A Brief History of Loss Prevention

History of Loss Prevention

The history of loss prevention reflects the dynamic nature of the industry and shows how it has risen in importance in the retail world since its inception. Back in the Sixties, retailers called the departments that were engaged to impact loss security. Many of the practitioners in those departments fit the nomenclature of their department in demeanor, behavior, action, and results. There was little communication between the security practitioners and the senior management of the retailer, unless, of course, a major debacle occurred that resulted in legal action taken against the store. When that happened, the communication that resulted was very much negative in nature.

As losses continued, enlightened practitioners and occasionally their enlightened chief financial executives began to understand the value of prevention—a proactive approach versus the reactionary past. As this concept became more commonly accepted through the Seventies, retailers began changing the name of that department to loss prevention. Those in charge of this function began to think of their responsibilities in different terms. A significant metamorphosis continued through the Eighties and into the Nineties.

Loss prevention executives learned to relate what they did to profit improvement. The bottom line was impacted through measurable reduction in losses, such as inventory shortage, cash loss, credit fraud, expense management, and the liability lines on the profit and loss statement (general and workers’ compensation).

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As some of the professionals of this emerging function continued to deliver results, they gained recognition and appreciation from their companies’ senior management teams. Some of these departments were renamed once again, this time to asset protection, a designation that implies a broader scope of involvement in the successful results of the retailer.

Often, these asset protection teams carried out their mission with a true client and service provider relationship. They made certain their internal retail clients completely understood the role of asset protection, what were the expectations, and how they were to measure performance. In addition, both assets protection and the client learned how to work together to maximize the return on any capital invested in technological solutions for prevention and detection.

Today, more than ever, there is a need for increased intelligent and effective ways to protect assets. Access to data, analysis of that data, and using the results of the analysis to improve productivity and efficiencies and detect potential theft, fraud, and other forms of loss is essential. Effective supply chain monitoring by loss prevention (still the most commonly used name of the profit-enhancement function) will uncover and resolve many opportunities to impact previously unmeasured loss, from outright product and cargo theft to vendor manipulation and fraud. Sometimes the complexities in many retailers’ logistics systems can cause inventory misstatements and other data integrity issues, which should be detected through effective monitoring.

The brand of any retailer is a critical asset that must be preserved. Erosion of the brand will directly impact top-line revenue and eventually (often quickly) shareholder value.

The employees of the retailer are also considered by some to be the most important asset in the company, even more so than the customer. That belief is based on the premise that the employee represents the brand in the best light to the customer, provides a great experience for the customer and thus contributes to both the top and the bottom lines.

Loss prevention professionals must continue to grow on both a personal and industry basis to meet the evolving challenges of their expanding responsibilities. Being as well versed in business operations and strategic thinking is as important as understanding basic loss prevention techniques. Embracing technology and partnering with both internal and external suppliers will help you push the envelope both inside your company and as an industry. Actively participating in the industry, through trade associations and avenues like this magazine, will not only keep you on the forefront of the evolution, but also allow you to contribute to the changes.

This article was excerpted from “Emerging Trends in Loss Prevention.” 

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