


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replenishment systems are used. The sale of theitem is not recognised by the system (it has simplybeen scanned through using a generic code) andtherefore is unlikley to be replenished and out ofstocks and data inaccuracy with follow.

WasteFor retailers that sell date sensitive products such as supermarkets, being able to quickly and easilyidentify the sell-by-date of products is critical if theyare to minimise shrinkage losses through waste. As items begin to reach their sell-by-date retailersneed to be able to easily identify them anddiscount accordingly to encourage a sale. If they donot, then products which go beyond their agreedsell-by-date have to simply be discarded, generatingsignificant shrinkage in the process. In this example,the date stamp has been overprinted on otherinformation making it very difficult to identify.

Theft

The final area of shrinkage that packaging can havean affect upon is theft when it is on open display inthe store. This can manifest itself in many ways, butthe key areas can be summarised as size ofpackaging and product accessibility. Many productssold by retailers are relatively small, particularly inhealth and beauty. For example, creams and certaintypes of cosmetics can have a relatively small shelffootprint in relation to their retail value. As detailedat the start of this report, there are ongoing tensionsbetween sustainability (using a sufficient amountand type of packaging that is perceived asreasonable given the size of the product) and risk(making it sufficiently difficult to easily conceal theproduct by would-be thieves). The examples belowhighlight this tension.

Work by criminologists has highlighted theimportance of concealability when offenders decidewhich products to steal from retail stores andtherefore the way in which packaging or the lack ofpackaging impacts upon the overall footprint of aproduct can be one of the key explanatory factors inunderstanding why some products are more proneto theft than others18.

A second theft-related factor is the extent to whichproducts can be stolen by removing them fromtheir packaging while the thief is still in the retailstore. Certainly for the opportunistic offender (asopposed to those who are seeking to sell on thegoods they steal) then it is the product itself theyare interested in and not its associated packaging.The example below shows how easily accessiblepackaging can enable a thief to simply and easilyremove the product leaving the packaging behind.Obscured date stamp

Oversized packaging

Product easily removed from packaging

18 Clarke, R. V. (1999) Hot Products: Understanding, Anticipating and Reducing Demand for Stolen Goods. Police Research Series Paper 112. London: Home Office.


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Difficulties Applying Product ProtectionIn addition to the factors outlined above, packagingcan also cause a number of problems when itcomes to the application of product protectiondevices, particularly relating to the use of EAS tagsand security stickers. Outlined below are some ofthe key problems associated with packaging andthe application of security products.

Particularly for more opportunistic thieves, the degreeof visibility of the protection device is an importantfactor in creating deterrence – the more visible thesecurity the less likely thieves are to steal the product(essentially increasing their perceived risk of beingcaught). A common approach adopted by someretailers is the application of security stickers warningpotential thieves that the product is protected bysome form of electronic tag (which may notnecessarily be the case). Depending on the size andlocation of this sticker, it can seriously compromisethe overall look of the product as well as obscureimportant product information, which could misleadthe consumer and be potentially illegal in somemarkets. Below is an example of this situation.

Similarly, many retailers will apply a ‘soft’ EAS tag tothe product that if not deactivated at the till willcause an alarm to be activated at the exit of thestore. These tags are widely used in the retail sectoracross the globe but, like the security stickersmentioned above, can, depending on where theyare positioned, compromise the overall look of the

product, obscure product information, make the tagineffective and cause problems with deactivation atthe till. Below are some examples of these problems.

In the first example, the soft tag is obscuring muchof the product information making it difficult forthe consumer to read it.

The second example is similar but also highlightshow the size of the packaging (small) can lead tothe tag itself being compromised (the tag is bentaround the corner of the packaging which is likelyto make it malfunction).

Security sticker obscuring product information

EAS tag obscuring product information

Poorly applied and damaged EAS tag


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The third example shows how if a tag is locatedsome distance away from the barcode, then whena member of staff scans the barcode the EAS tag isunlikely to be deactivated at the same time whichcan lead to a false alarm activation at the exit of thestore.

Retailers also make use of ‘hard’ EAS tags which areconsidered to be a much more robust and visibleform of deterrent on theft prone products.However, unlike ‘soft’ EAS tags that are simplystuck onto products with an adhesive, ‘hard’ tagsrequire a pin to be anchored through the productpackaging (they are frequently used on garmentswhere the pin can be easily pushed through fabricor through the product label). Increasingly thesetags are being used to protect a wide range ofproducts but their design requires that the tag mustnot be easily removeable by a potential thief.Below are some examples of how productpackaging can cause problems with these devicesand also how the tags themselves can compromisethe product packaging.

The first example illustrates how the application of ahard tag on a premium bottle of champagne hasseverely compromised the display of the productand potentially impacted upon the likelihood of thisproduct being sold (not least because the aestheticsof the display box which is an important part of themarketing of this product has been devalued).

