NEWS & SOLUTIONS 1997-10-13

ADAM BLAIR

Nobody likes to lose.

Loss prevention, a constant concern for retailers because even a small shrink percentage attacks the industry's thin profit margin, is getting a boost from innovative combinations of existing technologies.

Closed-circuit television systems that interface with cashier-monitoring systems, for example, can help loss prevention professionals pinpoint and document employee theft far more quickly and easily than was previously possible.

"More and more retailers are using CCTV with point-of-sale interface systems," said Chuck Miller, vice president of loss prevention services at the Food Marketing Institute, Washington. "This software can alert management to cashiers who aren't within expected parameters" for high-shrink categories, such as meat or tobacco.

Miller also noted increasing usage of electronic article surveillance systems, pointing to several recent chainwide rollouts of the technology.

Retailers whose loss prevention efforts have proven effective told SN that while they rely on an increasing technological arsenal to foil both internal and external theft.

Marene Allison VP, loss prevention A&P Montvale, N.J.

Internal theft is a larger concern [than external theft], for the simple reason that employees are at the store longer than customers, so they have more opportunities. We don't assume that every employee is trying to steal from us -- we're just trying to find the bad ones.

The most effective technology for reducing shrink is simply POS scanning, because with scanning you can tell what you're losing. Otherwise you just don't know.

We're very progressive in managing our shrink. For example, we take inventories every six weeks, and this helps us keep our grocery and health and beauty care shrink percentage at under 0.5% of sales. That's well under the industry norm of 1% to 1.2% of sales.

We also use a POS software system that establishes cashier norms and identifies exceptions. It's helpful both for loss prevention and to identify training needs. While it doesn't solve the problem of cashier theft, it does give you more places to look.

I've looked at systems that tie exception reporting software directly into the CCTV system, which would give the loss prevention department even more guidance. With a total of 900 stores under various banners, the problem isn't recording someone stealing -- I'm sure I've caught thousands of cashiers on videotape. I just have to find it to use it. It's pointing to the rock you have to look under.

What will also be helpful are electronic POS journals, which are part of a general POS upgrade we're planning. These journals record all transactions at a particular register.

With existing paper journals, if I'm conducting an investigation of a particular cashier's transactions, I have to go down the spool, item by item, to find the particular one I'm looking for. One can literally look at journal tapes for days.

With an electronic journal, I can pull up a record using the store's computer system and search a particular time frame, or look for transactions over or under a certain amount or in a particular range. This type of data mining is another way to locate the 'rock' more quickly and more specifically.

To combat external theft, I can make the most secure store you'd want, but could you buy anything in it? I hate to have to lock things up because it just reduces sales. We try to make security effective, but fairly transparent to the customer. It's just the crooks that we want to let know it's there.

We use CCTV, which is useful not only for loss prevention and security in terms of shoplifting and armed robbery, but also for cases of economic fraud, such as slip and fall accidents.

Dan Faketty director, loss control Super Kmart Centers Troy, Mich.

Super Kmart stores are an interesting target for dishonest people. The biggest issue is that the stores are two to three times as large as a typical supermarket, ranging from 170,000 to 190,000 square feet in size. The stores also operate 24 hours a day.

Another issue is that besides groceries and the high-shrink categories there -- such as meat, cigarettes and health and beauty aids -- the stores sell consumer electronics, power tools and apparel like leather jackets and sporting goods. Not only are these higher-ticket items, they're also easy to resell or even to return to other retailers for credit.

Nevertheless, our shrink rates are lower than the industry averages in both the discount retail and grocery industries.

We use a number of different systems to combat shrink at our 99 stores. Currently, 10 stores have EAS systems; a total of 40 will have EAS installed by Nov. 1; and by fall 1998, all Super Kmarts will have it. This way we can take advantage of the source tagging initiatives in the vendor community.

In addition, we use a microprocessor-controlled CCTV system in all our stores. This is important in helping us monitor rear receiving areas, especially from 5 p.m. to 6 a.m. At other times, the area is staffed and supervised by a salaried manager.

The CCTV system is linked with the door alarm systems during these 'off' times, so that when any door opens in the back of the building, a camera goes to a prepositioned point and begins to lay down on videotape exactly what's happening.

This way, a loss prevention manager can go to the alarm system printout, which tells which door opened, when and for how long, and also have a video record. There's no guesswork.

I've also been looking at systems that interface POS systems with the CCTV systems. By next year, we should be able to purchase an off-the-shelf system that will tie these together. We already do exception reporting at the POS, but it's not currently interfaced with the CCTV system.

Also on the horizon is using digital technology to store CCTV images on a computer hard drive rather than on a videotape. We have literally thousands of tapes, which we save for 31 days before taping over them.

Michael Bekstrom VP, loss prevention and risk management

Andronico's Market

Albany, Calif.

To address the problem of vendor theft, we've implemented one of the most stringent receiving policies in the industry. Every company employee who receives any goods has to go through a two-hour receiving certification course.

We also have a receiving error log at all receiving locations within the store. Any discrepancy on an invoice, whether a short or an overage, is recorded in these logs, along with the date, the company, the driver's name, the product and the dollar amount.

All this information is sent in weekly to the loss prevention department, where it's fed into a computer program we developed in-house. It gives us a printout of all receiving discrepancies at all eight stores and reveals patterns. It tells us that certain drivers are very consistent with being short at several stores.

We've set up criteria in the computer program to give us a "hot sheet" of companies and/or drivers that are a consistent problem. Then we tell our grocery buyers to inform the vendor company that if this driver is short again at any one of our receiving doors, the company will not be allowed to deliver any goods at Andronico's. It stops this type of shrink instantly.

This program was first implemented in 1992, when we had five stores, and in its first three months we prevented more than $30,000 in shortages.

On the technology side, we're slated to put in a system this year that will feed the video images from our in-store CCTV systems over phone lines to a central location. While this type of technology isn't exactly cutting-edge, it has become more cost-effective.

Nick Barilla director, loss prevention Giant Food Landover, Md.

Our shrink level is probably one of the envies of the industry, at 0.5% of sales or below. Methods of reducing shrink are addressed at orientations for new people, and preached and practiced throughout every store on a consistent basis.

On the technology side, we use EAS systems in our higher-shrink and higher-risk stores, about 65 stores out of a total of 175. In addition, we use cashier-monitoring systems that provide exception reports of POS activity.

Some of our most effective ways to combat shrink are employee involvement programs.

For example, we have an anonymous tip line for people to report examples of internal theft. We involve our people by letting them know they don't have to work with a thief.