The Bunker Blog

A study released in December, 2008 shows that many companies are seeing an increase in workplace crime, and specifically, theft related crime. Of course, this just serves to further support what we have already been saying all along. Those of us working in the field don’t really need studies to tell us that there has been a definite increase in internal and external theft issues. But, this does give us some more ammunition, in the form of facts, to help combat the problem.

Awareness, training, accountability; these three are still the keys to reducing incidents, and to catching internal theft early. Many companies are increasing their audit cadence this year so that issues can, hopefully, be identified earlier. Inspecting what we expect has always been a key to success in shrink reduction, but it is much more crucial today.

We face an up-hill battle against shrink, and we have to fight a tougher fight with fewer troops this year. Less eyes in the stores means more opportunities for theft.

Employees who feel the pressures of this down economy, including reduced payroll and benefits, are much more likely to steal from their employers. These thefts can range anywhere from simple time theft to multi-thousand dollar embezzlements. Loss Prevention MUST, not only expect this, but get out in front of this issue and be proactive in efforts to discourage disgruntled employees from causing a “bad to worse” scenario for retailers.

As always, comments are welcome

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According to the most recent NRF Loss Prevention Survey, businesses lost $41.6 billion in 2006 to theft and fraud. That’s about 1.61% of sales lost to theft-related shrink. Many experts are reporting that employee theft is increasing by 15% per year on average. The NRF survey also found that $19.5 billion, or 47% of these losses, were due to employee theft and fraud. If the 15% holds true, we should see that losses caused by employees will hit about $22.4 billion for 2007.

Most experts agree that approximately 30% of employees steal from their employers. 75% of those do it repeatedly. The average time it takes to catch an employee who steals is 18 months.

Just to give you an example, I had a case a few years ago where, after an investigation, I caught an employee in the act of taking merchandise out the back door. The employee then admitted to me that he had taken approximately $78,000.00 in merchandise. When that store took physical inventory, the losses were estimated to be more like $150,000.00. The employee stated that he had been stealing from the store for approximately a year. By the way, he was a trusted manager, who had keys, an alarm code, etc.

What does this all mean? It means that retailers, who are now suffering by and large from soft sales and increased costs, must be even more dilligent in their efforts to deter theft and fraud, and to recover losses whenever they do occur. This war is fought one battle at a time, and on many fronts. Loss prevention has to adapt quickly to the changing economic climate, and develop solutions to new theft methods. Also, awareness levels have to be raised through training, coaching, practical exercises, etc. Employees must share ownership of the shrink in their stores, and not just view it as LP’s problem.  Programs that educate employees about shrink and recognize those who help deter theft work best.

There is a lot at stake. $22 billion dollars is an astonomical figure that most of us can’t even really grasp. However, we can grasp our own losses, and we all know that those losses cost us dearly in profits.

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Every successful business sets goals. In fact, most businesses have many goals, both short term and long term. Sometimes, though, small and medium sized businesses may overlook one very important goal: The shrink goal. To reduce shrink, you need to know your current shrink level, have a plan to reduce it, and have something (a goal) by which you can measure the effectiveness of your efforts. Jim Lockwood, at SevenActions.com, has written a great article on setting SMART goals. These same principles can be applied to setting shrink goals. Here is how:

• Specific Goal – Specifically, how much shrink is acceptable? Most of us would immediately answer, “None”, but that is not realistic in most cases. Businesses need to understand what shrink is, and then set a goal as to what is the acceptable number, in dollars, and as a percent to sales.
• Measurable Goal – This is where you need to know your current situation. You’ll need to take inventory to see what is “lost”. Spot checks throughout the year on high shrink items will help you measure progress, and then a follow up inventory, at least annually, will give you your results.
• Achievable Goal – Don’t set a goal that you don’t even believe you can reach. This is very important. If you have a high shrink level, an achievable goal may be to cut that shrink by 20% over the next year, or it may be achievable to cut it by 40%. If you believe it is possible, after identifying the causes, to reduce shrink by 40%, then it is.
• Reasonable Goal – It is not reasonable to expect to eliminate all shrink at once. Most of the time, shrink is reduced incrementally by eliminating the current causes, and then reacting to new causes as they arise. With the right plan, and a real commitment to reduction of losses, it is reasonable to expect to lose less than 1% of sales to shrink.
• Time-Based Goal – Set a date by which you want to achieve your shrink goal. Give yourself a year so that you have a full year of sales to compare with your losses and have a true read of your shrink as a percentage of your sales. However, you can also set “waypoint” dates where you can perform mini-inventories in high shrink areas so you can re-direct your efforts and revise your plan if necessary.

Because a reduction in shrink equates to a huge increase in profits, it is absolutely worth the time and effort to set a shrink goal and hold your business, and yourself, accountable for reaching it.

