Why should we, as loss prevention practitioners, consider modeling the loss prevention enterprise? After all, our job is to stop theft and other losses with cameras, tags, alarms, and all the many types of technological tools at our disposal.
It is precisely because of the ever-advancing technology as well as the many possible preventive and investigative tactics available to us that requires us to clearly understand our mission. Modeling can help us visualize the process, illustrating the interrelationship of technology and tactics that will help us effectively build an efficient, successful, integrated loss prevention strategy.
Loss Prevention Technology Integration Model
Integrating technology within the loss prevention enterprise can be represented by several different models. In order to simplify the approach, the model chosen for this discussion is a high-level view of the portion of the loss prevention enterprise designed to impact theft and fraud. In most retailers,loss prevention is the only entity specifically charged to control theft and fraud. So, as we explore ways to be effective in our responsibilities of reducing theft and fraud, and in utilizing data and technology intelligently and effectively, it is helpful to understand the visual representation illustrated in Figure 1.
The enterprise begins with prevention and the impressions of control. This is where loss prevention spends most of our time and a majority of our capital budgets. If done successfully, then the rest of our workload is measurably reduced. But, our success is caught in the dichotomy of our corporate mission.
The mission of retailers is to buy and sell highly desirable goods at a profit. In the brick-and-mortar world of retailing, we open the doors of our stores every day and beg customers to come in and shop. These same customers represent both our success, if we can provide an environment to promote purchases, and our potential loss, if that environment permits theft.
And to represent our retailing brand to our customers, we are dependent upon our sales associates. These are the people whom we screen carefully prior to offering employment and then monitor equally as carefully once they are on board. Again, they represent both our potential success and failure.
So, because of the nature of the business the loss prevention enterprise supports…access to highly desirable goods, transacting valuable financial data, and exposure to highly tempting opportunities…we must successfully integrate people, processes, and technology to promote sales and control loss.
Intelligence is raw data from various sectors within the retail environment that can become effective information for action. It is from this intelligence that detection of loss is realized. This intelligence could be as simple as the auditory alarm triggered by an EAS tag or as complicated as the exception reports that indicate refund fraud.
This data is collected from various sources, such as point-of-sale, receiving, human resources, vendor files, physical observations, tip lines, and so on. The data is then stored in numerous repositories, including ASP models, data warehouses, digitized CCTV, and other data storage facilities. But all of this data is not useful until it has been analyzed, sorted through, sanitized, and formatted in a user-friendly design that becomes information for action.
The information referred to here is case information and the action is the act of investigating the case. We call this process case development.
When the case is thoroughly, legally, and swiftly investigated, it terminates in case closure. Data extracted from closed cases is usually derived into lessons learned, which then become extremely effective in developing new intelligence and methods of prevention and impressions of control.
The end result from this model is a continuing upgrade to our strategy for preventing loss as well as new tactics for detecting and gathering intelligence when loss does occur. The overall effect of a fully integrated loss prevention enterprise is a reduction of loss.
Five Tactics that Impact Theft and Fraud
There are five basic tactics employed by the loss prevention enterprise to impact theft and fraud.
Prevention— As mentioned above, if we exploit this tactic intelligently, then we measurably reduce the rest of our workload. Prevention is both the beginning and end of a fully integrated strategy.
Detection— When our prevention tactic has failed and an act of theft or fraud occurs, we must detect that act the very first time it occurs and as near real time to the occurrence as possible. The more time that occurs between the first incident of theft or fraud and the resolution of the incident, the more losses the retailer suffers.
Investigation— Immediately upon the discovery of a theft or fraud incident, the analysis of the data surrounding the incident will lead into the investigation of the incident. It is always helpful to remember that the investigation must occur both swiftly and legally, two terms that are often in conflict with each other.
Resolution— The tactic of resolution occurs when the investigation leads to who did what, how, when, where, and why, and a confrontation takes place with the individual responsible. For example, if we are talking about a dishonest associate, the resolution is usually an interview, followed by employment termination, and, in all likelihood, prosecution.
Recovery— This tactic is essential to make the retailer whole again. While recovery of the stolen merchandise is certainly desirable, civil recovery statutes enable the retailer to offset some of its costs incurred in the loss prevention enterprise.
Whenever we are selecting a new technology to employ in the loss prevention enterprise, it is essential to understand which of these five basic tactics this new technology would support. Figure 2 is an attempt to illustrate how certain sample technologies support each of these tactics described.
As you consider what is represented by this illustration, you should also think about how the integration of these technologies will complement each other in the enterprise and how ultimately the people, processes, and systems become interdependent.
As the captain of the loss prevention enterprise, the LP director and his team will be most effective through maximizing the utilization of as much intelligence as you can possibly collect and use that intelligence to successfully carry out these five basic, yet critical, tactics.
Application of the Loss Prevention Enterprise Model
Now that we have produced a model and understand the five basic tactics used within the model, how do we apply this theory to practice?
I have advocated utilizing multiple means of intelligence to carry out the five basic tactics of loss prevention. I have also shown that raw intelligence without analysis does not result in actionable information.
As you evaluate your sources of intelligence, which may be varied and technologically up-to-date, you may find that you lack the means to readily combine and analyze the data. This may indicate where you need to focus your acquisition of new technology.
At the same time, by knowing that one data analysis technology versus an alternative solution can also provide you with the information necessary to facilitate your civil recovery efforts, you have the opportunity to more easily justify the expenditure. If you did not take into consideration the interrelated aspects of your various tactics, you ma fail to realize the full potential of various technologies and not gain maximum usage of your capital dollars.