The second example shows how a hard tag hasbeen rendered largely ineffective because the pinapplication is through a hole that is too large andhence means that the tag can be far too easilyremoved.

The third example shows how a hard tag has beensuccessfully secured to robust packaging but in theprocess has made the display of the products onthe shelf unsightly.

EAS tag applied too far from barcode

Hard tag compromising display box

Insecure hard tag on product

Application of hard tag causing display problems


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The fourth example shows how the application ofthe hard tag through the middle of the packaging(to make it difficult to remove) is covering upimportant customer information (similar to the softtag example above).

The example below is similar – tag obscuringproduct information – but also the packaging isrelatively weak (made only of cardboard) and so thetag could be easily ripped off if it is near the edge.

Finally, the use of ‘spider’ EAS tags can alsocompromise the quality of the packaging ofproducts. These devices are generally used to securehigh value relatively bulky items that are easilyopened and their contents stolen. In order to ensuretheir effective use, the spider tag needs to be verysecurely attached to the product that can causeproblems to packaging that cannot withstand thisrobust approach to the application of such devices.In addition, and like the other two types of EAS taghighlighted above, spider tags can also obscureproduct information reducing the customer’sopportunity to learn more about the product theyare interested in purchasing.

The examples below highlights these particularproblems.

Shrinkage and PackagingAs can be seen, the scale and extent of theproblem of shrinkage is considerable and yet it isalso an enormous opportunity for those retailersthat recognise the way in which effective shrinkagemanagement and control can increase retailprofitability. What is also apparent is that themajority of shrinkage losses are caused byoperational failures within the retail sector. Whatthe various examples above show is that packagingcan play a profound role in generating theoperational failures that ultimately cause shrinkage.The next part of this report will outline an approachdeveloped by the ECR Europe Shrinkage Group toenable organisations to quickly and easily identifythe particular operational failures that are beinggenerated by product packaging – the ECRShrinkage Road Map.

Hard tag obscuring information

Hard tag potentially easy to rip off

Spider tag obscuring product information

Spider tag damaging packaging

Understanding the Problem:Developing a Road Map

Approach


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Understanding theProblem: Developinga Road Map ApproachGiven our overarching premise that operationalfailures are the root cause of most forms ofshrinkage, the next step is to describe an approach,which has been developed over a number of yearsby the ECR Europe Shrinkage Group for identifyingthese failures. This work, which began back in 1999sprung from the Group’s desire to develop a newway to begin to address the challenges of shrinkagewithin the retail sector. In the subsequent years, theGroup has road tested this approach in over 40companies and across more than 100 supply chains.It is thought to have produced savings in excess of€600 million for those companies that have used it.The approach is called the Shrinkage Road Map, andit is made up of a series of steps that enable lossprevention practitioners to more accurately identifythe root causes of the problems they face and thendevelop ‘fit for purpose’ solutions to deal with theseproblems. In the context of this report, we believe itis a valuable tool for identifying how problems withpackaging can lead to shrinkage. Underpinning this‘Road Map’ are five key principles:

• Adopt a systemic approach to identifying andanalysing packaging problems from a supplychain perspective. Supply chains consist of alarge number of diverse activities, eachconcerned with different aspects of the handlingof products and exchange of information. Thesevarious activities combine to form a series ofprocesses and procedures (and potential areasfor operational failures to occur).

• Adopt a systematic approach to understandingthe problems of packaging. Supply chains areinherently complex and therefore to understandthe vulnerabilities they present any investigationneeds to break down the overall activity into aseries of manageable component parts, whichcan be done through an analysis of existingprocesses.

• Develop an approach which is focussed onidentifying the key areas of risk within thebusiness, something which has been described asthe ‘hot concept’. This seeks to identify the ‘hot’

products, places, processes and people withinretail organisations and making them the focus ofinitial ameliorative actions.

• Collect accurate and timely shrinkage data. TheShrinkage Road Map encourages the collectionand analysis of as much data as possible relatingto the shrinkage problem under considerationprior to any decision-making relating to possiblesolutions.

• Develop a collaborative approach. Much of thesuccess achieved with the Shrinkage Road Maphas been through the bringing together of allparties who have some responsibility for themovement of goods through their entire lifecycle (from the moment of manufacture rightthrough to the time when the customer leavesthe store with the product) and therefore canhave an impact not only upon the propensity forpacking-related shrinkage to occur but also howit might be alleviated.

The Shrinkage Road MapThe Shrinkage Road Map is intended to act as amanual or guide, describing the overall activities thatneed to be undertaken in order to reducepackaging-related shrinkage through theidentification of the root causes of specific problems.This guide consists of a general approach made up ofthe steps a company needs to follow, together withtechniques and tools to help undertake each phaseand to deal with packaging problems that may beencountered. The general approach that forms theheart of the guide is shown in Figure 3. As can beseen, this structure is both simple and systematic andprovides the means for planning and undertakingprojects while guiding users towards continuousimprovement through the cycle.

