Qual Quant (2010) 44:1093–1103

DOI 10.1007/s11135-009-9260-9

An application of six sigma methodology to reduce

shoplifting in bookstores

K. S. Chen · C. S. Shyu · M. T. Kuo

Published online: 18 July 2009

© Springer Science+Business Media B.V. 2009

Abstract Recently, bookstores in Taiwan have been facing keen competition and the resul-
tant impact. Most shopkeepers understand that when they sell one hundred dollars worth of
merchandise, they may not even generate ten dollars worth of profits. However, when they
lost one hundred dollars worth of merchandise by shoplifting, it means they lost 100% of
cost and possible profits. For this reason, shopkeepers face a crucial task, determining how
to construct a model with a set of evaluations, analysis and suggested improvements, in order
to promote the management of shoplifting in bookstores. This article, therefore, applied Six
Sigma methodology to help reduce the incidence of shoplifting in bookstores.

Keywords Cause and effect diagram · Specification limit · Matrix analysis

1 Introduction

The twenty-first century is not only a century of lifelong learning, but also an era labeled
as the knowledge economy. Nowadays, acquiring knowledge has become a way to maintain
companies’ or countries’ competitive power. Even though the methods employed to acquire
knowledge differ, acquiring knowledge from books is still the cheapest and easiest way.
Moreover, people have to decide when and where to read books. The bookstore, therefore,
has become a very popular place for people to patronize; the number of bookstore consumers

K. S. Chen (B)
Department of Industrial Engineering and Management, National Chi-Yi Institute of Technology,
Taichung, Taiwan, ROC
e-mail: kschen@ncut.edu.tw

C. S. Shyu
Graduate Institute of Educational Administration, National Pingtung University of Education, Pingtung,
Taiwan, ROC
e-mail: shaw55kimo@gmail.com

M. T. Kuo
Department of Education, National Pingtung University of Education, Pingtung, Taiwan, ROC

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has become more and more extensive. The bookstore is not only one of the cultural indexes
of a country; it has been dubbed part of the “culture industry.” The evolution of bookstores
reflects the economic development of a country.
Most Taiwan bookstores, mainly sell the books which they themselves published; in early
days these stores were run by the publishers themselves. In addition, there are some different
sized traditional bookstores that are located in Taiwan. In traditional bookstores, the goods
they sell are not diverse and they do not pay attention to decorations. Since the opening of
the Kingstone Bookstore and Senseio Bookstore, selling books and stationery items in large
bright spaces, Taiwan’s bookstores have moved to the chain store operation stage. In the late
nineties, the rise of the Eslite Bookstores with their refined and sophisticated approach has
pushed the bookstore chain competition to a higher level. Differing from the traditional book-
stores, these bookstore chains changed city residents’ life styles and consumer behaviors.
According to an investigation, the statistics on the number of bookstores in Taiwan was
2100 in the year 2003 (Government Information Office 2002). Thus, it is clear that the book-
stores will inevitably face keen competition and a powerful impact in the future. The low
efficiency bookstores will inevitably be eliminated; therefore, only the bookstores with good
management and achievements will be able to survive and to develop. One of the biggest
challenges that the bookstore dealers face is shoplifting, which is also a management prob-
lem. Data for the calendar year 2001 suggest that the average retail firm loses 1.7% of its gross
sales revenues to “inventory shrinkage.” “Shrinkage” refers to those losses that are attributed
to shoplifting, employee theft, vendor fraud, and administrative (paperwork) error (Hollinger
and Davis 2002). Furthermore, Dabney et al. (2004) suggested that security executives esti-
mate that at least one-third of their inventory losses result from shoplifting incidents. The
retail industry suffers somewhere in the neighborhood of $10 billion in losses due to shoplift-
ing each year; losses that are attributed to larceny-theft and shoplifting are serious problems
and may not be neglected. Renee (2005) suggested that when it comes to theft, retailers are
fighting a two-front war: against both shoppers and employees. In fact, smart shopkeepers
all understand that when they sell one hundred dollars worth of merchandise for customers
they may not net ten dollars worth of profit. However, when they lose one hundred dollars
worth of merchandise by shoplifting, they have lost 100% of cost and potential profits. Thus,
the need to counter shoplifting is accepted by shopkeepers. For this reason, shopkeepers face
a crucial task, determining how to construct a model with a set of evaluations, analysis and
suggested improvements, in order to promote the management of shoplifting in bookstores.
From the perspective of current methods of management, Six Sigma is the best method to
improve such performance; as a result, the present study applied Six Sigma methodology to
reduce the problems of shoplifting in bookstores.
In recent years, more and more companies have been employing Six Sigma. With Six
Sigma methodology, companies or organizations can integrate the concept of costs and the
method of statistical analysis. Adopting the clear-cut process of problem management of
Six Sigma, companies can solve or improve all kinds of problems. Motorola invented Six
Sigma in the mid 1980s as a powerful business strategy to improve the quality. Jack Welch,
the former CEO of General Electric, adopted the Six Sigma quality program in late 1995.
Through the adoption of Six Sigma methodology, General Electric put into place an operating
methodology and corporate culture that rewarded excellence and fostered improvement of
business processes across the board. Later, Six Sigma efforts at such companies as CITI Band,
Bank of America, DuPont, Sony, FedEx and Ford were successful at enhancing management
performance. Recently, Taiwan companies have begun to express an interest in Six Sigma. For
example, ASUS (a laptop and motherboard manufacturer shipping 52 million motherboards
in 2005, which means one out of every three desktop PCs sold last year was powered by an

