Data Digging Catches Employees Red-Handed

Tracking operations data more closely led liquor distributor Young’s Market Company to employees who were committing fraud and theft.
Vincent RyanJune 11, 2013

Cases of Jack Daniels, and other potent potables, tend to disappear in the liquor business. “Booze runs away, it has legs,” said Kevin Manion, CFO of Young’s Market Company, at a conference last week. “When I was in the bakery industry it was donuts.”

Not that Young’s Market, a $3 billion wine and spirits distributor in the Western United States, could tell the degree of missing liquor. Processes and operations had become inefficient at the distributor of iconic liquor brands, and information was lacking. As a family business, it didn’t have a lot of data or infrastructure to track the company’s performance in such areas as purchasing, warehousing, delivery and sales, said Manion.

Young’s Market knew that had to change. Just two years ago the company had 12,600 traffic lanes by which planes, trains and trucks delivered liquor products. But once the right systems were installed, a thorough data analysis helped the company reduce the number of lanes to 617. 

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Young’s Market also unearthed some metrics that were both more surprising and troubling, because they involved fraud and theft among its 1,500 employees. By running staffing models, for example, the company found it was paying many employees who weren’t showing up for work every day, Manion told attendees at CFO’s Corporate Performance Management West conference last week. The company’s incident rate of worker’s compensation claims was “dwarfing the national average.” (In California, the number of claims averaged 6.2 per 100 employees among self-insured companies in fiscal years 2011 and 2012, according to the state’s Workers’ Compensation Institute.)

Young’s Market hired worker’s compensation specialists and security experts to discover which employees were committing fraud. In one case, an employee with a worker’s comp claim was costing the company more than $100,000 in pay and about $200,000 in medical bills annually. “We have a lien on his house today,” Manion said. The company’s incident rate is now down to about seven claims per year.

“We saw the metric, it was bad, it was awful, and then we dug into it. When you leave a little blood on the floor people pay attention,” Manion said, referring to the company’s efforts to catch the fraudsters.

In another example, Young’s Market found that the revenue per square foot and inventory shrinkage at some of its Young’s Market Express stores didn’t look right. After installing pinhole video cameras, it found that an employee was stealing individual bottles of liquor and stashing them in his car. The company brought the evidence to local district attorneys.

Product was also being stolen from the company’s 500 delivery vehicles, but Young’s Market wasn’t fully aware of it. Then the company installed route-planning and telematics software from Descartes to optimize routing. By knowing the route every truck took every day, and having drivers log in at every delivery location, Young’s Market found that occasionally two trucks would meet and “product was jumping off those trucks more than other trucks,” Manion said.

Still, by collecting and analyzing operations data, like stops, mileage and hours per truck route, the company is finding more efficiencies than malfeasance. Instead of zigzagging all over the place, the paths its trucks travel are simpler, and Young’s Market can track when a truck strays from its assigned route. “If they deviate, we call them up and say, ‘why are you deviating?’ ” Manion said. The company also gets more deliveries, revenue and profit out of each truck, and Manion estimates route planning and tracking has saved the company $4 million per year.

“What we found saved a bundle of money,” said Manion. Not to mention many bottles of bourbon.