Figure 3: The Shrinkage Road Map

Develop Solutions Analyse

PlanEvaluate

Implement Map & Measure

CORPORATE POLICY


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The Shrinkage Road Map is designed to enableboth problem diagnosis and solutionimplementation. The structure consists of asequence of steps where through well-plannedinvestigations, the packaging-related failures thatcan present opportunities for malicious and non-malicious loss are exposed. These vulnerabilities arethen prioritised and subsequently analysed toreveal the underlying root causes. The multi-disciplinary project team can then work together todevelop appropriate solutions. These solutions are,where appropriate, tested in trials where theireffectiveness is assessed. Where a solution is foundto be successful it is then implemented widely andbusiness practices standardised around it.

Step 1: Develop a Project PlanThe first step in the Shrinkage Road Map isplanning. Planning is based upon setting clear,realistic, attainable objectives with criteria forknowing when these objectives are met. Thisrequires the shrinkage team to have answers to thefollowing questions:

• Which products are to be the focus of theproject (this needs to be highly focussed and notbased upon generalised categories of goods)?

• What are the goals of the stock loss reductionactivity (such as clearly defined and measurableimpacts upon shrinkage, sales and or out ofstocks)?

• How far along the supply chain will theinvestigations take place (such as from point ofmanufacture to the retail distribution centre orfrom the point of delivery to the store andeventual sale to a customer)?

• Who needs to be involved in the project andhow will they react to it (this will vary dependingupon the range of the supply chain beingconsidered)?

• When is the date by which some benefits mustbe identifiable (the project may have to takeaccount of seasonality and expectations withinthe business)?

• What are the constraints to undertaking theShrinkage Road Map (such as seasonality,possible ambivalence or hostility from particularparts of the organisation about the work of thegroup)?

The answers to these questions guide the projectteam’s activities towards achieving their goals.Starting the project in this way is especiallyimportant in cross-functional/inter-companyprojects where the effectiveness and efficiency withwhich project resources are used dramaticallyimproves with up-front investment in planning.

Step 2: Map Key Processes and MeasureProblemThe second step focuses upon a rigorous diagnosisof the problem based upon the range of the supplychain selected and the products underconsideration. It also needs to consider all theoperational processes and procedures which play apart in the products’ life cycle. This step is a crucialpart of the Shrinkage Road Map. It seeks todevelop a very detailed map of a given product’sphysical movement through a retail supply chainand the information flow associated with it. Theaim is to identify how at each point the productand its associated information interacts with variouspeople, processes or procedures, and whetherpotential packaging-related failures associated withthis flow create the opportunity for shrinkage. Themost effective way to do this is through the use ofProcess Mapping.

Process Mapping

Documenting the movement of particular productsthrough a supply chain helps individual peopleview their work from a process perspective. Often,existing ways of working have never beendescribed or even viewed as processes – they canoften simply be viewed as ‘the way we do things’.Process mapping is a technique used to detailbusiness processes that focuses on the importantelements that influence behaviour, allowing thebusiness to be viewed at a glance.

Process mapping can be carried out at a number ofdifferent levels, with some focusing more at themacro level, such as the movement of productsbetween different locations, such as from amanufacturers site to a distribution centre and thenon to a store; the meso level, such as themovement of goods within a particular location,such as from the back of a store to the front of thestore; and at the micro level, such as the precisemovements and processes associated with aproduct as it moves within a given part of alocation, such as a receiving area within a store.


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The data for creating a process map is best collatedby physically following products as they pass alongthe supply chain. This involves visiting each site thatthe product passes through and documenting thesteps involved in its journey such as receiving,storage, dispatch and so on. It is important to stressthe importance of physically following the product– there can be an enormous difference betweenwhat is supposed to happen and what actually doestake place as the product moves along the supplychain. Generally speaking, the more detailed aprocess map can be, the more useful it becomesand is an important component when analysing theoverall threats a given product and its packagingfaces as it moves through a supply chain.

Step 3: Analyse Risk, Identify Causesand Prioritise ActionsOnce the process map is complete and all availabledata has been collected, the next stage is to analysethe process itself together with the data collected todetermine and prioritise the many possiblepackaging-related failures that could create theopportunity for shrink. With these ‘drivers’ ofshrinkage prioritised, the possible root causes ofthese failures can then begin to be understood.

A useful tool for undertaking this is Failure Modeand Effects Analysis (FMEA). This tool is particularlygood at identifying the various ways that processesand procedures may fail, as well as determining theeffect of different failure modes. In particular, FMEAenables you to score the potential risk of differentfailure modes based upon the severity of the lossshould a failure happen, the likelihood of a failureoccurring and the ability to detect that a failure hasoccurred. Once these scores are made they canthen be multiplied together to provide an overallrisk score for each of the potential failure modes.This enables the most vulnerable packaging-relatedfailures to be identified and then these become thefocus of the next stage of the Shrinkage Road Map –the selection of potential solutions.

