Everything loss prevention managers do focuses on finding ways to reduce loss, which can originate from a wide variety of sources. LP professionals are expected to keep a watchful eye on all areas of the retail business, but it is virtually impossible for any individual or small group to keep track of precisely what is happening in every area of a business, across multiple locations. Procedural review audits can help.
LP's Dilemma
In a world of limited time and resources, loss prevention's greatest challenge is often pinpointing the activities that, if given time and attention, will have the greatest impact on reducing shrink. Since it is impossible to completely eliminate shrink, every single day, loss prevention professionals must make choices regarding where to spend their limited time, resources and energy. The possibilities are virtually endless; investigating theft cases, streamlining operational processes, protecting merchandise, managing security, preventing safety hazards and securing special events. Loss prevention truly touches every aspect of retail business operations and it is simply impossible for LP managers to tackle every single activity that can help reduce loss. So what is an LP professional to do? The answer lies in achieving visibility.
Procedural Review Audits: Providing LP with Visibility
Procedural review audits (PRAs) are an excellent tool used by loss prevention professionals to assess areas of greatest risk and loss. They also enable them to prioritize where their limited resources should be directed. Audits are commonly used in retail to evaluate compliance with different regulations and ensure best practices are implemented across retail stores. A PRA is similar, but for our purposes, structured specifically to identify areas of risk and point toward root causes.
PRAs provide visibility into conditions in the field, helping LP managers understand and prioritize potential problems. Without this high-level view of the landscape, LP must reactively address the issues that happen to pop-up before them rather than proactively choosing to address the issues that are most critical to the organization as a whole.
The areas where PRAs can be used are virtually unlimited. Consider these examples:
Supply Chain – There is tremendous opportunity for loss between the time the delivery truck door opens and when merchandise is finally displayed on store shelves. Inventory may change hands several times, increasing the likelihood of administrative errors, potential theft, spoilage, waste and losses due to damage. Procedural review audits are extremely useful for understanding whether or not all received items are properly evaluated, processed and stored to minimize both purposeful and inadvertent losses.
Compliance & Regulatory Issues – Depending on the type of retail business, failure to comply with regulatory standards can result in losses, fines, or even damage to the brand. Consider food safety, for example, where improper handling of food can result in significantly high levels of waste, as mishandled items must be thrown away. Even worse, improper handling could result in health problems, which can lead to lawsuits or brand damage. Audits can be used to identify problems early and also pinpoint processes that, if addressed immediately, can eliminate the potential for losses and fines.
Pricing Integrity – Markdowns are extremely common in retail, but handling price changes consistently and effectively is a real challenge for many retailers. When items are marked down on the shelves, they must simultaneously be marked down in the POS system, ensuring that price scans are seamless, correct, and pose no glitch to cashiers who are then left to make a judgment call, guess, or hand-key a price. PRAs are a great way to confirm that pricing discrepancies are not occurring.
Safety – Safety hazards can create staggering losses in terms of damage to the product, or worse, harm to customers and employees. Ensuring safety across all operational facets of the store is a solid foundation for loss prevention. Safety audits may include anything from ensuring that the fire doors are not blocked and are functioning properly, to verifying that when a spill occurs, all employees know the protocol for timely and thorough clean up.
Operations – LP may monitor operations to ensure that processes are being executed consistently and correctly across all locations. The consistency and frequency with which processes are carried out greatly impacts LP. For example, it is important to ensure that a damaged or faulty product is returned immediately to the supplier to avoid financial loss.
Start Today
Savvy retailers will use the remainder of this year to prepare for 2012: making the most of limited resources, focusing on known areas of loss, and putting measures in place to keep a close eye on what is going on in the field. PRAs are a critical part of this process. LP professionals can begin identifying potential problems and create and issue audits to assess conditions in those areas and begin the year with full awareness of problems and challenges. This is a perfect time to learn from the greatest loss-causing problems of 2011.
The Two Sides of the Coin
Loss prevention professionals understand the importance of defending profitability by preventing losses and streamlining operations. However, the other side of the profitability coin is helping the organization achieve the best possible customer service and satisfaction. Retailers should maintain a dual effort on these fronts throughout 2012.
In a tough economy, when spending is tight, retailers must work even harder to attract consumers and earn their dollars. Shoppers expect and prefer clean, safe shopping environments where items are available, easy to find, service is good and lines are short. While much of this falls outside the core mission and capabilities of loss prevention, LP professionals should be mindful of how their efforts positively or negatively impact the customer shopping experience. Include these elements in your PRAs. It may be anything from making sure the aisles are free and clear of debris and boxes, to ensuring that shelving solutions designed to deter theft do not also deter purchases.
Execution is Everything
A great deal of a PRA's success depends on how well it is designed and executed. A good PRA will not only identify key risks, but will also point to the root cause(s) of the problem. For example, instead of asking exclusively if refrigeration units are maintained at the correct temperature, the better audit will ask additional questions regarding the quality of new employee training and the adherence to a proper maintenance schedule for the equipment. This allows the PRA to point to the possible reason for the failure, enabling the retailer to address the root of the problem more effectively.
Likewise, no PRA is successful if findings are ignored. To effectively root out shrink, retailers should be prepared to take action based upon the results. The goal is to identify the point of failure and address it to strengthen the overall performance of the company. Companies must have people and processes in place to assign accountability for someone to take action. The corporate office can support this principle by putting incentives and consequences in place to encourage everyone from the district manager all the way down to the store employee to take action and correct issues identified in PRAs.
By effectively using PRAs, LP professionals can gain insight into what is going on throughout the organization as a whole. The more they know, the better decisions they can make, and the more effectively they can act to reduce shrink. The right information helps point the way for LP professionals to increase their impact on the organization's bottom line.
Andrew Wren serves as chief executive officer of Wren Solutions, a loss-prevention technology provider helping LP professionals reduce loss, increase profits and rise as heroes in their companies. Wren is responsible for corporate and product strategy, leveraging his more than two decades of security technology expertise. To learn more about Wren's solutions, visit www.wrensolutions.com.
