Anytime loss prevention pros implement a new operational procedure, new administrative process, or new piece of loss prevention technology, they are likely to consider how it’s going to effect LP spending. Indeed, in many cases, controlling costs may be a primary objective.
Expectations and reality don’t always match, however. Sometimes, new retail security solutions or strategies cut costs far beyond what LP was thinking would happen. In other cases, cost savings disappoint. A national study by SDR/LPM looked at this expectation gap. In this post we examine several strategies that retail respondents said had the most surprising upside.
The study asked LP executives about thirty different security department strategies that are often thought to reduce or help control costs, whether as an ancillary or primary benefit. The list looked at a wide range of retail security solutions and strategies, such as automating select security functions via web-based applications; use of video analytics; development of centralized security monitoring or control centers; outsourcing LP functions and, conversely, bringing them in house.
For each strategy, the survey asked LP executives if they had implemented it and, if so, how effective it was at controlling or reducing departmental costs. LP pros who had implemented the strategy in question rated it on a 1-to-5 scale. A score of 1 indicated that the measure or activity substantially failed to meet expectations for cost control; a 5 rating indicated that the measure or activity substantially exceeded expectations for cost control. A score of 3 indicated that the realized cost savings was what LP execs had expected. LP executives rated each of the 30 measures solely on its performance in the area of containing or reducing costs and not on other performance criteria.
Perhaps because the ability of security technology to reduce costs is frequently described, projects such as IP video surveillance, video analytics, and online background checks were not identified as providing the biggest cost-cutting surprise. These and similar technology solutions largely scored in the 3.2 to 3.5 range. They did better than expected at cost-control, but modestly so.
So what had the most surprising upside?
Using remote computer capabilities, such as for online training and remote investigations, provided LP the most pleasant surprise, according to the survey. The strategy rated 3.89 on the 1-to-5 scale.
Retail respondents were among the security professionals most pleased with a move from LP training by live instructors to training conducted online or via software. They were also happier than counterparts in other industries with using online capabilities to reduce travel expenses associated with investigations.
The distribution loss prevention manager for an Ohio retail company said that his strategy to cut costs in recent years has been simple. “More [remote] interviews.” Telephone and online video interviews have saved the company millions in recent years by reducing travel costs and increasing investigators’ productivity.
Although it’s an attractive solution, particularly for cases involving suspected dishonest employees, it should not be viewed as the preferred means of interviewing subjects, warn some experts. Remote interviews can miss suspects’ nonverbal cues. Face-to-face meetings are a better format for squeezing out the truth from dishonest employees and resolving integrity issues.
As such, remote interviewing is more appropriate for theft and loss investigations and should be avoided when possible in threat or harassment cases, according to Gavin Appleby, employment law attorney, trainer, and author. He thinks companies should avoid them in harassment cases because they are “far less effective than those conducted in person.” In-person interviews are also beneficial in the event that case one day lands the company in a courtroom, he said.
So, while companies may be keen to use online video interviews to shave costs, the corporate LP department needs a protocol that identifies when it is the preferred means for conducting investigative interviews.
Here are two other strategies that proved surprisingly beneficial to LP:
Transferring responsibility. Because the hourly wage of LP staff has climbed significantly in recent years, the gap has closed between the wage of line security staff and other line workers. So while using security personnel to fill other duties has been a viable solution for reducing costs in years past, it is possible that it now makes better fiscal sense to use general staff to perform LP functions. The tipping point is unique to each organization, so LP departments may want to recalculate their assumptions in this regard now that the average LP officer has become more expensive.
Many retailers know that by enhancing training and motivating loss prevention staff, they can reduce cash losses, deter thieves, and boost profits in high-loss stores. But deploying officers on a resource-to-risk basis is less attractive as security salaries climb. One LP director said he thinks store managers today are often correct when they say that doing without the considerable—and escalating—cost of guard contracts makes better sense. A retailer may find that providing stores with technology, leadership, training, and some additional staffing hours is more economical. This can arm store associates with the knowledge they need to reduce waste levels, deter crime by effectively interacting with customers, and reduce stock loss by ensuring the accuracy of deliveries.
In terms of effectiveness, re-assigning select store security functions to other departments was rated 3.75, indicating that the strategy has provides LP with a surprising financial upside. It’s a strategy that only 20 percent of responding LP departments had undertaken, according to the study.
Re-negotiating. Re-negotiating or re-bidding LP equipment maintenance contracts is a strategy that three-quarters of LP executives said they’ve tried. It’s cost-control rating, 3.82, indicates that the strategy was substantially more successful in saving money than LP execs thought it would be when going into negotiations.
To negotiate maintenance contracts effectively, a strict accounting should be maintained of all vendor maintenance visits. Every time a vendor comes for a repair, there should be a record of what they did, how long it took, how many staff they needed to do the job, and other details about the visit. By analyzing these logs before yearly maintenance negotiations, companies can then make the business choice that makes the most sense, such as going with “hourly,” or self-insuring some components, or assuming the risk of preventative maintenance. Having detailed data of past maintenance lets companies make more cost-effective decisions regarding features of future maintenance agreements.
Many experts believe that the best time to negotiate long-term maintenance is before the purchase of equipment, when companies are vying for your business. At this time, retailers may be able to demand a longer warranty that doesn’t start until the date of acceptance and includes all software upgrades, fixes, and new versions.
Finally, because respondents indicated that equipment maintenance is an area of excessive costs, an acceptance test plan—that examines a system’s capabilities against exactly what a store needs it to do—may also save retailers money. The burden is on the purchaser of retail security solutions to identify how it intends to use the system and arrange a factory acceptance test of the system to see whether it meets their needs.