Loss Prevention Strategies at Canadas Largest Food Distributor

retail industry, grocery store shrink

Dean Henrico is senior vice president of loss prevention for Loblaw Companies Limited where he is responsible for loss prevention strategies across the enterprise. He has more than twenty-seven years of retail experience in both LP and operations. Prior to coming to Loblaw, Henrico worked for Walmart Canada as well as Zellers.

EDITOR: For those readers outside Canada,describe Loblaw Companies.

HENRICO: Loblaw Companies is Canadas largest food distributor, and were a leading provider of drugstore, general merchandise, as well as financial products and services throughout Canada. Theres over 1,036 corporate and franchise stores from coast to coast. Were one of Canadas largest private-sector employers with more than 139,000 full- and part-time colleagues. The companys headquarters are in Brampton, Ontario. Thirteen million customers shop in our stores each week, and 2015 sales were nearly $46 billion Canadian.

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We have twenty-one different banners,ranging from wholesale clubs to harddiscounts, such as Maxi in Quebec and theNo Frills (franchise) banner, as well as theSuperstore format in the Western market,Ontario, and Atlantic Canada. We also haveconventional banners such as Loblaws,Zehrs, Fortinos, and Provigo. Loblaw offersCanadas strongest control (private) labelprogram, including the unique PresidentsChoice, no name, and Joe Fresh Stylebrands. In addition, the company makesavailable to consumers Presidents ChoiceFinancialservices and offers the PCpointsloyalty program

EDITOR: Is Loblaws the predominant bannerin the company?

HENRICO: Loblaws stores are only in theprovinces of Ontario and Quebec and whilethe Loblaw name is well known nationwide,one could argue that our most recognizablename across Canada is our Superstorebanner, which is in every province. TheSuperstore banner takes on different namesin different parts of the country, so its knownas Real Canadian Superstore or LoblawSuperstore. Its called just Superstore orAtlantic Superstore on the East Coast

EDITOR: Is a Superstore more than a typicalfood retail operation?

HENRICO: We talk about Superstore as aone-stop shop. Not only is there grocery andgeneral merchandise, but youll find a photostudio, in some cases a Presidents ChoiceFinancial Banking operation, a drycleaner,a wine store, eyewear, Joe Fresh apparel,which is our branded line of clothing,and a pharmacy. What we dont offer areautomotive services.

EDITOR: As senior vice president of lossprevention, describe your responsibilities.

HENRICO: I manage the loss prevention strategies for our retail locations and twenty-seven distribution centers, of which six are third party. There is also our support office in Brampton, Ontario, which has about 3,200 employees. There are also four regional support centers and two IT development sites. Under the LP hat, we have the traditional loss prevention focus in regard to total shrinkage at retail locations and also all integrity investigations involving corporate colleagues.

EDITOR: What are the priorities and objectives of the loss prevention strategies within your company?

HENRICO: Shrink is the top priority. We also look at total waste, whether it is food, time, or ineffective processes.

EDITOR: Have the loss prevention strategies changed significantly during your tenure?

HENRICO: When I joined the organization in 2005, I came in as director of operations in the province of Quebec. My background throughout my career has been about 70 percent in LP and 30 percent in operations. I firmly believe you need to understand the total intricacies of the retail operation to be successful in LP today.

In 2005 and 2006 our organization was not ready to change its paradigm in regards to our loss prevention strategies. Then in 2007 we underwent a fairly extensive project to simplify and refocus the organization. There was significant change in the leadership at that time. We made the decision to transform our loss prevention strategies from a traditional reactive, cops-and-robbers, external/internal theft-oriented organization into a compliance-based LP organization.

Today we believe that in LP youre only as good as the incident that does not occur. My team and I dont spend a lot of time focusing on external and internal numbers, although it is a key component of our business. Instead, our loss prevention strategies focus on identifying the root cause of what allowed each incident to occur.

Then we implement corrective action either in a specific location or, if its a systemic issue, throughout the organization or the banner, depending on the case.

EDITOR: How do you then go aboutidentifying where there are vulnerabilities orincidents to attack proactively?

HENRICO: We certainly look carefully atspecific incidents. However, we focus on thedata that relates to the cost of shrink and toanything that falls on the L side of the P&L.Our store operators focus on the P side,and LP focuses on the L side.

EDITOR: In moving loss prevention strategies from a reactive to proactive approach, have you developed data-driven programs and initiatives?

