A Tale of Two Retailers

Not quite the order that Charles Dickens had in A Tale of Two Cities, but borrowing these words in this order works for this tale of two retailers. This is the story of two very different retailers with different clientele, merchandise variety, and approach to customer service, but who shared the common needs for improved operational efficiency to impact shrink and profitability. To achieve their common goals, both recognized the need for a way to improve and enhance their audit strategies through advanced technology.

This is the story of how Bloomingdale’s and Navy Exchange Service Command (NEXCOM) have utilized technology to maximize their audit capabilities to share a common success.

A Need for Improvement

Prior to the implementation of an online audit process, the Bloomingdale’s approach to auditing merchandise security and exposure standards was becoming outdated, ponderous, and lacked the efficient ability to collect data.

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Both compiling the data and delivering the audit were manually driven, resulting in the underutilization of resources. The auditor spent three to four hours collecting data and an additional three to four hours compiling the data into the audit report for each department.

The audit group was frustrated that the deliverable to their customer was a one-dimensional

document stating yea or nay regarding compliance to a standard. They were further frustrated that the auditor was not able to effectively communicate with the department and area managers what their audit results and opportunities were until the audit was compiled and it was time to leave.

This outdated process left them little time to engage with their customer to discuss real solutions with a corrective action plan for positive performance improvement. In addition, the audit team had very little opportunity to engage with those individuals who execute the shortage control basics daily, as the audit results were delivered to the store management and then disseminated and communicated down to the department management and staff.

Although this method may be effective in many environments as the practical way to implement controls, for Bloomingdale’s it was an obsolete procedure that was misaligned with the ideologies and commitment of being proactive versus reactive, as represented by the current senior management team.

NEXCOM, not unlike Bloomingdale’s, was doing a great deal of audits, but was looking for a method to both improve efficiencies and provide more actionable data for analysis with short- and long-term solutions.

They had several electronic versions of audits, but those audits were compliancebased and relied on each location taking the initiative to select and complete a particular audit. The audits were loosely scheduled, and it was a tedious task to measure compliance with the corporate directives and standards. Though managed to the maximum available proficiency, the shortage control and audit team struggled with ways to improve.

Both companies realized that their ultimate goal has always been to reduce shortage. The team at Bloomingdale’s realized they spent far too much time on the process of auditing and not enough time on the substance of the audit, with significant opportunities in communication and follow-up action.

To “work smarter, not harder” was the goal of both organizations. Each recognized the need to migrate their program to a more automated solution, but were not willing to let a canned electronic audit program dictate their direction or limit their capabilities. For the team at Bloomingdale’s to become automated meant a platform with flexibility and intelligence to allow for a unique approach in data capture, communication, and report delivery. NEXCOM’s needs were less complex, but broader in scope.

A Common Technology Solution

Both organizations turned to RuMe Interactive of Lindenhurst, NY, for development and implementation of an on-line solution that would incorporate and accommodate both of their needs. As development partners, along with several other retailers, a tool named APISaudit was designed to allow each retailer the ability to create their own custom audit forms and reports with the flexibility to allow each to execute their individual audit strategies while appealing to their own corporate culture.

The first phase has provided a more efficient and flexible platform for the input and collection of data as well as better reporting. With the move to a fully automated process, both companies saw improved efficiencies in the amount of time to complete an audit and ability to provide instant feedback to the customer, while also building historical data for comparison reports and for reference in data collection and communication with the management. With easy access to historical results, it was easier and more effective to identify repeat offenders and operational deficiencies.

This new technology meant that the function of performing an audit changed. At Bloomingdale’s, the corporate audit team is equipped with laptops and tablet PCs. Wireless capabilities allow them to further leverage the existing technology within the IT infrastructure to connect remotely to the application and perform audits, while instantly reporting results back to the central database.

The audit is performed quickly and now combines the process of data collection, data entry, and report preparation into one easy step as data is entered and immediately ready for reporting.

During the audit or at the completion of the audit, the auditor now has the flexibility to meet one-on-one with the department manager and review results as they are taken as well as compare against historical performance and provide immediate feedback on a suggested course of action to correct any issues. This has enhanced the auditor’s capacity to directly impact shortage and profit performance by taking a proactive role in the corporate shortage strategy, rather than just report results to store management and move on.