Cause and Effect Analysis

This technique is especially useful when employedto structure the outcome of a brainstorming sessionwith a project team, when they contribute theirfindings, experience and understanding. The mainspines of the diagram are given broad headings(these are fairly arbitrary and can be selected by theproject team) around which causes to the symptomof a problem are grouped. To focus effort, the

Product scanned • Associate will use dump

code and the inventory

record will be inaccurate

• Associate will use the wrong

dump code and inventory

record will be inaccurate

• Associate will not use the

dump code and customer

will not be charged

Product bar code cannot

be scanned

Potential Effects of

Failure

Potential Failure

ModesProcess Step

The ways a processcan fail

Failure ModeThe unacceptable

consequences of failure

Effect

Figure 4: Example FMEA Analysis


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major causes of problems need to be identifiedfrom amongst the trivial many. Where possible, thisshould be achieved statistically through thecollection of data highlighted in the previous stageof the Shrinkage Road Map. If all the data is notavailable, then it is possible to get the project groupmembers to identify many of the most significantproblems from their experience. Outlined below isan example where the packaging on a product hasbecome damaged and some possible explanationshave been identified grouped around people,processes, procedures and product issues.

Five Whys

Once initial ideas have identified the main causesof the packaging-related problem for a givenproduct, another technique – the Five Whys – canbe used to explore the deeper underlying rootcauses. This technique explores the underlyingcauses of losses as fully as possible by repeating thequestion, ‘why?’ five times as this has been foundto be the number of times it takes before the rootcause of the problem is identified. For example:

Initial problem: Product is incorrectly scanned atthe checkout:Why? Till operator made a mistake.Why? Scanned the wrong barcode.Why? More than one barcode visible and

readable.Why? Barcode visible on promotional packaging

and individual products.Why? Poor collaboration between retailer and

manufacturer on product packaging brief.

Through the use of this deceptively simpletechnique, the root causes of problems can bequickly identified.

Through the use of FMEA and a number of othertools and techniques, it is possible to identify the keyfailure modes associated with any given process andidentify what the underlying root causes may be. Thisapproach, however, is critically dependent upon theprevious step – developing a comprehensive processmap of the products movement and information flowthrough the supply chain – without it the variousmodes of failure will not be identified. It is alsodependent upon the quality and diversity of thepeople brought together in the project team. Byhaving representatives from different parts of a retailbusiness and indeed those from outside theorganisation, fresh insights and alternativeinterpretations of likely causes can be developed. This third step in the Shrinkage Road Map is as muchabout identifying root causes and brainstorming ideasas it is about collating information and drawingconclusions. Once this step has been completed,then the project team can move on to the next partof the Shrinkage Road Map, which is concerned withdeveloping solutions and prioritising actions.

Step 4: Develop Solutions and PrioritiseActionsThe majority of solutions are usually extremelycontext-specific and it is not the purpose of thisreport to detail all those that are available to theloss prevention practitioner. However, for manyproblems there could well be a number of potentialsolutions and therefore, the Shrinkage Road Map

People

Process

Product

Process

Thief opens to try and removeEAS tag but then leaves store

Consumer opensto view contents

Employee opens pack todemonstrate product

EAS tag obscures informationso customer opens pack

Product is damagedin transit

Consumer opens tocheck product details

Figure 5: Example Fish Bone Analysis


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approach suggests using a Solution Matrix todetermine the applicability of any given range ofpotential solution (see Figure 6).

Figure 6: The Shrinkage Road Map Solution Matrix

Most solutions can be gauged against two keyvariables: the ease with which it can beimplemented in a given retail environment, rangingfrom very slow and hard to accomplish through tobeing very fast and easy to implement; and theimprovement potential it can deliver, ranging fromlow through to high (this could be expressed inmonetary terms or perhaps in a percentagereduction in shrinkage) The improvement potentialalso takes into account the anticipated cost of thesolution. Given these two variables, potentialsolutions can then be placed upon the matrix basedupon how they score.

Step 5: Implement SolutionsIn a similar manner to the approach used to plan theoriginal Shrinkage Road Map, the implementation ofany proposed solution requires project planning.Critical to successful implementation is theidentification of a primary sponsor who will beresponsible for delivering the benefits of the project.To achieve success the sponsor, usually a seniormanager, needs to ensure that the project teamconstructs a clear and robust business case. Thisbusiness case defines what is to be delivered, thebenefits this will bring and the resources required.

The creation of an implementation plan isnecessary to map the best use of resources toachieve the desired objectives within time and costlimitations. Here the tools of project managementwill prove useful, whether applied to small or large-scale projects. Where a project team undertakesplanned change for the first time, the plan should

consider not just the task but also the learningnecessary to deliver it. At a top level, a project planis constructed by following a sequence of steps, asdescribed below:

• Identify the overview tasks needed to completethe project.

• Show the interrelationships between tasks andthe sequence in which they can be undertaken.

