Those of us who have been loss prevention professionals for any length of time can likely share some horror stories about experiences with national retail alarm systems companies. Issues ranging from poor customer service to missed alarm dispatches have put many in the unenviable position of trying to justify using one retail alarm system or another. When combined with ever-increasing costs of new system installations, repair maintenance, and reoccurring monitoring fees, frustration levels quickly rise among those charged with protecting the brick-and-mortar assets of our respective companies.
For many, the size of our company budget and loss prevention policies dictate that we do the best we can by partnering with a good alarm vendor. There are several to choose from that have built their reputations on being the “better” alternative. Some of the best have invested the effort and resources to make the fit with their customers as seamless as possible.
Beyond a certain customer size, however, even the best retail alarm company partners begin to fall short due to the sheer volume of the task. Too many signals, too many code changes, too many repair issues, too many simultaneous new store projects—you get the idea. Eventually, the customer asks the question, “Can we do this alarm thing ourselves?” The answer is sometimes a resounding “Yes.”
Evaluating the Fit
Every company has a unique set of conditions under which it operates. This uniqueness is often the primary driver behind the decision to bring an alarm program in-house. Management churn, schedule adjustments, administrative reporting demands, and custom loss prevention needs can all be significant components of the decision process: a decision process that must also consider how such an in-house program will integrate with the total loss prevention approach.
Management Churn
All dynamic companies face the challenge of management churn. High-performing employees are promoted to new positions, trainees and sales staff are brought up through the ranks, others are recruited from outside the company, and some unfortunate souls are transformed to the status of customer. Each of these changes has a domino effect on the administration of alarm access codes and dispatch call lists.
Have you ever called an alarm company to verify dispatch data only to find that none of the account information in their database was correct? How about deletion of old access codes? Ouch! No matter how much effort and time is invested in getting things straight again, it only lasts until the next personnel shuffle by operations.
But what if the retail alarm center had access to the same systems and information used by human resources and operations? What if this information could be automatically updated in a way that could prevent widespread inaccuracies? By teaming up with IT and HR partners, an in-house retail alarm program has an opportunity to develop systems and procedures that can greatly reduce this exposure.
Inadequate Resources
Supervised openings and closings can be the bane of any alarm monitoring center. Effective supervision is dependent upon the monitoring center having accurate entry/exit schedules and adequate communication infrastructure. This is especially true for alarm centers monitoring accounts that are concentrated in the same time zone and have identical opening and closing schedules. Just picture 2,000 to 3,000 facilities all opening within five minutes of each other and what it might take to ensure all signals (read phone calls) are received and processed. It is a tough challenge that many alarm companies are unable to effectively meet. Unless adequate resources are dedicated to the issue, the client is vulnerable during two of the most critical time frames of the business day.
An in-house program can overcome this challenge by sizing infrastructure and staffing to meet this critical peak time frame. A partnership with the IT group can provide opportunities to explore alternative communication options that can enhance capabilities. Further improvement can often be realized by forming partnerships with additional in-house support groups to assist in developing creative methods of obtaining accurate entry/exit times.
Focused Reporting
Retail alarm activity reporting can be a useful tool if offered in an efficient format that doesn’t smother the end user. Alarm companies that blindly send out reams of paper to their clients are doing little more than depleting valuable forest products. Online access to alarm information is a better alternative but can still be problematic for users that are unsure what they need and when they need it.
An in-house program can provide the means to custom-fit reports to individual needs. Email of real-time events and integration of alarm activity with data mining applications are alternative methods that also provide efficiencies not easily duplicated with an outside alarm company.
A well-designed, in-house alarm program can be a valuable tool for the field loss prevention manager. Real-time notification of alarm zone trips, after-hour entries for overt installations, and alarm event analysis are just a few of the things a typical in-house program can offer. Although outside alarm companies excel at providing “canned” products, they rarely have the resources required for “one-off ” activities that are needed in many retail investigations.
Comparing the Costs
“Is it cost-effective for us to have an in-house alarm program?” The answer to this question depends upon the details, which can be as unique as the various programs that have been rolled out over the years. Current monitoring costs and ownership status of existing retail alarm systems equipment must be weighed against in-house start-up costs and operating expenses. This typically dictates that the in-house program be clearly defined and modeled before making comparisons. Some important questions to ask:
- Have I exhausted the potential for service fee reductions with my current or alternative retail alarm vendors? It is the rare alarm vendor that will refuse to consider significant cost reductions when faced with complete loss of a reoccurring revenue stream. Ever thought to ask for scheduled cost reductions instead of cost increases? It has been done.
- Does my company have the expertise on staff to tackle the intricacies of building and running a comprehensive alarm program? If not, what measures will be necessary to recruit the needed talent?
- Are there any potential obstacles to obtaining assistance from IT, telecommunications, and other support groups within your company? Outsourcing these skills and services is expensive and rarely allows for seamless integration with company systems.
- How critical is an alarm program to my company’s business model? If even temporary loss of retail alarm systems monitoring cannot be endured, back-up arrangements will need to be considered. These arrangements could range from a local off-site facility with total or partial redundancy, to a contractual arrangement with another central station to transfer monitoring responsibilities.
Once the envisioned program has been defined and appears to address the critical expectations of the company and end users, the process of identifying program costs can begin. The typical components that must be considered to build a viable working budget include:
- Facility construction,
- Capital expenditures, such as alarm receivers, computer automation system, and telecommunications equipment,
- 24/7 staffing, and
- Controllable expenses.
With the budget process completed, realistic cost comparisons can then be made against the existing outside services. Additional considerations might also include any operational efficiencies that would be realized by bringing this activity in-house. These might include better control of false-alarm fines or enhanced control of sales floor environments to reduce shrink.
It is important to note that the growth requirements of an in-house retail alarm program do not directly track with the increase in monitored alarm accounts. In other words, as stores are built or facilities added to the program, it does not necessarily follow that staffing headcount or infrastructure must increase. Although there are certain “saturation” milestones that dictate additional resources, for the most part, the cost per account decreases each time an account is added. Put another way, a staff of twelve people can monitor 100 accounts or 1,000 with the same cost effectiveness.
This article was excerpted from “Retail Alarm Monitoring: In-House or Third Party?,” which was originally published in 2006. This article was updated December 12, 2016.