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ASUS motherboard), implemented Six Sigma to improve business management and set up
38 measurement indexes. Rob Garf, an analyst at Boston-based AMR research, suggested
that Six Sigma retailing provides an integrated set of processes and technologies to remove
the variability from store operations (Wan 2005).
Slater (2000) pointed out when General Electric implemented Six Sigma management
processes, MAIC (measure, analysis, improvement, control) was the management process
chosen for problem solving. Chung (2001) suggested that the management process of problem
solving of Inventec is DMADV (define, measure, analyze, design, verify). Although these
management processes mentioned above appear different, they all rely on rigorous statistical
methods and implementation of control mechanisms in order to tie together quality, cost, pro-
cess and people. Snee and Hoerl (2003) argued that Six Sigma problem-solving methodology
(DMAIC) is recommended when the cause of the problem is unclear. Antony et al. (2005)
suggested the application of the Six Sigma problem-solving methodology, DMAIC (define,
measure, analyze, improve, control), reduced the number of defects in the engine cylinder
manufacturing process and thereby improved customer satisfaction as well as the business
profitability of the company. According to the definition of Six Sigma DMAIC processes
given by Michael (2002), this article applied DMAIC to reduce shoplifting problems and
thereby promote operational performance of bookstores. These steps are as follows:
Define: ameliorate the shoplifting problems.
Measure: take the total loss (TL) caused by shoplifting as measurement direction and then
define the sub-index on measurement loss according to the average loss amount and upper
specification limit of the loss amount.
Analyze: use cause and effect diagram to chart the loss. Determine the main reason leading
to the loss and analyze it particularly.
Improvement: use a cause and effect matrix to provide management advice for shopkeep-
ers in bookstores, according to the main reason of loss as analyzed according to the cause
and effect diagram.
Control: construct the mode of loss control and monitor the degree of loss in time, by
setting the upper and lower specification limits, and the control center.

2 Definition and measurement

In recent years, the number of bookstore clients increased greatly, bringing the challenge of
higher profits, as well as more theft to bookstores, along with the demand for better service.
The problem of theft results in book loss, management difficulty, and higher costs. As a
result, the first defined problem is to reduce the rate of book theft. The purpose of this paper
was to adopt Six Sigma in order to define the loss of bookstores caused by thefts. In general,
most bookstores currently provide complex services to their customers, and we divide stolen
goods at bookstores into three categories: books, stationery items, and boutique. Each stolen
category attributes to different losses; X i j refers to loss of stolen goods j of category i and
Ni is the total number of stolen goods of category i where j = 1,…, Ni , i = 1, 2, 3. 1, books;
2, stationeries; and 3, boutiques. We then define the sum of the stolen goods of category i,
T L i , as:


