LP and Operations: Combat Shrink and Boost Profitability

andrew wrenRetail loss prevention (LP) professionals have their hands full fighting shrink and preventing theft. Whether through organized retail crime (ORC), shoplifting, vendor fraud or employee theft, fighting retail crime in its various forms continues to be a primary focus for LP teams everywhere. There is evidence that those LP efforts are paying off and helping retailers stop losses to their bottom lines. There is also reason to believe that LP teams, in partnership with operations professionals, can broaden their scope to combat profit losses of all kinds.

Preliminary findings released in June from the National Retail Security Survey indicate that retail theft was down in 2011 from 2010 by more than eight percent. However, according to the 2012 National Supermarket Shrink Survey, more than 60 percent of store shrink is the result of “a breakdown in or the absence of effective store operating best practices.” This means that less than 40 percent of store shrink is the result of “theft and/or misdeeds” and highlights the need for LP teams to focus on all forms of loss, including but not limited to theft.

The role of loss prevention is evolving from a focus on “catching the bad guys” to an approach that addresses any and every source of lost profits. Of course, theft and fraud continue to demand attention, but there are also inefficiencies in operating practices of which retailers may not be aware. To identify these sources of loss, LP must broaden its focus and take on a multifunctional role that can include responsibility for shrink reduction, compliance, operational issues, safety and claims management, security and employee training. Doing this, however, requires effective communication and collaboration between all stakeholders.

A holistic approach to enhancing profitability

Profitability in retail requires consistent execution. Ensuring consistent execution, in turn, requires focused attention on operating practices. In partnership with operations teams, loss prevention must first identify operational inconsistencies that can lead to loss. From there, teams can begin to build and, when necessary, recreate processes that are designed to limit the potential for loss. For this, there is no single solution. Thus, it is imperative that these teams understand their unique situations and work together to learn the reasons why inefficiencies occur.

Once “at risk” processes have been identified, they must be monitored, and exceptions to those processes must be investigated. Are exceptions occurring within systems (i.e., inconsistent or inaccurate freezer temperatures that may lead to spoilage) or as a result of human error? Ensuring consistent execution is a tall order, especially when people are involved in the process. Therefore, when inefficiencies are spotted, a thorough investigation must follow and resolution must be swift and decisive. This is where store audits come in.

Technology can bridge the gap between LP and Operations teams

Technology can assist LP and operations teams in the monitoring of processes and investigation of exceptions, bringing them to swift resolution by ensuring that the results are communicated to the right people or departments. Audits, a leading indicator of shrink and performance, can be the catalyst that helps to shed light on organizational inefficiencies. In fact, the right auditing tool can help retailers enhance profitability by providing loss prevention and operations professionals with the means to address and respond to operational breakdowns and inefficiencies in a timely fashion and in the face of limited resources.

An effective auditing tool provides:

  • Mobility: mobile capabilities, like the ability to conduct audits on a tablet and share results and photos while still in the store, speed up the audit process and enhance communication of results.
  • Follow-up: provides the mechanism to assign, track and resolve issues efficiently.
  • Enterprise analysis: gives a clear snapshot of performance, highlights weak spots and facilitates effective allocation of limited resources.

The result is a streamlined method of identifying and monitoring processes, addressing exceptions and bringing issues to resolution quickly and effectively.

Clearly, shrink reduction will remain a top priority as loss prevention teams continue to face the new challenges that present themselves all the time in retail. However, in order to keep pace with the large percentage of shrink that is not attributed to theft, loss prevention and operations teams must come together to identify all sources of loss and prioritize their efforts to fix inefficiencies. With effective communication and collaboration, these teams will be well equipped to successfully identify and tackle sources of lost profits that might not have been apparent in the past. This will most likely result in reduced shrink, improved processe and a stronger bottom line.

Andrew Wren serves as CEO of Wren Solutions, a loss prevention technology provider helping leading retailers reduce loss and increase profits. Wren is responsible for corporate and product strategy, leveraging his more than two decades of security technology expertise. To learn more about Wren Solutions, visit www.wrensolutions.com.