Technorati Tags: retail loss prevention,retail shrink,shrink reduction,shrink goal,lp best practices

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Simply put, if you have certain expectations of security within your organization, from a cash handling program to merchandise protection standards, you must audit these procedures regularly, or they will lose much of their effectiveness. Why? Because your employees will perceive them only as important as you do.

If you place high importance on a particular program, you will follow up regularly to ensure that it is running properly, and efficiently. Employees see that, and will take their cue from you, in most cases. For example, if you demonstrate great customer service skills, and demand that same level of customer service from your employees; and, you regularly review with them any opportunities and strengths to help them improve, they will “get it”. Essentially, they will become very good at customer service, and will thereby increase your sales.

By the same token, if your employees know that you are going to review your security policies and programs, and that you are going to follow up with them about any deficiencies or strengths you find, then of course, they will follow your lead, and make those programs important to themselves, too.

It’s really about managing people. You just have to apply the same principles you employ to increase your business to the programs that protect your assets. If you never check to see if the back door is locked, your employees will not think it is important to keep it locked.

Even small businesses can, and should, have a security audit in place. Depending on the size of the business, and the specific need, the audits could range from a simple checklist to a full-blown multi-area, detailed audit process. When it comes to security, here are some things that every business owner should be checking on a regular basis:

• Physical Security – Are your doors locked? Is your building secure? Is your alarm working properly? Including all motion sensors and door contacts? If you have cctv, is it working properly? Are the times correct on your video output?
• Cash Handling – Is your cash handling policy being followed? Are the proper signatures, dates, etc. in place? Is your safe always locked? Do you regularly remove cash from registers so that you limit your liability in case of theft or robbery? Are your daily/nightly deposits secured? How are your registers counted? By whom? Are the fail-safes being used consistently? Is there accountability for discrepancies?
• Merchandise Protection – Are your lockable cases kept locked at all times? Is your high theft or high risk merchandise protected from theft? If you use Inventory tags, are they being used to your expectation? Do your employees respond to alarm activations?
• Operations – Are you checking your receipts of goods for discrepancies? Are you following up with vendors on any issues to ensure you get credit for mistakes? Is your stock area clean and organized, so that any theft activity will be more obvious? Is there a process in place to verify all receipts?
• Safety – Are your customer areas free of any potential dangers? Are your fire exits clear and unobstructed? Are your back areas clean, organized, and a safe work environment for your employees? Do you have an emergency plan? And, do all of your employees understand it?

This is just an example of the basic items that any business owner should be auditing on a regular basis, be it monthly or weekly. Sometimes, a simple checklist will work. The key to the audit is the follow up. All discrepancies must be corrected, and reviewed with the employees to ensure that everyone understands the importance of the programs. If you inspect what you expect, you will find that you will see improvements in execution, and reductions in losses.

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The front door to your business is the most important door. It’s where your customers enter and exit. It is also where the thieves will enter, and at least most of the time, exit. Most businesses do a fairly good job of locking their back doors. But we can’t lock the front door, or else we have no customers. So, what is the answer? There are several ways to control the front doors from a loss prevention perspective.

Most major retailers use electronic article surveillance, or inventory control tags, to help protect their inventory and deter theft. With this system is a set of pedestals that work as receivers and alarms at the front doors. The problem is that, when this system is not used effectively, it becomes dead weight to the business. Tags cost money, and so does the maintenance on the system. So, why not use it? If would-be thieves perceive that no one is going to even approach or question them if an alarm sounds, then the deterrent factor is lost. Every alarm should be followed by a response by an employee. It should be approached as a customer service issue, because if a tag is mistakenly left on product, it creates an inconvenience for the customer to come back to the store to have it removed without damaging their merchandise.

Closed Circuit Television (CCTV) systems are extremely effective at deterring theft and at providing evidence in cases where deterrence efforts are ignored by thieves. Any store that uses CCTV should have a good, clear shot at all public entrance/exit door(s). The best identification video will always be the shot at the entrance. Along with that, it is worth the couple hundred dollars investment to loop that video into a public view monitor, which shows would-be thieves that you are monitoring your doors.

Finally, a greeter is a great idea for door control. Not only can the greeter help your customer service by being available for questions and to give customers direction, but they also show the would-be thief that there is a person at the door that they’ll have to pass to get out with your merchandise. It is a proven fact that no shoplifter wants to be noticed, let alone engaged in conversation by an employee. By greeting every customer, coming and going, your door greeter will deter more theft than you will probably ever realize. That person can also be available for EAS alarm responses.

Now to the receiving doors. It is imperative that these doors be secured at all times, and that a member of the management team is present any time they are open. Keys and alarm codes must be controlled, and only members of management should have access. One bad associate can take more merchandise than 20 shoplifters if allowed free access to the back doors. CCTV should also be used to monitor this area at all times.

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Technorati Tags: loss prevention,retail loss prevention,lp best practices,retail theft,shoplifting

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