Ni
T Li = X i j , i = 1, 2, 3 (1)
j=1

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For instance, a bookstore during inventory time found the shortage of some stationery
items. If a ballpoint pen is sold at the price of 35 and there are 10 found in shortage; a stapler
is sold at the price of 45 and 2 are found in shortage; and a knife is sold at the price of 25
and 3 are found in shortage, then the bookstore lost (TL) of 35 ×20 + 45 × 3 + 25× 5 = 960
dollars due to theft.
Obviously, the total loss of the bookstore is the sum of the stolen goods of these three
categories, shown as follows:
T L = T L1 + T L2 + T L3 (2)
If the amount of stolen goods in each category is uncertain, according to Montgomery (2001),
the total loss of stolen goods Ni is a random variable with a Poisson distribution. The prob-
ability density function is shown as:
e−μi μin i
P (Ni = n i ) = , Ni = 1, 2, . . . , i = 1, 2, 3 (3)
ni !
where parameter μi refers to the average number of stolen goods, E(Ni ) = μi . In addition,
loss X i j is a continuous random variable caused by the shortage of category i in the time
of theft j. To reduce the total average loss, we have to reduce either the average number of
stolen goods μi or average loss of stolen goods θi , but when theft occurs, the loss is suffered.
As a result, the key to reducing the total average loss is to reduce the average number of
stolen goods μi . To achieve this objective, the maximum theft Ui is defined by operation
objective, customer satisfaction, operational scale, and other factors employed to examine
the maximum tolerance of bookstores for theft.
It is obvious that any reduction of theft improves management efficiency and counters
management loss. From the categorization of stolen goods, we found that due to the large
number of items offered for sale at bookstores, it is unlikely that the theft rate could be
reduced within a short period of time. Thus, this paper defined the time loss measurement
index according to the average number of stolen goods, Ui , and the maximum number of
stolen goods:
μi
I Li = , i = 1, 2, 3 (4)
Ui
where, I L1 refers to time loss measurement index of category 1; I L2 refers to time loss mea-
surement index of category 2; and I L3 refers to time loss measurement index of category 3.
From the above Formula 4, when I Li = 1, the average number of stolen goods μi equals
to the maximum number of stolen goods Ui indicating the tolerance capacity of bookstores
reaching the maximum; when I Li > 1, μi is larger than Ui indicating that bookstores cannot
tolerate the number of stolen goods. In other words, bookstores have poor operation man-
agement and that results in the average number of stolen goods exceeding the maximum
tolerance capacity. When I Li < 1, μi is smaller than Ui showing that the number of stolen
goods does not exceed tolerance capacity of stolen goods, and thus that there is good oper-
ation management. Apparently, time loss measurement index is the decreasing function of
μi . A smaller value of μi shows a smaller average number of stolen goods at a bookstore,
better management efficiency, and a lager time loss measurement index.
This study used optimal estimation of I Li time loss measurement index as the measuring
statistics. Optimal estimation refers to the minimum of unbiased estimation and it is defined
as follows:
N̄i
I¯Li = (5)
Ui

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An application of six sigma methodology to reduce shoplifting in bookstores 1097

Fig. 1 Radar analysis diagram

 mi
Where N̄i = l=1 Ni /m i , obviously, E( I¯Li ) = I Li , and V̄ ( I¯Li ) = I Li /(m i u i ). Then we
√ 
assume that Z = m i Ui ( I¯Li − I Li )/ I¯Li and when value m i is large enough, statistics Z is
close to normal distribution according to the Central Limit Theorem. As a result,

 √ 
m i Ui ( I¯Li − I Li )
P −Z α/2 ≤  ≤ Z α/2 = 1 − αi
I¯Li
   
I¯Li ¯ I¯Li
⇒ P −Z α/2 ≤ I Li − I Li ≤ Z α/2 = 1 − αi
m i Ui m i Ui
   
¯ I¯Li ¯ I¯Li
⇒ P I Li − Z α/2 ≤ I Li ≤ I Li + Z α/2 = 1 − αi (6)
m i Ui m i Ui

Confidence interval of 1−αi of I Li is shown as follows:

