He had no explanation for it, but was sure the numbers had been doctored in some way.ĭuring the remainder of 2013, a number of high-level managers departed from the company. During the last days of August 2013, Shane’s annual inventory audit showed a massive reduction in the store’s shrinkage rate that surprised even him: down to less than $80,000 from roughly $800,000 the previous year. However, it didn’t seem to be enough to satisfy Cook and top management. Not only did shrinkage decline but other forms of loss, including changing price tags on items of clothing, were significantly reduced. The asset-protection program handles shrink, safety, and security at each of its stores. He managed to convince Cook to hire an “asset-protection manager” for the store. Shane did what he could to tighten systems and controls. It didn’t hurt that he would qualify for a bonus as well, so long as the shrinkage rate was cut by more than two-thirds. He knew the pressure was on to keep the store open, save the jobs of 40 people, and cut losses so that the regional manager could earn a bonus. There had even been talk of closing the store altogether. Prior to his arrival at the Atomic City store, Shane had heard the store had shrinkage losses as high as $2 million or more-a sizable hit to its bottom line. Historically, Walmart had a relatively low rate of about 0.8% of sales. As a result of fierce competition, profit margins in retail can be razor thin, making shrinkage a potent-sometimes critical-factor in profitability. In 2013, Shane was contacted by Jeffrey Cook, the regional manager, and told he was being transferred to the Atomic City store in order to reduce the troubled store’s high rate of “shrinkage” (i.e., theft including shoplifting and employees stealing) to levels deemed acceptable by the company’s senior managers for the region. But nothing prepared him for the ordeal he would face as a Walmart veteran and the new store manager in Atomic City, Idaho. He was in touch with his values and always tried to act in accordance with them, even when the going got tough. Shane O’Hara always tried to do the right thing. Any resemblance to actual people and events is coincidental.2 “Literary license” has been exercised for the purpose of emphasizing important issues related to organizational ethics at Walmart. The facts of this case are from the Walmart shrinkage fraud discussed in an article in The Nation on June 11, 2014. The average cost of retail robberies dropped to $5,309.72 from $8,170.17 in 2015, but remained at more than double the $2,464.50 seen in 2014.įor the first time in the survey, retailers were asked about return fraud, reporting an average loss of $1,766.27. The average loss due to employee theft per incident was put at $1,922.80, up from $1,233.77 in 2015. The rise was partially attributed to retailers allocating smaller budgets for loss prevention, leaving them with fewer security staff to fight theft, the report said. Shoplifting averaged $798.48 per incident, up from $377 in 2015. Shoplifting continued to account for the greatest losses of overall shrink. Shoplifting and organized retail crime accounted for 36.5% of shrink, followed by employee theft/internal (30%), administrative paperwork error (21.3%), and vendor fraud or error (5.4%). The thefts amounted to 1.44% of sales, up from 1.38%.Īccording to the study,1 which was sponsored by The Retail Equation, 48.8% of retailers surveyed reported increases in inventory shrink, and 16.7% said it remained flat. Inventory shrink totaled $48.9 billion in 2016, up from $45.2 billion the year before, as budget constraints left retail security budgets flat or declining, according to the annual National Retail Security Survey by the National Retail Federation and the University of Florida. The nation’s retailers lost a staggering amount of money in 2016 due to shoplifting, organized crime, internal theft, and other types of inventory shrink. Well written, proper grammar, and follow APA guidelines including references and in-text citations when needed. When answering the three questions above, consider the questions that are presented in the case and use those to frame your responses.Ĭase study write-ups follow proper APA formatting and integrate Chapter 3: Organization Ethics and Corporate Governance (attached). What are the ethical issues in this case, and who is being affected?ĭo you think what Shane did was whistleblowing? Explain what is meant by whistleblowing? Read the case Walmart Inventory Shrinkage (a GVV case) below and write a 5-7 page executive summary on the case, including answers to the following questions.
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