While the team at NEXCOM was able to see immediate benefits in their new approach, they still encountered challenges that prevented them from executing the operation audit program effectively. Some of the challenges included lack of complete management buy in, accuracy, and lack of follow-up to the issues identified. The accuracy issue stemmed from the fact that audits at NEXCOM are “self reviews” with only annual reviews conducted by loss prevention

.Now that they were able to better distribute the audits, they needed to rethink the format and take the audits to the next level. As with any new initiative, they wanted to start off small and see if the new design met their needs. The target store operational review, which is only assigned to high shrink locations, was redesigned to focus on action items and quantifiable results. This review is less of a compliance review and more of a list of functions that are performed on a monthly basis to prevent and/or identify shrink.

For example, instead of just asking the question, “Do price labels reflect the current price?”, the new approach provides for an action item to “Scan the softlines’ area and process a manual price change for missed items during the completion of the price change worksheets.” In addition, the dollar amount of the manual price change will be entered into the system, thus quantifying the results.

By reworking the questions into action items, requiring the locations to input data rather than simply selecting yes or no, they are moving towards increased management buy-in and increased compliance.

They are also tying the results of the operational audits to the store’s shrink committee, thus ensuring follow-up to issues identified.

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In addition, the new audit process is moving the company forward in utilizing this process as a training vehicle for the store operation teams.

Efficiencies of the New Process

Using this new process, Bloomingdale’s realized the following efficiencies:

  • Estimated decrease in audit time of over 30 percent.
  •  Ability to archive audit data in a searchable database.
  • Ability to identify store, regional, and company opportunities by reviewing the audit results across the company.
  •  Going forward, the ability to quickly compare performance season to season.
  • Ability to review the audit in progress and update area management as the audit is conducted.
  • Because results are instantly available, the ability to formulate action plans with the area management, so that solutions are implemented ASAP.

At NEXCOM the new approach further allowed them the following efficiencies:

  • The ability to customize reviews based on the type of operation.
  •  Moving from having one operational audit for each store to six customized operational audits.
  •  Identification and ability to address systemic issues as well as opportunities unique to a certain type of operation.
  •  Capability of assigning the audits rather than having the locations determine which audits they need to take.
  •  Having individual store logon IDs also ensures that each location is reviewed, rather than the main location

To “work smarter, not harder” was the goal of both organizations. Each recognized the need to migrate their program to a more automated solution, but were not willing to let a canned electronic audit program dictate their direction or limit their capabilities.

The efficiencies of both organizations result in a positive impact that translates into dollars and cents in many ways. Savings are recognized in the time to perform, review, and report audit results, while travel is impacted with the ability to have locations self-audit and report findings that can be measured to ensure compliance.

Administration of the program is centralized with the flexibility to create or edit audit templates on the fly so there is little to no overhead with changing direction of the audit or adding new responsibilities.

Reporting is automatic, and with the ability to export and attach audit reports to email, the delivery may also be automated and the audience broadened with little additional effort. The biggest impact, however, is through the increased awareness through communication of the audit process, results, and action plans to ensure operational efficiency and effectiveness to impact shrink and improve profitability through the measured execution of corporate standards.

Long-Term Benefits

Having realized the improved efficiencies and cost savings of the first phase of the project, it is the second phase that is viewed as the real “meat and potatoes” of the program. With the partnership of the solution provider, both companies are creating a management-reporting tool that allows the manipulation of the data to identify trends.

By analyzing the data and business and operational trends, both companies expect to uncover “shortage risk factors.” The ultimate goal with the analysis at both Bloomingdale’s and NEXCOM is to run regression studies confirming the value of the data as it relates to shortage, weigh the data appropriately, and create a shortage risk factor (SRF) report. This report will then be manipulated to feed a dashboard concept displaying audit results and further identifying stores by color code (green, yellow, red), indicating their propensity for higher shortage. Additionally, the audit questions will be able to be weighted in terms of risk to highlight shortage exposures.

Very different retailers, very different needs utilizing the same technology to reap benefits that are both different, yet similar.

From the Bloomingdale’s perspective, the leverage of technology in their audit strategy provides many benefits:

 

  • Online availability provides a platform to incorporate other users’ programs, such as operations and risk management.
  • The collection of data for analysis is invaluable from both an analytical and documentation standpoint.
  • The platform flexibility helps meet LP’s ever-changing needs, providing an infinite amount of information that will be used to better support and impact the needs of their internal customers and overall business.

NEXCOM has identified additional benefits:

  • The corporate office is able to identify those systemic issues that may require a change in policy or additional training.
  • The corporate office is able to measure compliance with the audit program, while running reports based on established due dates and audit assignments.
  • Management has access to the audits and results via their own unique log-on. Thus, here is the tale of two retailers rewriting their histories and their futures by capitalizing on the opportunities provided through the effective use and leverage of technology, innovation, and creativity. As Dickens said.

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