   
I¯Li I¯Li
[L i , Ui ] = I¯Li − Z α/2 , I¯Li + Z α/2 (7)
m i Ui m i Ui

According to the confidence interval of said index I Li , we are able to clearly understand
the estimated interval value of the time loss measurement index. This study comprised a
radar analysis diagram according to indexes of three categories and their confidence inter-
vals. Gray zone in Fig. 1 below, shows a triangle of three time loss measurement indexes at
value 1, the tolerance area of stolen goods of three categories of bookstores. This paper used
three different intervals of three categories as the examples for the description shown as the
following diagram:
From the radar analysis diagram, when the I L1 interval is within the tolerance area, book-
stores have reached to the maximum tolerance area, and when the I L2 interval is within
the tolerance area, the number of stolen goods does not exceed the maximum tolerance of
bookstores, signifying that there is functional operational management. When I L3 interval
is outside the tolerance area, the number of stolen goods exceeds the maximum tolerance of
bookstores, indicating a high level of stolen goods stemming from poor management. Thus,
the radar analysis diagram helps us to understand theft problems of three categories at book-
stores, and that may serve as reference for future improvement at bookstores. To facilitate
management of bookstores, this study proposed the following measurement procedures:

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Table 1 Index value and

Category Index value [L i, Ui ]
up-down limit
Books I L1 [L 1, U1 ]
Stationery items I L2 [L 2, U2 ]
Boutique I L3 [L 3, U3 ]

Step 1: Record stolen goods in three categories of stationery items, books, and boutique
after inventory checking including quantity number and amount of stolen goods.
Then calculate the averages, respectively.
Step 2: Calculate the actual time loss measurement indexes of the three average numbers
according to the defined indexes and enter them in Table 1.
Step 3: According to the actual time loss measurement indexes acquired in Step 2, we define
their up and down boundaries with Eq. 7 and enter them in Table 1, as shown bellow
Step 4: Mark confidence interval of [L i , Ui ] according to Table 1 and estimate according
to the principles below:

A. When 1 ∈[L i, Ui ], the tolerance capacity of bookstores for the number of stolen goods
has reached the upper boundary and tighter control is required.
B. If 1 < L i , bookstores cannot tolerate the number of stolen goods and there should be
improvement strategies for countering the high level of stolen goods resulting from
poor management.
C. If 1 > Ui , the number of stolen goods does not exceed the tolerance capacity of book-
stores and there is a functioning operational management.

3 Analysis

As described earlier, this paper adopts Six Sigma to improve the main defined problem of
bookstore management efficiency, that is, to reduce the theft rate at bookstores. In addition
to the estimated values of time loss measurement indexes and radar analysis diagram, this
study provides an estimation model and enacts a set of measurement steps. In following these
steps, if the result is found to be outside of the gray area, then the bookstores cannot tolerate
the number of stolen goods. Poor management results in a high level of theft. They need to
examine and analyze the factors that contribute to the theft loss. In other words, the main
purpose of the analysis stage is to identify the reason for, and time of, the theft occurrences
during the operating process. In fact, many analysis methods and tools are available, and
for many businesses; they are concerned most with the convenience of use, while promot-
ing service quality. Antony et al. (2005) made use of a cause and effect diagram to identify
questions of overheating car engines according to six dimensions: material, machinery, size,
procedure, environment, and human resources. Through the application of a cause and effect
diagram, manufacturing quality has been improved. The cause and effect diagram is a good
tool for analysis; thus, this paper uses it as the tool to analyze the reasons for the theft at book-
stores. Figure 2 is the cause and effect diagram of theft occurrence at bookstores, according to
four dimensions: environment, personnel, procedure, and management system, as described
below:

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Environment Personnel

Moral
Display

Facilities Attitud
Lighting

High Theft Rate

Access Control
Delivery

Training
Reward
Check out

Procedure Management

Fig. 2 Cause and effect of theft in bookstores

A. Personnel:

1. Moral characteristics: Along with the social change and advancement of living standards,
value concepts have changed, too. Moral characteristics dominate the value concepts of
employees. Managers must face the challenge of moral cultivation through educational
training. In other words, theft by staff becomes unlikely when employees at bookstores
behave according to a high level of moral standards.
2. Attitude: It is essential to have employees who respect their work; when employees carry
out their responsibilities with great effort, their pride helps to preclude the occurrence of
theft. If employees at bookstores also pay more attention to possible suspects, the theft
rate will definitely be cut down.