HENRICO: One of the first programs wecreated was called the At-Risk CouponProcess (ARCP) program that is designed tohelp us manage at-risk products, which areall the perishable or date-coded products.As you know, the majority of waste in foodis on the fresh side of the business. Ourfocus in this area saw early and quick wins indriving down shrink. We have a dashboardfor that. Every Monday morning, the updateddashboard tells us exactly what bannersare driving those numbers, exactly whatstores, and what departments within thestores. The district supervisors dig deepinto the numbers to find out if departmentmanagers are over ordering or what productsthe support centers or distribution centersare pushing into the stores. The district LPsupervisors drive that in partnership with thedistrict store managers.

We have also a scorecard that tracks pricereductions; what we call host reductions.The numbers from both of those dashboardsmake up our Total Waste Component. Inother words, we look at all at-risk productsin terms of product that is sold at reducedprices or product that is thrown out becausethe stores were stuck with too muchproduct. That view of total waste defines thepriorities for our district LP supervisors aswell as people from the buying division.

EDITOR: With such a massive organization, how are loss prevention strategies organized to attack shrink?

HENRICO: When I took over thedepartment, we were reactively respondingto a huge number of calls from the stores.However, from a return-on-investmentperspective, we were not focusing wherethe actual dollars were. We streamlinedthe operation to become a lean LP teamfocusing where the actual ROI justified it.Currently, LP has 700 people, includingninety district supervisors across Canadaalong with store-level LP representativesand a few administrative staff. In addition,for the twenty-one distribution centers thatthe company runs, there are LP districtsupervisors, managers, and uniformedsecurity officers.

EDITOR: If we look within yourorganization, it is the district LP supervisorwho is the critical element of the LP team.What are the priorities of this position?How do they spend their time? I know theystart with that dashboard on Monday, butwhat are the components of their job?

HENRICO: They focus on the total wastebucket, the total shrink numbers in theirrespective districts, and on their respectivestores compliance. The total waste result isthe outcome of process compliance or lackof process compliance. In that context, theshrink result should not be a surprise.I remember when I was a districtsupervisor and you would know yourstores. Even before the physical inventorywas counted, you would know if a storewas going to have a good result or a badresult. Its similar to an exam in school.If you studied and did your homework,youre not worried on exam day. So theLP district supervisors are focused onprocess compliance. The primary toolfor process compliance is the LoblawAccountability Report (LAR), which iscompleted every quarter by the district LPsupervisor in partnership with the districtstores manager.

As an organization going throughsignificant changechanging not onlythe functions, but the culture of LPweneeded to drive the partnership of thedistrict managers, operations managers,and district LP supervisors. We created theLAR program because it gave us a way tofocus together on process and compliance,which are the real shrink drivers.

We condensed the majority of theexisting audits into one, which becamethe LAR. Internal audit agreed to use theLAR, and the audit they conduct now is themeasurement of the effectiveness of bothmy district LP supervisor and the districtoperations manager.

We condensed the majority of theexisting audits into one, which becamethe LAR. Internal audit agreed to use theLAR, and the audit they conduct now is themeasurement of the effectiveness of bothmy district LP supervisor and the districtoperations manager.

Loblaw district LP supervisors alsospend time on the LP NOW program,which stands for No Opportunity Wasted.LP NOW is basically a daily store LP tour.A district LP supervisor visits one or twostores a day depending on the banner.If youre visiting a 20,000 square-footconventional grocery, you can do severalstores in a day. But if youre visiting a130,000 square-foot Superstore, youprobably can only do one ortwo stores.

The LP NOW program is a detailedlook at the shrink drivers in eachstore. It is based on both a checklist ofcommon elements that they must lookat every time theyre in the store and acustomized inspection of specific issuesthat a stores data identify. LP NOW helpsdrive compliance because a copy of theinspection report is left at the store anda copy is sent to the district office. Thedistrict LP supervisors go back in forsecond and even third visits to ensure theissues are corrected in a timely fashion.

Our district LP supervisors alsospend time leading and developingthe LP representatives who comprisethe store-level LP team. One of thecomponents of an effective shrinkreduction strategy is training anddevelopment of not only our LP team,but our 139,000 colleagues. They are theeyes, ears, and pulse of the operationas to whats happening. So, the districtLP supervisors spend a lot of timecommunicating the LP message indistrict meetings, in store meetings,and even in store huddles which happenevery morning

They also handle all retail integrityinvestigations. We have a corporateinvestigative team that handles issues, suchas kickback investigations.

EDITOR: Is shoplifting and apprehendingshoplifting among their responsibilities?

