Loss Prevention, Capstone Project Example

Introduction

Loss Prevention is the concept of establishing policies, procedures and business practices to prevent the loss of inventory or money in a retail environment, according to LP Innovations (2012),  and once a program has been designed, opportunities for reducing losses will be identified and corrections made, to ensure that business can  become more profitable in the future.

The concept is important in any business environment, according to LP Innovations (2012), due to the fact that when a retail entity loses inventory for example, the loss goes directly to the bottom line profitability which will include the replacement cost.

Additionally, the profits that should have been generated have been used to purchase new inventory, open new stores, contributes to employees benefit package, increase earnings, conduct additional advertising as well as purchase equipment or technology that could lead to increase in overall productivity.

A History of Loss Prevention

Retail Loss Prevention evolved out of the private law enforcement industry or Security Industries, according to Downey (2002), into what is now the sophisticated Asset Protection Industry, after a period of 5 decades of growth, development and technological changes.

According to Downey (2002), the service received  by the Retail America was satisfying for a period of time, but in the mid 1960’s , senior management of firms began wanting more for their money than just detection and apprehension of thieves. They began embracing the proactive mode by asking how they could get in front of the problem and start preventing the losses, and this led to the birth of the Loss Prevention concept.

Pivotal to the change, according to Downey (2002), was the change in attitude by Loss Prevention executives; who began to learn to relate what they do with profit improvement. They began focusing on reducing losses in inventory, cash, credit fraud, and expense management and other variables on the liability lines of the profit and loss statement, and this led to senior management becoming more and more impressed with their functionary roles and gave them greater recognition.

The excellent management practices by many in the industry, continued into the 1970’ and 1980’s, especially among LP executives that carried their mission with true client service provider relationship, by ensuring their roles and expectations were communicated and  completely understood, and how their performance should be measured, according  to Lee (2003).

Further, and of critical importance, as Loss Prevention gradually evolved into Asset Protection, was the coming together of both the providers and their clients to work as  a team in maximizing returns on any capital invested in technological solutions for prevention and detection (Lee, 2003).

Despite the progress, according to Lee (2003), there is still need for intelligent and effective ways to protect assets, and some companies have responded by using motivational strategies like Maslow Hierarchy of needs to good effect. A number of these companies have made their employees their most important asset, in order to empower them to work to both provide excellent retail service to the customers and to protect the assets at the same time. In the short term this would help to reduce the amount of operational losses experience.

Challenges in the Retail Trade

According to Frost and Sullivan (2012), there are hundreds of different categories of retailers operating in the United States, and the challenges they face are diametrically opposed to those faced in small convenience stores located across the country.

These retailers are required to (a) continually improve their in-store customer experience which will increase customers’ loyalty and maximize sales, (b)drive efficiency in business operations to generate higher margins, and )c), practice loss prevention in both in-store and supply chains locations (Frost and Sullivan, 2012).

Reports from the National Association for Shoplifting (NASP) without doubt gives an indication of the enormous challenge Loss Prevention executives face in the retail industry. The association reports that there are approximately 27 million shoplifters in the United States today and of this amount; 10 million have been caught trying to steal from supermarkets, department stores, specialty shops, drug stores, music stores, convenience stores and thrift shops (Frost and Sullivan, 2011).

In terms of the impact of shoplifting on the retail industry and the urgent need the Loss Prevention executives to find technological solutions, especially in surveillance at both the in-store and non-store locations, the National Retail Federation (2010) brought some critical statistics that should be give serious considerations. The association informs that base on the 2010 Organized Retail Crime Survey, shoplifting was costing retailers between 15 and 30 billion dollars annually, and approximately 89% of the retailing executives interviewed confirmed that they had been victims of organized retail crimes during the 12 months under review.

The Retailing Environment

The retailing environment that Loss Prevention is challenged to provide services, according to the North American Industry Classification System (NAICS) (2011), is made up of a number of establishment that are engaged in retailing merchandise generally without transformation and providing services that are incidental to the sale of merchandise.

Further, according to NAICS (2011), these stores falls into two categories, namely the store and non-store retailers, with the former involve in operating point of sale locations that are designed to attract walk-in customers, and the latter engaged in outreach sales activities like the publishing of paper and electronic catalogues, broadcasting, door to door sales, sales from stalls and the publishing of direct-response advertising to influence customers.

According to frost and Sullivan (2011), some common examples of retailers the Loss Prevention companies provide service for are, (a) Motor Vehicles and Auto Parts Distributors, (b) Furniture and Home Furnishing Stores, (c) Electronic and Appliance Stores, (d) Food and Beverage Stores, (e) Health and Personal Care Stores, (f) Clothing and Accessories  Outlets, and (g) General Merchandise Stores.

Software and Technology

Losses along supply lines and in in-stores can be prevented Frost and Sullivan (2011) asserts, by using the appropriate wireless solutions that conduct asset monitoring , performs  tracking  surveillance and utilize alarm systems.

In terms of tracking and monitoring technologies, Frost and Sullivan (2011) recommend the use of RFID along several supply chains, as they tags placed at appropriate locations can be read as the goods progress to their final destinations.

Additionally, losses can practically be eliminated by fitting GPS transmitters on the most expensive (Hot) items leaving manufacturing locations or warehouses to retail outlets, according to Frost and Sullivan (2011).

Companies like Wall-Mart and Home Depot who operate retail chains across the country and globally, have used RFID technology, video surveillance, intrusion detection, alarm systems as well as other sensor based technologies to successfully protect their assets and in the process reduce their bottom line losses, according to Frost and Sullivan (2011).