B. Environment

1. Display: Most bookstores now adopt a complex management model and consequently,
expensive commodities such as glasses, pens, and translation equipment are also on
display besides books and they are much more expensive than books. Therefore, the
methods chosen by bookstores in displaying these expensive commodities is also a very
important consideration.
2. Hardware and software facilities: They include electronic label, electronic monitors,
anti-theft systems, and so on, that help to monitor or manage transactions at bookstores
and help to prevent the occurrence of illegal behaviors.
3. Lighting on site: Lighting at bookstores influences consumers to some degree. A well
lit environment attracts consumers and a poorly lit environment keeps consumers away
and provides more opportunities for thefts.

C. Management system:

1. Educational training: Issues can include: an introduction to anti-theft procedures, man-

agement of the theft problem, timing required to report thefts, etc. The educational
training helps to increase the professional knowledge of employees and improve the
revenue performance of bookstores.

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Table 2 Relevance matrix analysis

HR department Stationery department Book department Management department

Personnel    
Environment    
Management system    
Procedure    
 refers to direct relevance;  refers to indirect relevance

2. Access control: Access control of personnel plays an important role in bookstore man-
agement because it requires employees to abide by disciplinary requirements. Through
this control, access of non-employees and access of employees outside work time is
reduced or eliminated, to avoid theft from occurring.
3. Reward system: Proper rewards prevent inside theft (by staff) and motivate employees
to proactively counter theft problems.

D. Procedure

1. Delivery inspection: General delivery inspection is carried out by both an inspector and
delivery person and it is important for bookstores to regularly check the quantity of goods.
Delivery inspection can also help to avoid unnecessary disputes between bookstores and
suppliers.
2. Check out procedure: Correct check out procedure prevents the occurrence of incorrect
item identification and then listing this item as a theft.

4 Improvement

As mentioned above, this paper uses a cause and effect diagram from the perspectives of four
dimensions: personnel, environment, management system and procedure to identify reasons
for the theft occurrence and then we analyze four questions to identify four factors of the
relevant matrix analysis as the vertical dimension and the organization structure of the book-
store as the horizontal dimension to propose improvement strategy via relevance analysis, as
shown in Table 2.
As shown in relevance matrix analysis, moral characteristics and attitude of employees
have direct relationships with the HR department and indirect relationship with the rest. Thus,
to improve moral cultivation, HR managers need to enact job specifications and rewards and
conduct seminars on job ethics. In addition, HR managers should adopt management by
“wandering”, to directly observe and understand the front-line workers and indirectly moni-
tor things in a more effective way. With regard to the attitude of employees, the HR department
should encourage proper working attitudes, and without interrupting customers, employees
should know what the customers are doing in the bookstores. In particular, for those near
schools, more attention should be paid to customers during peak (after school) hours.
Environment can be examined according to the analysis of three factors: display, software
and hardware facilities, and lighting condition. From relevance matrix analysis, we know
that more expensive commodities with higher unit price, smaller size, and lighter weight
are locked in the display cabinets and only with customer request, will they be brought to

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customers to avoid theft. Furthermore, at the end of each business day, the quantity of expen-
sive commodities should be re-checked. The Management department needs to take great
care of the relevant anti-theft system. At present, most bookstores are equipped with security
mirror, electronic label, monitors, anti-theft system at the entrance and exit, POS system and
so on, to cut down the theft rate and avoid losses at bookstores. The book department can
create a comfortable reading environment with soft lighting and at the same time, preclude
theft that often occurs in a poorly lit environment.
Three factors of management system: educational training, access control, and rewards
are analyzed. From the use of a relevance matrix analysis, we found that the HR department
should invite scholars and experts regularly to talk to employees about anti-theft management
and encourage employees to work together to cut down on theft. In terms of a reward system,
the HR department should adopt strict and fair reward and punishment policies. Once an
employee is found to be involved in theft, a punishment or warning should be given imme-
diately to let them know the seriousness of the issue. On the other hand, those who help to
prevent theft occurrence should be rewarded. In terms of access control, the Management
department should regulate the entrance and exit during office hours and after office hours to
avoid employees bringing out unpaid for books or commodities; receipts should be presented
for verification purpose.
With respect to procedure, two factors of delivery inspection and check out procedure are
described. With the use of the relevance matrix diagram, the delivery inspection and check
out procedure are found to have a direct relationship with the Management department; thus,
the Management department has to ask inspectors to check both delivery inspection and pro-
cedures to verify the consistency with orders. In particular, a careful inspection is required
for those packages that have been opened. Delivery persons should first present the delivery
order and display each commodity and request an inspector at the bookstore to verify item by
item. Moreover, empty boxes should be flatly pressed to avoid carrying out unpaid for items
by employees. If delivery inspection procedure is carried out, then the loss of bookstores
can be cut down to the minimum level. Cashiers should carefully handle purchased items, in
particular, for those with smaller sizes and larger quantities.

