HOW LOSS PREVENTION CAN COST YOU LESS, SAVE YOU MORE, SERVE CUSTOMERS BETTER

One of the major issues for loss prevention and profit protection managers is the cost of protecting products from theft and damage. How do you ensure measures are proportionate to the risks, across multiple products and stores?

Of critical importance is to recognise that each store and product group is not equally at risk at all times. Specific places, products and processes are more vulnerable to loss than others.

There has been much research on this by innovators like Adrian Beck and practitioners like Martin Speed who have looked at the principle of the ‘hot concept’.

This concept is a powerful way to ensure that busy loss prevention managers – with tight budgets and operating in ever more complex environments – can focus on those goods and processes that are most vulnerable. The concept offers a logical and effective way for retailers to prioritise security measures and control losses from a range of sources.

Hot Places

If you take any location in the UK – any City, town or postcode – you will find that not all these areas are equally vulnerable to the risk of crime. There are inevitably certain areas which suffer crime disproportionately. It was found in a recent study that just 3% of the geographic area of one city accounted for 50% of all recorded crime.

Increasingly total loss specialists develop a risk register for a store group. Each site is ranked according to shrinkage history and levels of recorded crime in the area. This data we can glean from data mining reports across the group.

We also use internal and branch performance data, along with external intelligence from leading GEO-centric suppliers to develop algorithms that provide statistics, with less reliance on unsupported opinion on the risks to a location. We call it the “Science of Where” – a strategy deployed by ESRI (Environmental Systems Research Institute), our partners in this solution.

Here at the LodgIC intelligence centre we have developed a range of tools to understand the threats and deploy countermeasures. We use mapping and postcode analysis software and ‘resource to risk’ modelling to deploy security solutions – manpower, software and hardware. The results are measured against KPIs and incidents monitored by our crisis management teams.

The lesson from this is that the more you understand about the relative threats to a store and how they arise, then the better prepared you can be.

There is a range of parameters that we use to understand the relative risks for each location. This includes the percentage of transactions voided staff turnover, competency, customer service feedback and EPoS data. Also, we generate data from reports on the activities of organised retail gangs.
This data is used to prioritise security spend and the deployment of protection resources. This strategy has proved highly effective, with our Elite guarding teams deployed to target specific locations according to data from a range of sources, such as local crime reports and our internal data.

In my experience, good loss control results usually follow good managers and experienced staff: the Total Loss concept is not purely about the theft of goods, but includes losses from all sources.

Hot Products

There is also a body of research identifying hot products. These are goods which are most prone to theft and damage. Ron Clark produced some interesting work identifying the key aspects of those items most vulnerable to theft.

He developed the acronym CRAVED to describe the key attributes:

● Concealable (easy to hide when being stolen)
● Removable (easy to remove)
● Available (easily accessible)
● Valuable (either personally to the thief or to others who may wish to purchase it)
● Enjoyable (generally the product is enjoyable to own or consume)
● Disposable (a ready market for the stolen item exists)

At the LodgIC Intelligence Centre we analyse the losses for product groups. Then we assess issues such as the size, display and portability of goods, to specify appropriate protection. Solutions might include smart shelves and other smart devices; also the use of CCTV, RFID, trackers, and online monitoring – and deploying security staff.

We assess every aspect of cost and usage of security measures: how will the security device be applied, monitored or deactivated? What are the consequences for retail processes and systems?

Using the Hot Product concept we are able to ensure a solution that keeps everyone happy – including busy store and security managers.

We are now reviewing international findings which define a new role – Hot Product Assistants – to track and ensure protection, with optimal availability at all times for the customer. This is achieved through a detailed understanding of the product journey, liaising with supply chains, security and retail managers as part of our ‘sell more, lose less, serve better’ strategy.

Hot Processes

The concept of hot processes looks at the problem of losses arising at any stage in the retail supply chain; from dispatch by the supplier through to arrival in store, then customer selection and payment at the point of sale.

The losses commonly associated with hot processes are mostly from damage, but not always. One issue is that an effective and sustainable solution may be as much the responsibility of the product manufacturer as it is the retailer.

Adrian Beck sets out five key areas of the retail process that are particularly hot:

● Product movements (increases the risks of damage, delivery to the wrong location, wrong quantity, incorrect paperwork)
● Handling (damage, exposure to theft, loss of paperwork)
● Change of form (reworking can cause loss of identification, damage, and wastage)
● Exchange of ownership (as well as the risks associated with physical movement, processes relating to the transfer of information and money can also pose risks that may generate loss)
● Storage (increasing the potential risk of damage, theft, loss of value, obsolescence, and so forth)

Adrian talks about the concept of the loss prevention roadmap to identify the risks for any given product in the supply chain process and then to identify ways to mitigate risks.

At the LodgIC Intelligence Centre we deploy a range of measures according to the organisation and operation of the supply chain. To understand where losses are arising and the risks, our audit teams investigate the movement, storage and handling of goods.

Test purchasing is another invaluable way to find out what is happening in-store, particularly at the point of sale. Simply observing movement and activity, based on experience of associated risks, can offer a major return.

Other tools employed include Transpeye and data analysis to identify exceptions and events that require investigation. This might range from goods returned through to the opening of fire doors. The Transpeye system offers pre-set alarms to identify and alarm a wide range of events in the EPoS, security or other systems.

Employment screening should not be overlooked and is at the start of Hot Process countermeasures. Our EMPS services enable retailers to check the records of a range of staff, including drivers and warehouse personnel.

Hot Innovations

Another area for attention relates to ‘hot innovations’ – any new technology or process that impacts negatively on losses.

A prominent example of this is the use of self-scan checkouts – described by some as ‘a recipe for shoppers to help themselves.’

Newspaper reports tell us that people are stealing £3.2 billion worth of goods from self-service tills each year – some £5 per person a month.

Almost one in four people admit to stealing at least one item without paying. A study shows theft from unmanned checkouts has more than doubled in the past four years.

There are a range of countermeasures to employ from scan avoidance technology.

Generally, the solution is a mix of measures including the use of point of sales data allied to video analytics. Again, the use of Transpeye offers an invaluable software system to connect a range of data sources – including smart shelves and devices – and then set alerts that the retailer can specify from a menu. You are then never more than three clicks at any time from the data you need to spot any losses.

In conclusion, all these hot areas taken together help us to understand where, when and how losses arise, and then to take action to stop them, whilst saving you time and delivering better customer service.

Contact: Lodge Service – www.lodgeservice.com

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