• Estimate the types and amount of effort neededto complete these tasks.

• Calculate the resource profile over time tocomplete the project.

• Identify potential risks to successful projectdelivery.

• Mitigate risks or plan contingency.

• Iterate the plan to match it against resourceavailability.

• Secure resource.

• Put in place procedures for evaluation.

Evaluating the effectiveness of the stock lossreduction effort provides information that guidesthe direction of the next cycle of loss reduction –evaluating the implementation.

Step 6: Evaluate ImplementationThe stock loss reduction project ideally ends with aneffective solution in place. However, this is not theend of stock loss reduction as a whole. From theorganisation’s perspective, evaluation of one projectis important in order to determine the success of thesolution and guide future projects. The review istherefore the last step of one project and perhapsthe first step of the next. The evaluation should berigorous, robust and led by somebody who canprovide an objective review, independent ofequipment providers and those who may havecommissioned the project in the first instance. Theyneed a clear mandate to assess the performance ofthe implemented solution and compare this againstthe level of performance originally planned.

In addition, the aim of this feedback phase is toidentify whether any further action is requiredbefore the current project can be signed off and togain a better appreciation of successful approachesand solutions that might be applied during futureprojects. It should be noted, however, that theevaluation process may need to be ongoing as theperformance of an initiative can change as its‘environment’ alters.

Ease of Implementation

Imp

rovementP

otential

Slow/Hard Fast/Easy

High

Low

Solution 1

Solution 2

Solution 3

Solution 4

Solution 5

Solution 6


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Minimising Packaging-Related Shrinkage


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MinimisingPackaging-RelatedShrinkageThis report has outlined the scale and nature of theshrinkage problem faced by retailers and theirsuppliers. It has also focussed upon the role thatpackaging can play in generating shrinkage, lookingparticularly at the way in which damage, waste,error and theft can result from packaging decisions.It has also put forward a methodology which theretail sector can use to begin to identity the variousways in which packaging may be the defining factorin why some forms of shrinkage is happening. It is atried and tested approach that focuses upon theidentification of the root causes of commonshrinkage problems as they impact upon particularvulnerable products.

This next section proposes a number of key areaswhere better consideration of packaging could havea dramatic and profound impact upon theshrinkage losses suffered by the retail sector.

As we outlined in the last section, becauseparticular solutions are very content specific,varying by the type of product under considerationand the peculiarities of the retailing environmentwithin which it moves, these guidelines can onlyaddress the more generalised issues relating toshrinkage and product packaging. It is also worthnoting that if changes are to be proposed topackaging to try and reduce problems that maygenerate shrinkage, early engagement, particularlyfor new products is critical – lead in times can be aslong as 36 months for the launch of new products.

Importance of Understandingthe Retail LandscapeThe journey from point of manufacture to point ofsale and beyond can for some products be arduousand risk prone. There are a plethora of opportunitiesfor products to get damaged, lost, inadvertentlymisplaced, stolen and indeed for some items to goout of date. Moreover, the modern retailenvironment is highly complex. It increasinglyrequires just in time stock management, the rapidmovement of large quantities of goods, and employsstaff who are under increasing pressure to do morein less time. It has also to deal with increasingly fickleand demanding customers who expect greaterchoice, competitive pricing and products that lookexactly like they are portrayed in the advertising. All of these factors and more combine to putconsiderable pressure on the way in which goods are packaged.

When considering how to design packaging that willbe less likely to generate shrinkage, it is vitallyimportant to understand the retail landscape thatWell protected products in the supply chain

Products in the supply chain


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given products will move through as they make theirway to the customer. This is where the ECR EuropeShrinkage Road Map offers real value. It provides theindustry with a methodology to carefully analyse howparticular products interact with the retail landscapeand at what points product packaging becomesvulnerable, particularly to damage.

As we detailed earlier, this risk will vary as a productmoves along the supply chain and the packagingneeds to be able to adjust to the environment withinwhich it is operating. For instance, the demands onouter packaging are considerable as the productmoves through the early stages of the supply chainwhere the pressures of moving high volumes of stockinevitably leads to a more robust approach tohandling and storage. As the product nears the retailstore, the demands of the packaging begin to change,moving away from a priority on withstanding robusthandling towards being more about enabling quickand accurate identification of products and the abilityto apply product protection (where applicable).Mapping out this changing demand (and associatedrisks) is an important part of developing productpackaging that is less likely to generate shrinkage.

Balancing Efficiency andProtectionClearly minimising shrinkage is not the only criteriaconsidered when packaging is designed – otherfactors a much more likely to dominate the agendasuch as cost, ease of handling, convenience,aesthetics and productivity. What this research hasidentified is that some of the decisions made toimprove these factors can have a consequentialimpact upon the likelihood of packaging togenerate shrinkage.