5 Control

This paper also proposes an anti-theft management model built on DMAIC of Six Sigma
suggested by Michael (2002) to effectively control the theft rate at bookstores. As a result,
this paper develops the control anti theft model at bookstores to avoid theft occurrence and,
at the same time, to monitor the control of the theft rate. Under the guidance of this model,
bookstore operators are able to know the control result of theft rate and adopt real-time
measures to improve management efficiency. In accordance with Eq. 6,
 √ 
m i Ui ( I¯Li − I Li )
P −3 ≤  ≤ 3 = 99.73%
I¯Li

P I Li − 3σi ≤ I¯Li ≤ I Li + 3σi = 99.73% (8)


I¯L i
where σi = m i Ui

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According to Eq. 8, we acquire up and down boundaries and central line of I¯Li ,as shown
bellow:

I¯L i
UCL = I Li + 3 (9)
m i Ui
CL = I Li (10)

I¯L i
LCL = I Li − 3 (11)
m i Ui

Actually, I Li is unknown. We take the average of group m of sample I¯Li to replace I Li and
then we get UCL, CL and LCL as followings:
From the above acquisition, we use the average loss measurement index I L i to estimate
the actual I Li and revise Eqs. 9, 10, and 11 as follows:

I¯L i
UCL = I L i + 3 (12)
m i Ui
CL = I L i (13)

I¯L i
LCL = I L i − 3 (14)
m i Ui
where

1 ¯
m
I Li = × ILi (15)
m
i=1

Obviously, according to the above up and down control limit and control center, we are
able to adopt a control principle and method to conduct real-time monitoring on theft rate at
bookstores.

6 Conclusion

The coming of the “experiential economy” era enables human beings to transform their
activities from industrial production to cultural production. In the future, besides traditional
industrial products or services, there will be more and more cultural experiential products.
Bookstores in Taiwan are transforming. Bookstores are not places that display only tangible
products such as books; they will become experiential cultural sites.
Along with the growing number of bookstores and consumers, bookstore operators inev-
itably face the problem of theft and how to effectively reduce theft rate is a major concern of
bookstore operators. Little previous literature has discussed procedures and models that help
to improve and control the problem of theft faced by retailers; therefore, this paper adopts
the DMAIC model of Six Sigma proposed by Michael (2002). Since this model systemat-
ically defines five stages of definition, measurement, analysis, and control as the steps of
execution, through measurement, we can quantify the stolen goods. Improvement strategy is
further proposed via the result acquired from tool analysis. The coordination with the control
model helps to solve or counter problems in time while helping to monitor and maintain
efficiency results within the required area.

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In terms of measurement, this paper uses total loss (TL) of stolen goods for measure-
ment and defines the time loss measurement index according to the up boundary of average
number and total number of stolen goods. Interval values are then acquired to compile a
radar analysis diagram. In the stage of analysis and improvement, we construct a cause and
effect diagram of stolen goods at bookstores, identify the main reasons in four dimensions:
environment, personnel, procedure, and management system, and we propose four sugges-
tions for improvement. In the end, anti-theft control model is built according to up and down
boundaries and central center to monitor the theft problem and push it down to a permissible
scale.
This paper found that theft rate is cut down through the use of the DMAIC model of
Six Sigma. Bookstore operators should continue training their employees and improving
hardware and software facilities and they should also conduct more effective contacts and
communication with each department. With all those measures, they will be able to improve
management efficiency in a fiercely competitive environment.

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