HENRICO: Due to various factors, this yearwere seeing a 31 percent increase overlast year in actual shop-theft apprehension.Dollars recovered is up 50 percent.When you break down the numbers,it shows that 2.5 percent of resolvedcases represent 20 percent of the dollarsrecovered. These are much larger cases,involving thefts of meat, alcohol, healthand beauty products. In Canada, werealso starting to see organized retail crime(ORC), which is a well known problem inthe U.S.

EDITOR: Have you instituted a formal ORCprogram within the company, either fromtop down or from bottom up?

HENRICO: Presently, we do not have aformalized program. However, we aretracking it and allocating resources basedon where the issues are across Canada.There is no legislation in Canada thatwould compare to anything that is beingdone in the U.S. We are far behind on thatfront in Canada.

EDITOR: Could you talk about your LPtraining program?

HENRICO: We have comprehensive trainingprograms for both new LP representativesand district supervisors. Once they arelicensed in their province, they canofficially start their training program withus. That training program is done througha peer trainer. There are also virtuallearning centers and mandatory virtuallearning courses that they must complete.There is also code-of-conduct trainingthat they must complete and sign off onevery year. So that can take, depending onthe background of the LP representative,between three and six weeks

For new district LP supervisors, thetraining is more comprehensive and isalso done through both a peer trainerand virtual training. The specific trainingdepends on their retail background.Personally, the most valuable experienceI had was the time I spent in operations.For example, if you dont know how theretail operation should be done, its moredifficult for you to detect an exception.

If we were hiring a district supervisorwith no traditional retail operationsexperience, that person would go toone of the Loblaw stores of learning.These stores offer training at the bronze,silver, and gold levels. They would takethe retail training program at least at thebronze level. This means they would beintroduced to P&L, how to read a purchasestatement, ordering, merchandising,et cetera. The objective is for them tounderstand the retail side before we trainthem on the LP side.

EDITOR: Would you also do it in thereverse? Do you ever hire a district LPsupervisor with predominantly operationsexperience and no LP experience?

HENRICO:Our loss prevention strategies include building a very cross-functional team with multiple skill sets. Ive hired both operators and internal auditors. I also have former store managers who are district supervisors. I have a former store manager who is my director of corporate policy. Of course, were always looking externally. Because of the multiple store formats, we have district supervisors who are responsible for three or four formats. Shrink in the Superstore format is not necessarily driven by the same factors as the shrink in a conventional or a hard discount format. So we hire outside when we find the right candidate. But when we have a chance to promote from within, I very much encourage that.

EDITOR: In recent years,U.S. retailers have beenchallenged by a recessionary economy.Has that been a challenge in the Canadianmarket as well?

HENRICO: Its been a challenging year inthe retail market for all retailers. Wevehad to allocate our resources to covermultiple factors, from increases in lossincidents to planning for H1N1.

EDITOR: Have you seen anincrease or decrease in internal oremployee dishonesty?

HENRICO: Thats up 5 percent, butdollars are basically flat. Until 2007 thisorganization never did pre-employmentcriminal record verification. We hadno policies or procedures that helpedprevent an incident. One of the firstactions I took was to implementpre-employment criminal verification.At that time, the average do-not-hirerate in Canada was 5 percent. We weresignificantly higher for several months,which confirmed our suspicion that theperson who couldnt get a job at otherretailers ended up joining us. I wasforecasting that we would see a decreasein internal colleague dishonesty, but thathasnt happened.

EDITOR: Regarding technology, is Loblawinvolved with EAS and CCTV?

HENRICO: It varies with the age of theassets and the age of the location andthe banner, but we have CCTV in alllocations. Its a critical element of internaland external apprehensions. We useEAS mainly in our Superstore format.But because of the amount of productand SKUs, were not using it in a fulllocation. You would not have a storethat is completely EAS tagged. We useit primarily for apparel, electronics, andsome health and beauty items.

EDITOR: There are U.S. grocery retailerswho outsource LP at the store level. DoesLoblaw do that?

HENRICO: We do some outsourcing mainlyin our franchise locations, but not inour corporate locations. Depending onthe location, the season, the issues in aspecific market, we will use third-partyuniform guards at the exit doors, similar towhat you see in a lot of U.S.-based storeswith paid-duty police officers. However,in Canada there are not many policedepartments that offer paid-duty for retail,so we have to use private security firms.

From a traditional store LP perspective, I much prefer having our own people who know the store, know the operation, know the business. Our loss prevention strategies are built around relationships. When I was a district supervisor, I spent most of my time talking to colleagues. They told me what the reports would tell me, but more importantly, they told me about what was happening in the store. So, I prefer by far having LP representatives who actually work for Loblaw and who have the best interests of our organization on their mind at all times; who know the operations, clientele in the location, the shopping patterns of the customer, the shrink issues in that location, which department managers are new and need help.