For example, products that have perforated edgesto enable customers to open them more easily, orwhere packaging has been designed to facilitatequick and easy restocking of retail shelves (such asshelf-ready packaging) may be more prone todamage earlier in the supply chain due to therobust handling practices these products are likelyto encounter. Similarly, the use of plain andunbranded outer packaging may reduce printingcosts but can lead to products being overly difficultto identify, which can lead to mis-picks andpackaging being unnecessarily opened leading todamage and potential theft.

There is undoubtedly a balance to be struckbetween ensuring that packaging maximisesefficiency and delivers value in the retailenvironment and at the same time ensures that therisk of shrinkage in minimised. This requires twothings. First the use of the ECR Shrinkage Road Mapto identify the relationship between any givenpackaging design and likely incidents of shrinkage,including careful consideration of the financialimpact of the latter and the likely cost ofimplementing a solution on the former.

Secondly, there is a need for a greater role for lossprevention specialists in the early stages ofpackaging design, particularly for new products. By doing this, it is much more likely that a betterbalance will be struck between the requirementsfor supply chain efficiency and ensuring that therisk of shrinkage is minimised. Through dialogue, abetter balance can be achieved which recognisesthe needs of all parties concerned.

Clear handling advice; better product visability required

Well protected and clearly identifiable packaging


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Sustainability and RiskAs detailed at the beginning of this report there areongoing tensions between the need to meet thegrowing demand for sustainability and associatedsavings in packaging and the need to minimise therisk of shrinkage. Good packaging is vital if productsare to survive their supply chain journey and becapable of being effectively protected from theftwhen they are displayed on the retail shelf. Whilethere appears to be growing consumer andGovernment pressure to minimise the use ofpackaging, from a shrinkage perspective the reversecan sometimes be the case.

Criminological research has shown that the abilityto easily conceal small high value products is a keypart of a thief’s decision-making process. Theevidence seems to suggest that increasing the sizeof packaging makes a product less easy to beconcealed and then stolen. But there are alsoconcerns about the use of particular types ofpackaging such as plastic clamshells that are viewedas environmentally unfriendly.

Once again, research would suggest that these haveproven relatively effective in making it moredifficult for would-be thieves to remove productsfrom packaging in the store and also make it easierto apply protection devices such as EAS hard tags.This perhaps points towards a need to moreeffectively communicate the rationale for packagingdecisions rather than changing the packaging itself.

Identifying Products in theSupply ChainAs detailed earlier, shrinkage can be caused by thedifficulties of identifying products in the supplychain. This can manifest itself in various ways andclearly points to the need for careful analysis of theway in which packaging is designed to minimisethis problem. Clearer labelling to makeidentification of products easy is important atvarious stages in the supply chain including whenthe products are being selected at the picking stagein retail warehouses and when staff are selectingproducts in the back of stores to restock shelves.

Similarly, the use of bar codes can cause confusionboth within the supply chain and at the point ofpurchase, with more than one barcode on multipacks being a good example of this. Differentiatingbetween products within a range can beparticularly challenging for time-pressed retail staffand some good work has already been done onusing colour coding to help staff identifydifferences. This problem can also impact upon thequality of stock auditing and any errors arising fromthis can adversely impact upon store inventoriesleading to out of stocks, as well as theft, damageand spoilage.

Oversized packaging makes it less easy to conceal

Example of clear differentiation


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Enabling Product Protection The use of EAS tagging and other security deviceson products perceived to be at risk from theft has along track record in retailing and their use is likelyto increase further in the future. This is becauseother forms of security such as present andwatchful employees are becoming a moreexpensive and inevitably rarer resource and thelarge supermarket chains are stocking greater rangesof non-food products that were traditionally sold inbespoke outlets where higher levels of staffvigilance was possible.

How the majority of these security products havebeen applied can best be described as ad hoc,inconsistent and on many occasions to thedetriment of the carefully designed aesthetics of theproduct packaging. Early we provided a number ofpictorial examples of how both soft and hard EASand security stickers have been applied to productsin ways that obscure key product information andmake them more difficult to display on retailshelves in ways that look appealing and maximiseshelf use. Similarly we identified examples of wherethe application of security devices, in particularhard tags has been highly compromised because ofthe nature of the packaging to which it is beingapplied. We also showed how the application ofdevices such as spider tags could damage theproduct packaging.

What is required is a much more holistic andconsidered approach to how products are likely tobe protected in the retail environment and theimplications upon the design of packaging. Forinstance, if soft tags are to be applied (either atsource or in the retail store or distribution centre)then it would seem sensible for space to be madeavailable (preferably close to the barcode to assistin deactivation) for the tag to be attached where itdoes not obscure product information.

Tags that are placed inside the packaging shouldalso, where necessary, be located near the barcodeas well. Similarly, if hard tags are to be used, thenhow they will be attached and secured topackaging should also be considered. For instance,should there be a pre-drilled hole for the tag to beapplied through, should the area around where thetag will be attached be made of a material that ismore durable and less prone to ripping?

