1
Cosmetics Company – Significant increase in customer complaints about company products
A major cosmetics company approached us requesting assistance in identifying causes for increased customer complaints about products—leading to losses and profit decline.
Investigation Conclusions:
- The disposal process—the company chose the cheapest option for the disposal of products that failed quality testing—disposal and dumping of defective products in an open landfill.
- Passersby found the intact discarded products, cleaned them, used some, and sold some in the local market.
- Buyers who used the products suffered various symptoms and skin irritations. Some wrote negative reviews on social media and others contacted the manufacturer demanding compensation.
- The manufacturer chose to compensate complainants with identical new products and added an additional gift product to prevent reputational damage.
- Simultaneously, the manufacturer approached internal parties and external investigators to understand the source of complaints.
Actions taken to prevent similar future damage:
- We conducted a process survey—identified the weakness in the disposal method
- Defined the disposal procedure
- Selected a supplier for the disposal process according to procedure and negotiated costs
- Defined control procedures for the process—responsibility, frequency, method
Insights and Conclusions:
- Loss of product or money is only part of a chain of additional losses and damages. As we learned from the field, every direct damage triggers a complex of indirect damages. Beyond missing inventory, real damage occurs beneath the surface as brand value and trust erode. These are damages difficult to quantify, but their implications are long-term and critical to the organization. Without professional treatment and a precise solution, small losses will quickly transform into significant and real risks.
2
Retail – Significant Shrinkage at High Financial Volume Due to Poor Handling of Distribution Pallet Returns Process
An international retail company responsible for distributing thousands of products to thousands of customers nationwide requested our contractor to characterize a preventive solution for a cross-organizational operational problem causing significant financial loss and improve controls over the reusable wooden pallet return process from customers to the company’s distribution center.
Contractor Investigation Conclusions:
- Responsibility for collecting wooden pallets from customers rested with distribution route drivers
- The control process on this matter was deficient:
No final deadline was defined for the driver to collect pallets from customers
b. Manual return document management
c. No ongoing supervision of actual returns—driver could complete a return report without actually returning pallets (sell externally / recycle / discard / other)
d. Depreciation exceeding 1 million NIS annually was only detected by the finance department on the finalization of the annual report—in practice, this could no longer be addressed - Uncontrolled process prevented precise identification of those responsible for losses (drivers / customers) and addressing them
Active Actions for Future Prevention of Similar Cases:
- Building a dedicated process for preventing future losses of this type
- Implementing security procedures / security department actions to improve driver control and identify specific risk factors
- Adding technological tools for supervision and monitoring
Insights and Conclusions:
The gap between planning and execution is the central place where losses occur. Therefore, in our view, the integration of loss prevention consultants with security expertise must occur already in the initial planning stages of processes. Correct planning by experienced professionals and the implementation of proven proactive strategic controls designed to identify and block potential loss breaches will significantly reduce shrinkage and maximize organizational profits.
Loss prevention is an important organizational concept and value. It’s not about reaction but about planning.
3
Retail – Discrepancy Management System
- When a client faces inventory gaps, the first question asked is ‘why?’. The second question will be ‘who’s to blame?’
SBY’s loss prevention consultant found the answer during a comprehensive survey conducted at the client’s. He identified that the client’s external logistics supplier managed discrepancies without a proper control process, leading to inventory gaps and financial losses. An incident of this type illustrates how a small operational vulnerability can lead to significant losses.
Consultant’s Investigation Conclusions:
- Discrepancy management was actually performed by the supplier—a situation where the supplier checks itself
- Risk of biased decision not free from interests (didn’t automatically receive branch discrepancies and didn’t always conduct a real internal inspection)
- Therefore:
a. Could not accurately assess supplier performance quality / service and make a correct decision regarding penalization / reward for performance
b. Created inventory distortions
c. Reliability of data from the supplier’s information systems was questioned
d. Client suffered significant financial losses:
1) Missing inventory / inaccurate inventory management
2) Rewarding when undeserved
3) Lost sales
Active Actions for Future Prevention of Similar Cases:
- Establishing a network discrepancy management system—objective external party, independent on behalf of client
- Establishing databases required for discrepancy analysis
- Building a joint work methodology with the client’s information system managers/consultants
a. Combining data analysis and extraction capability from the system with field investigation and control capability (integrating security systems)
b. Quick loop closure for identifying shortages / surpluses / losses of goods and products
c. Identifying trends and detecting potential/existing loss factors
d. Optimizing inventory management / ordering system
Insights and Conclusions:
This case study illustrates how close collaboration between security and loss prevention experts, information management personnel, and field personnel provides a comprehensive solution to client needs. Through information analysis we identified loss factors in the field, and in response, our controls directed information system managers to in-depth examination of critical data. This combination of strategic information-based vision with efficient field control is key to solving loss problems comprehensively.
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