Carrot or Stick: Which is a Better Approach to Minimizing Warehouse Theft?

December 14, 2018 Rebecca Hagge

I recently had the opportunity to attend the HARDI (Heating, Air-Conditioning & Refrigeration Distributors International) Annual Conference in Austin, Texas. At the conference, I heard from security expert Barry Brandman in a session titled “Insider Theft: What Every CEO Should Know About Protecting Their Business.”

Brandman, president of Danbee Investigations in Fair Lawn, New Jersey, shared personal examples of warehouse and distribution center theft and discussed what you should never do if you suspect fraud is taking place. He also outlined the seven biggest myths about business security (which you can read about on Brandman’s blog, here).

Creative Minds

Brandman highlighted the story of one company placing an undercover forklift driver inside its warehouse to investigate an increase in damaged goods. The undercover operative observed that damages were not excessive, contradicting reports turned in by the warehouse supervisor. This undercover operative also observed inventory missing on Monday mornings that was there when the warehouse closed on Friday evening. Covert cameras were installed and showed the shift supervisor returning over the weekend and loading pallets of product into a rented truck.

In a second example involving collusion, a distribution center’s process for selecting and shipping product involved the use of computer-generated pressure sensitive stickers. If the selector did not affix a sticker, the checker would not allow the product to be loaded onto an outbound truck. An undercover operative was informed by a selector that they had found a way to circumvent this system thanks to a duplication code in the software that allowed extra labels to be generated. The selector later admitted to getting paid roughly $2,000 per week by certain company drivers that he was overloading with extra inventory.

Aside from these two examples, Bloomberg News reported in March 2016 that Amazon was going so far as to shame former warehouse employees by showing videos of them being caught stealing on big screen monitors in their warehouses. The report noted that in some instances these videos would show silhouettes of these workers along with the words “arrested” or “terminated.” As one former warehouse employee conveyed to Bloomberg, “[t]hat’s a weird way to go about scaring people.”

With limited data available, it’s difficult to pinpoint exactly how much of a problem warehouse theft really is for distributors. Speaking at a Warehouse Education and Research Council conference last year, however, Dr. Brandman referenced a survey finding that 40 percent of delivery drivers had been invited to participate in some form of theft activity.

Creative Concepts

While undercover operatives, surveillance cameras and public shaming may be just a few of the tools distributors are employing to reduce warehouse theft, is a ‘stick’ really the best approach to motivate employees? Though perhaps effective, it’s unlikely to instill a positive, thriving workplace culture. What are some steps, ‘carrots’ if you will, that distributors can take to minimize warehouse theft? Based on what we’ve heard from our customers in recent years, a warehouse management system (WMS), along with worker incentives, can help deter or prevent theft.

Latitude’s Employee Performance Metrics, for example, provides on-demand access to warehouse performance data that can be used to show and reward employee progress. This helps take the guesswork out of understanding how well (or poorly) employees do their jobs. Managers can use this information to reward high performers, while identifying or coaching those who are falling behind the curve. Employees feel validated knowing their managers rely on hard data, and not subjective feedback or perceptions from others.

PathGuide customers also use these metrics to encourage team building by publicly charting team and individual performance using a centrally located screen in the warehouse (and not for the purpose of embarrassing those caught stealing). They found that this encouraged friendly competition between workers, and everyone became more productive as a cohesive team. In many cases, it also helped teams pick up the pace toward the end of each day because they had visibility to how many orders remained to be filled.

Jensen Distribution Services, for example, uses Latitude WMS to manage its warehouse incentive program. Landon Horton, vice president of operations, noted that “every four-week period, employees receive a bonus if they exceed 100 percent of their goals. On average, as few as 50 percent and as many as 88 percent of them get incentive pay.” If an employee regularly misses out, they go on a ‘watch’ list where supervisors look for wasted motion, distracted picking and other obvious reasons for poor performance.

By and Large

By utilizing carrots like pay incentives, distributors can use Latitude WMS to establish a company culture that emphasizes employee satisfaction through performance metrics. When combined with great warehouse system and process training, these incentives should encourage high performance and dissuade employees from stealing from the company. Chances are – you’ll find employees respond much more favorably to incentives rather than other measures such as heavy-handed deterrents or by shining a spotlight on the bad guys.

Rebecca Hagge – Marketing Communications Manager

The post Carrot or Stick: Which is a Better Approach to Minimizing Warehouse Theft? appeared first on Read Our Blog.

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