Loss Prevention and the Future

According to Figlio (2011), in the last 20 years progress in managing Retail Loss Prevention and Security have been positively affected by three major insights, namely measurement, prediction and benchmarking, and these fortunately for the industry overlaps, interrelates  and are ongoing.

In measuring losses according to Figlio (2011), relevant surveys of crimes involving employee theft, shoplifting and fraud has to be utilized to identify current trends and preventive measures that are used, especially from the National Retail Security Survey. The data for each store also has to be captured and analyzed periodically, to determine the effectiveness of the prevailing Loss Prevention programs, and to make modifications where necessary (Figlio, 2011).

Predicting losses, according to Figlio) 2011), can be accomplished by using predictive data to help in the identifying and addressing crime vulnerability situations. The data collected is very reliable and consistent because it was developed by combining various crime and socio-economic data with statistical and actuarial analyses as well as models, Figlio (2011) purported.

Retail companies then that utilize these tools, based on Figlio (2011) authoritative proposition, will be able through the competent services of their Loss Prevention professionals, to achieve significant reduction in losses at sites that were once deemed high risk management assets, during any financial period.

The next big idea on the horizon for Loss Prevention, note Figlio (2011) is the benchmarking of loss data and of the performance of Loss Prevention Security. By benchmarking, Loss Prevention executives are able to measure and compare results against established standards or reference points, and then from this change can be made based on the resulting highly accurate trends that will be predicted in the respective retail environment.

Benchmarking will be the tool of the future, according to Figlio (2011), because companies practicing internal benchmarking can provide information that will enhance the future development of the industry standard as well as receive vital data and technological assistance which will ensure significant impact can be made on the current $15b – $30b loses being experience by retailers nationally.

Careers in Loss Prevention

The Loss Prevention Foundation (2012) opined that the Loss Prevention field offers wide spectrums of career options and tremendous potential for growth, and as such is one of the hidden treasures of the occupational market place.

In looking for answers to provide industries that are faced with mounting losses in inventory, cash theft, fraud and other forms of thefts, Loss Prevention personnel are being recruited, trained and deployed to retail operations to use the latest high tech video systems, computerized investigative reports, and other special equipment on a daily basis to make sure reliable and competent services are delivered, according to Loss Prevention Foundation (2012).

In order to get employed in this thriving industry, Loss Prevention Foundation (2012) recommend entry personnel get certified via the LP Qualified program, and for those in the industry and desire upper mobility, the LP Certification provides that path on completion, especially for management and executive positions.

Access to Loss Prevention careers for military personnel it was pointed was also available as a result of a program called Hire A Vet, which was joint agreement between the Military Officers Association, the retail industry and Loss Prevention Foundation ,m according to Loss Prevention Foundation (2012). In order to ensure high quality personnel are recruited for this thriving industry, Loss Prevention and its partners in the project, targets soon to be honorable discharged veterans and train and deploy them one they are released, to work as Loss Prevention personnel in retail companies across the country.

Finally, a look at Career Builders.com was taken to ascertain the availability of jobs on the market, as well as to verify the authenticity of Loss Prevention Foundation argument. The exercise ended in the affirmative, in that there were 6353 jobs available on the website, broken down into 2997 in management, 2078 in retail (entry level), 1237 in Professional Services and 1115 categorized as others.

Conclusion

Loss Prevention without question  performs a vital function in the retail industry, perhaps saving companies millions of dollars annually, using the most current technology which include GPS tracking device, monitoring technology, RFID, intrusion detection, alarm system, surveillance systems, and other sensor based technologies, highly trained personnel including those under the Hire A Vet program , and prediction data from reputable sources.

The very diverse industry faces several challenges many of which differentiates it from the normal convenience stores, but with Loss Prevention executive developing new approach in terms of  relating everything they do to the bottom lines of companies, which are utilizing highly successful motivational strategies, the future seems a bright one for the industry, especially with the current team approach practice  between clients and providers , use of the current data on crime predictability, as the access to the results of surveys that highlight shoplifting trends by the National Retail Security Survey.

Reference

CareerBuilders.com (2012), Loss Prevention www.careerbuilders.com/job/Keyword/loss-Prevention/ , 10/25/12

Downing, G., (2002), Professional Transformation: The History of the Loss Prevention Industry, Integrated Solutions for Retailers (ISR) www.retailsolutionsonline.com/doc.mvc/professional-transformational-The-History-of -the-0002 , 10/24/12

Figlio, R., (2011). Benchmarking: The Next Big Idea in Loss Prevention Management CAP Index Inc www.ipportal.com/feature/article/item/313/-emerging-trends-in-loss-prevention.html?tml-component-sprint , 10/25/12

Frost and Sullivan, (2012), Retail Loss Prevention-Using Wireless to Stop Stealing www.msprint.com/docs/whitepaper/retail-loss-prevention-using-wireless-to-stop-the-stealing-?SFURSN=4 10/25/12

Lee, J., (2003). Emerging Trends in Loss Prevention www.ipportal.com/feature/article/item/313/-emerging-trends-in-loss-prevention.html?tml-component-sprint, 10/25/12

Loss Prevention Foundation, (2012), Why a Career in Loss Prevention? www.losspreventionfoundation.org/Q.1 , 10/25/12

LP Innovations Inc. (2012). An Introduction to Loss Prevention www.lpinnovations.com/page/57-loss_prevention_101 , 10/24/12

National American Industry Classification System Association (2011), Retail Industry Overview www.naics.com/censusfiles/NDEF44HTM#44-45 , 10/25/12