EDITOR: As you go to conferences, whetherU.S. or Canadian LP conferences, what areyour priorities in attending a conference andwhat do you hope to get?

HENRICO: Its to hear what practices theU.S. retailers are implementing or haveimplemented successfully. In my humbleopinion, the U.S. is light years ahead ofCanada in regard to ORC. Were seeinga significant increase in ORC in Canada,particularly at our border stores. Ipersonally attend conferences where I canlearn about how the U.S. is addressingthe ORC problem. Im also interestedin how retailers are looking at new andinnovative ways to address overall totalwaste in the organization.

EDITOR: You have an interestingbackground. Would you talk about howyou got started and ended up in retail?

HENRICO: I started in LP at Christmastimein 1988, about 27 years ago. I was 16years old and was hired as a bagger atthe local retail store because they werehiring for Christmas. They hired me fortwo weeks, but I ended up staying atHudson Bay Company for ten years. Itwas a great company to work for. I movedfrom bagging to replenishment. Theywere flexible with scheduling, so I couldjuggle both school and work. I workedearly mornings from 5:00 to 9:00 beforeattending classes

We lived in a small town in Quebecwhere my dad was chief of police. At onepoint, the store was having a problem withtheft and the store manager asked, Dean,why dont you try this loss prevention thing?I said, Sure. Seems like fun. It was fun. Itwas great. I stayed at that location for threeyears in LP walking the floor. Back then,camera systems were almost nonexistentcompared to the technology we have today.I did it the old-fashioned way by walkingthe floor with a baseball cap on backwards.Thats how I started in LP.

After that, I became a night crewsupervisor and thats where I learned themost about retail operations. For two years,I did total store replenishment. We receivedthe trailers at night, and wed have to set upall the merchandising promotions, etc. Thatwas a great learning experience.

Then I went back into LP and becamean internal investigator before gettingpromoted to regional LP. After that, I joinedWalmart as a district supervisor and waspromoted within the same year to regional.I left Walmart to join Loblaw as director ofoperations for the province of Quebec. Thisallowed me to move back to Quebec. Butthen a year later, just when we finishedunpacking, we moved back to Torontowhen I was promoted to vice presidentof LP.

EDITOR: What did your position asdirector of operations at Loblaw involve?

HENRICO: It was to implement strategicinitiatives to reduce financial wasteand improve operational efficiencies.A key to an effective operation andshrink reduction is the backroom.The two biggest areas of shrink andoperational waste, from labor to damagedmerchandise, are the backroom and frontend. I spent a lot of time implementing abackroom mapping process. The idea wasto reduce labor costs and excessinventory. There is a close tie betweeneffective operations and effective LP.If I dont have it in my store, I cantshrink it out. So, its really about havingthe proper inventory level that youcan manage effectively from a laborperspective.

EDITOR: If you were to address a group ofLP professionals who currently are at thestore or district level, what would you sayabout how to grow a career?

HENRICO: I would talk about never losing focus on the customer. Even though its our job to focus on loss prevention strategies, the vast majority of people who walk into our store every day are honest, hard-working, paying customers. So every initiative and everything we need to do must focus on making it easy for the customer.

I would also encourage them to learnas much as they can about the totalretail business. That includes havingconversations with department managersand store managers, asking questions instore meetings, and taking an interest inthe total business of retail.

I never thought Id spend my careerin retail. I also assume that the majority ofpeople Id be speaking to would probablysay they wont be spending their totalcareer in retail. However, retail LP offersa tremendous venue for people to grow,so I would encourage them to exploreall aspects of retailsupply chain, storeoperations, and distribution centers.Then I would repeat that its all about thecustomer. An idea is only as good as howmany times it rings through the front end.I talk to my team about how its easy tosit in a support center office and create aprogram, but theres no cash register inany of the support centers

EDITOR: With a father in law enforcement,when you were growing up, did you neversee yourself becoming a chief of police?

HENRICO: I thought about it at one point, but this retail thing happened so quickly, and its an exciting career. Theres so much you can do. My drive is about change leadership and change management. Having the opportunity to undertake such a significant change in loss prevention strategies at Loblaw has been a phenomenal learning experience. I have grown as an executive because of it and am eagerly awaiting the next change-management mission.

This article was first published in LP Magazine in 2010 and updated in February 2016.

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