These are merely examples, but the key is that byusing the ECR Europe Shrinkage Road Map, thesesorts of issues can be indentified and critically,through collaboration across the supply chain, morethoughtful and robust solutions developed.

Packaging GuidelinesWhile the comments above offer a broad overviewof the key areas for consideration whenundertaking a review of shrinkage that may becaused by packaging, detailed below are acollection of guidelines that have emerged from thisresearch. They are in no way exhaustive but shouldSpace on packaging for EAS tag

Example of hard tags for bottles


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be considered more as ideas to consider whenundertaking the ECR Europe Road Map to identitythe risks generated by packaging and how in turnthey may be best minimised.

They have been grouped into three key areas:improving product identification; reducing the riskof damage; and minimising the risk of theft andimproving the application of product securitydevices. This is then followed by a simple 20-pointchecklist that can be used to review the risk ofpackaging-related shrink for any give product andshould be used in combination with the ECRShrinkage Road Map detailed earlier.

Improving Product Identification• Select printing/coding technology that is a good

match for customer data reading processes.

• Select outer case liner or data label materials thatare compatible with the requirements of theprinting process.

• To prevent misidentification of palletised loadsthe barcode on the tertiary or secondarypackaging should not be concealed or obscured.

• Secondary retail-ready packaging must be clearlyidentifiable both from other products and fromother variants in the same range. This is essentialfor merchandisers to identify the product in theback of store where it may be on a roll cage ofmixed goods.

• As a useful control check always print the palletloading pattern on outers, this helps both toreduce the chance of the wrong loading patternbeing used and to make this more obvious if itoccurs.

• Consider utilising a combination of colourcoding, wording and numbering that reducesambiguity to a minimum.

• Ensure that date codes are not easily lostamongst other information. They must be clearlyvisible and legible to ensure correct stockrotation takes place.

• Pack variants that are too similar lead toconfusion at the till, in particular in the case ofmultiple purchases where a number of differentvariants may be treated as one during scanning.

• The inner packs on promotional multi-packs andsimilar grouped packaging will have maintainedtheir single unit code. It is essential that only thepromotional code is visible and accessible to thecheckout operator to avoid scanning errors.

Reducing the Risk of Damage• Outer packs should be designed so that they are

easily opened by the merchandiser without theuse of knives other than those specially designed,for example to open shrink wraps.

• The means of opening the outer must be clear,simple and reliable otherwise brute force will beused. A particular problem can occur where theouter also serves as a display unit.

• Where anti-sweep J hooks are used then theslots must be of appropriate size and the packtear resistant made with rip-proof card/plastic toprevent the product from being easily removed.Clear barcode information displayed

Clear product identification and handling guidance


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• Consumers may be tempted to open and try aproduct before a purchase – blister packs andrigid plastic shrink wraps are very effective atpreventing such abuse.

Minimising Theft and Improving theApplication of Security Devices

• Small items are at particular risk of loss or theft atany point after the transport outer is opened.Such items are frequently sold in large packs orin blisters to reduce the risk. Where such a stepis taken the resulting pack must still comply withthe Essential Requirements of Directive 94/62/ECof 20 December 1994 on packaging andpackaging waste.

• Where hard tags are used they must be attachedsecurely and not where they can be easily rippedoff. They should also not obscure importantinformation for the handler or the consumer/shopper, and be easy for staff to remove them.

• Soft tags require a dedicated position on thepack where they can be placed withoutobscuring important parts of the graphic, inparticular the logo, the product information andthe barcode.

• Soft tags that should be deactivated during thescanning process must be placed close enough tothe bar code for this to happen. This also appliesto tags that are placed inside the packaging. Clam shell design helps reduce theft and damage

Packaging Guidelines Yes No N/A

Improving Product Identification and Communicating Information Effectively

1 Are the barcodes on primary, secondary or tertiary packaging clear and unobscured?

2 Does the product information print well on the chosen case and label materials?

3 Are barcodes printed by the manufacturer of sufficient quality to be able to be read by the technologies used by the retailer?

4 Can you differentiate between various sizes, types etc. of similar product ranges within 5 seconds?

5 Has the use of colour coding or numbering been considered to differentiate between similar product ranges?

6 Are date codes easily identifiable on the product packaging?

7 Has the risk of scanning the wrong barcode on multipacks (especially promotional packs) been considered and minimised?

8 Is more than one barcode being used and is this likely to lead to confusion?

Reducing the Risk of Damage

9 Will the packaging withstand the various likely supply chain journeys?

10 Is the product likely to be stacked or put in delivery containers and if so, will it remain undamaged?

11 Can outer packs be opened easily without the use of sharp objects (where appropriate)?

12 Are the instructions clear on how staff should open outer packaging?

13 Has the product packaging been designed to withstand damage when interfacing with display protection such as a J hook?

14 Has the risk of customers opening packs to steal, examine or test products been minimised through for example the use of blister packs, safer cases or shrink-wrapping?

