orc in the food & drug industry€¦ · laser coding & branding. laser coding: a technology...
TRANSCRIPT
ORC in the Food & Drug Industry:
Are we to blame?
Who We Are…• Harris Teeter Supermarkets: Regional Upscale Grocery
Chain w/200 Stores based in Matthews, NC
• Operate in 8 States (NC, SC, VA, GA, Fl, TN, MD & DE)*Also operate in the District of Columbia
• Operate Grocery, Frozen Food and Perishable Distribution Centers, and a Milk/Ice Cream Dairy
Who We Are…
Detecting & Preventing ORC
A Harris Teeter Perspective
CCTV SystemFunctionality
Advanced Public View Monitor
Typical Loss/Recovery: Between $700-$900 per Incident
Laser Coding & Branding
Laser Coding: a technology used to “burn” a Label into the substrate, or layer of packaging
Laser Coding is achieved by one of three processes:
1. Coating Removal: The laser is absorbed by the surface coating which it vaporizes to reveal a contrasting substrate underneath.
2. Etching: The laser vaporizes material from the surface of the substrate without producing any color change. The resulting marklooks similar to an embossed print.
3. Thermochemical: The laser changes the material by heating it to a sufficiently high temperature to break molecular bonds. Thenew material formed by this process may have a different color, thus producing a discernable mark.
1. Coating Removal: The laser is absorbed by the surface coating which it vaporizes to reveal a contrasting substrate underneath.
Laser Coding & Branding
Supply & Demand
The Economics of ORC
Terminology & Definitions:
(Retail) Market*:
Gray Market**:
The business of buying or selling goodsat prices below those set by an official regulatory agency. (i.e., Diversion)
The market for the sale of goods or services to consumers rather than producers or intermediaries.
Gray Mkt Challenge?
Knowing what is legitimate or illegitimate** Source: http://www.thefreedictionary.com* Source: http://financial-dictionary.thefreedictionary.com/Retail+Market
Retail MarketSupply & Demand
Scenario
2. Retailer XYZ puts a 30% Markup on the Analgesics, grossing $157,625,000.
3. Assuming Retailer XYZ has zero-growth in size or market share the following year, how many cases of product do theyneed to replenish their shelves?
1. Retailer XYZ makes wholesale purchases of Analgesics from Broker ABC Inc., totaling $125,000,000 (5 million cases), annually.
(3% shrink at cost is factored in)
Answer: 5 million cases of analgesics. (Demand!)
Gray MarketSupply & Demand
Scenario1. Broker ABC makes purchases of Analgesics from an illegitimate
source (stolen product) totaling $100,000,000 (5 million cases), annually.
2. Broker puts a 25% Markup on the Analgesics and sells themto Retailer XYZ grossing $125,000,000.
3. Assuming Retailer XYZ has zero-growth in size or market share the following year, how many cases of product does Broker ABC need to purchase to replenish their own shelves?
(Demand!)Answer: 5 million cases of analgesics.
Let’s CompareRetailer XYZ
(Retail Market)Broker ABC, Inc
(Gray Market)
Sells 5 million casesBuys 5 million casesBuys 5 million casesSells 5 million cases
Buys 5 million cases
Buys 5 million casesSells 5 million casesSells 5 million cases
Sells 5 million casesSells 5 million casesBuys 5 million cases
Buys 5 million cases
The Difference Between Markets?
Nothing!
There is no difference between these two markets! They both operate, in equal measure, by the principles of
Supply & Demand!
Economic Cycle of ORC
Illegitimate Broker
Sells to Wholesaler
Fence sells to Illegitimate Brokers
Consumers Create Demand
Retailer supplies the Demand
ORC
Are we to blame?
Wholesaler (“Legitimate”Broker) sells to retailer
Boosters steal fromRetailer & sell to Fence
Why is This Importantto Understand?
Current Industry Initiatives on ORC:
•Focus on the Supply Chain* Boosters* Fences* Cargo Theft* “Cleaning” houses (EAS tag Removal, ink cleansing, etc)* Repack Operations
• ORC Investigative Teams* Implemented to impact the Supply Chain
Supply Demand* Boosters
* Fences
* Cargo Theft
* Cleaning houses
* Repack Operations
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How do we do This?
Build an Anti-ORC Buying Program!
Step 1: Meet with your executives and explain this process.
Step 2: Get a Commitment That Your Company Will NOT Purchase Stolen Product! (This may entail revamping incentive structure for buyers)
Step 3: Communicate Expectations (i.e., send vendors letters, establish procedures for violations, etc.).
Step 4: Audit for Compliance!
“We believe that if you are truly committed to eliminatingORC, then you must be equally committed to not
purchasing illegally diverted product”.
Harris Teeter Philosophy
Harris Teeter’s Initiatives on ORC:
• We do NOT “primarily” focus on the Supply Chain
• Our focus is spread evenly among Supply &Demand
• We do NOT have an “ORC Investigative Team”
Harris Teeter’s Initiatives on ORC:
Senior Management Team that is…
* Committed to ensuring we do not buy suspicious or illegally diverted product
* Requires an Audit to ensure compliance
What we DO have:
Is Your Company Buying and Selling Stolen Product?
How Do You Know?
Identifying Stolen Product:
Lot Numbers:• According to FMI’s “Thieves’ Market” video production,
Lot Numbers are the best indicator of illegally diverted product.
By a Show of Hands:
How many of you think it’s possiblethat your company buys stolen
Merchandise?
“No problem can withstand the assault of sustained thinking”.
Questions?
ORC in the Food & Drug Industry:Are We to Blame?