As the COVID-19 pandemic moves into its sixth month, it seems likely its impact on the logistics and supply chain industry will be long-lasting. Even when a vaccine becomes available, consumer and business purchasing behavior may have changed permanently, and with it, distribution centers may never be the same again. One area where the ripple effect of COVID-19 is likely to be felt in distribution centers is in security, and strategies for loss prevention and mitigating inventory shrinkage.
To understand why, look at how consumer behavior – a fundamental driver of supply chains – is changing. A survey by consulting firm McKinsey provides clues regarding how these changes may play out. The report finds that even after COVID-19 subsides, consumers expect to significantly increase their online purchasing across the board. This will not be confined to obvious categories such as books, apparel and groceries. Traditional “in-store” products such as OTC medicines, alcohol, and household supplies will increasingly be acquired via e-commerce.
The McKinsey report also explores what matters to consumers – how and why they chose one supplier over another. Importantly for distribution center managers, product availability has risen dramatically as a criteria for choosing one brand over another.
These changes mean distribution centers and inventory management are more important than ever before. And if inventory management is a key to success, combatting inventory shrinkage caused by employee theft is critical. The National Retail Federation estimates inventory shrinkage is a $45 billion problem, with a substantial portion of that cost coming from distribution center theft.
COVID-19 has forced companies to re-examine traditional approaches to DC loss prevention. One approach is automation. The US Chamber of Commerce makes the point that large retailers such as Amazon, Kroger and Walmart are spending billions to replace or augment warehouse employees with robots and automated processes. That should prevent inventory shrink by taking the human factor out of the equation.
For DC’s that cannot completely automate – which is most of them – companies are re-designing their security and loss prevention processes to make them safer from a health perspective and to take advantage of innovative new security technology.
For example, many distribution centers perform random employee “pat downs” using handheld metal detectors to ensure that employees are not bringing unwanted items to the workplace, or taking valuable items with them when the leave. The problem, of course, is that these pat-downs are not only intrusive, they create health risks and reduce employee morale. And they are often ineffective in preventing or detecting theft, because metal detectors only detect metallic objects.
As a result, a number of companies are exploring innovative new employee security screening technologies. One example is called passive terahertz that eliminates the need for pat downs. SONY DADC, the logistics arm of SONY Corporation, has deployed the solution. It allows the company to screen its DC workers for both metallic and non-metallic items, while maintaining social distancing between staff. The technology can even detect very small objects, such as CDs, cell phones and USB drives.
Of course, each company has unique employee screening and loss prevention requirements. But with careful planning and targeted use of technology, executives can ensure that their distribution and fulfillment centers meet the needs of customers and employees regardless of COVID-19, or the next pandemic.