Reducing the Risk of Theft and Improving the Application of Security Devices

15 Do small high value items have sufficient packaging to reduce the risk of being too easily concealed by thieves?

16 For products that will have a hard tag attached, is the packaging sufficiently robust to withstand the tag being ripped off?

17 For products that will have a hard tag attached, is there a pre-drilled hole to facilitate the application of the tag, and can it be easily removed by staff?

18 If a hard tag is to be used can its location be pre-identified to reduce the risk of product information being obscured and improve the way it is displayed?

19 If a soft tag is to be applied to a product on the outside and deactivated at the point of barcode scanning, is there a place on the packaging where it will not obscure product information and can it be located close enough to the barcode to ensure effective and consistent deactivation?

20 If a soft tag is to be applied on the inside and deactivated at the point of barcode scanning, can it be located close enough to the barcode to ensure effective and consistent deactivation?


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Packaging Checklist Product Number: ..........................................................................

Category: ......................................................................................

Total


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Appendix 1:Further Reading


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APPENDIX 1: Further ReadingECR Europe Publications (related to packaging)ECR Europe & Accenture (2006) Shelf ReadyPackaging – Addressing the Challenge: acomprehensive guide for a collaborative approach.

ECR Europe/EUROPEN (2009) Packaging in theSustainability Agenda: A guide for corporatedecision-makers.

Other Shrink-related ReadingBeck, A. with Peacock, C. (2009) New LossPrevention: Redefining Shrinkage Management,Basingstoke: Palgrave Macmillan.

CEN Standards for Packaging• EN 13431:2004 Requirements for the use of

European Standards in the field of packaging andpackaging waste.

• EN 13428:2000 Criteria for assessment of sourcereduction.

• EN 13429:2000 Requirements for relevantmaterials and types of reusable packaging.

• EN 13430:2000 Requirements for packagingrecoverable in the form of material recycling.

• EN 13431:2000 Requirements for packagingrecoverable in the form of energy, includingspecification of minimum inferior calorific value.

• EN 13432:2000 Requirement for packagingrecoverable in the form of composting andbiodegradation. Test scheme for the finalacceptance of packaging.

• CR13695-1: 2000 Requirements for measuringand verifying heavy metals and other dangeroussubstances present in packaging and their releaseinto the environment.

• CR13695-2: 2002 Noxious and other hazardoussubstances. Requirements for measurement oftheir presence and their release into theenvironment.

Additional Relevant LegislationWaste Framework Directive (2008/98/EC) (10)

The Waste Framework Directive is the 'umbrella'law for EU waste legislation. It has been revisedand updated in line with the EU ThematicStrategies on prevention and recycling of waste,and on the sustainable use of natural resources.Note, however, that packaging is regulated first andforemost by the Packaging and Packaging WasteDirective, which takes precedence over the WasteFramework Directive.

REACH (1907/2006) (11)

REACH came into force in June 2007. It is aEuropean Union Regulation concerning theRegistration, Evaluation, Authorisation andrestriction of Chemicals, including those containedin packaging materials.

Materials and Articles Intended to Come intoContact with Food (1935/2004) (12)

This Regulation establishes requirements for anymaterial or article intended to come into contactdirectly or indirectly with food and seeks tomaintain food safety.

Regulation (EC) no. 2023/2006 GoodManufacturing Practice for Materials andArticles Intended to Come into Contact with Food

This Regulation lays down the rules on goodmanufacturing practice (GMP) for the groups ofmaterials and articles intended to come intocontact with food.

Directive 2001/95/EC on General Product Safety (13)

Regulation (EC) no. 178 / 2002 GeneralPrinciples and Requirements of Food Law

Establishes the European Food Safety Authority andlays down procedures in matters of food safety (14).


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EU Sustainable Consumption & Production andSustainable Industrial Policy (15)

The EU’s Sustainable Consumption and Productionpolicy seeks to minimise the environmental impactsof products by looking at all phases of their life-cycle and taking action where it is most effective.Its core goals are to:

• Improve product energy and environmentalperformance targets.

• Foster their uptake by consumers.

• Set standards and incentives and publicprocurement policy.

• Define labelling requirements.

• “Green” and lean supply chains.

Other LegislationAs well as European legislation there is a significantbody of legislation enacted by individual memberstates. The ECR Europe/EUROPEN publication‘European and National Legislation on Packagingand the Environment’ covers this in greater depth.

DisclaimerThis representative list of further reading materialhas been compiled from the wide range ofpublications available on the subject. It is intendedsolely to assist the reader in further exploring thetopics covered within this document. It is notintended to be a comprehensive list and manyother valuable documents that exist on the subjectare not listed here.

Inclusion in this list does not imply that the views,opinions or advice contained within thesedocuments are endorsed by ECR Europe, thecompany representatives or consultant involved incompiling the document. Equally, exclusion fromthe list does not imply that an excluded documentis in any way less valuable or authoritative than anyincluded document.

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