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NEXCOM: Managing a Truly Worldwide LP Organization

EDITORS NOTE: Fritz Hirchert is director of loss prevention and safety, responsible for traditional loss prevention and safety functions for the U.S. Navys store operations on bases around the world. Prior to coming to NEXCOM in 1995, he held LP director positions with Home Quarters Warehouse, a division of Hechingers Stores, Payless Cashways, TGY, and RedOwl Food Stores/Snyder Drug Stores. Hirchert began his career as a store detective/management trainee at Montgomery Wards in Chicago after graduating from Michigan State University, with a B.S. degree in criminal justice.

Hirchert is active in the loss prevention industry, currently serving on the National Retail Federation loss prevention advisory council. He is also a past member of the Home Center Institute loss prevention and safety council.

EDITOR: For those who are not familiar with your unique retail environment, tell us exactly: what is NEXCOM?

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HIRCHERT: NEXCOM is short for the Navy Exchange Service Command, which is part of the Naval Supply Systems Command of the United States Navy. We operate the retail stores on Navy bases around the world that serve active duty, retired military, reservists, and their families.

Navy Exchanges are best described as regular retail stores. We have 109 Exchanges in twelve countries as well as about 1,200 service outlets. Service outlets would be gas stations, liquor stores, auto repair service centers, barber and beauty shops, optical stores, laundry and dry cleaning. Basically any type of traditional retail or service that is available in the U.S., we handle on Navy bases. Our annual volume is approximately $2 billion.

EDITOR: All are on Navy bases?

HIRCHERT: Actually, we have six main sites just outside the Navy gates, but all the rest are on the actual base. All sites are on federal property.
In addition, we have 187 ship stores. On every ship theres at least one small store. A carrier will have up to three stores. All we do there is supply them with merchandise. We dont protect them. We also have 105 uniform shops that serve the Navy and Marine Corps, as well as 41Navy lodges or motels that we operate on the bases. Customers can order Navy and Marine Corps uniforms over the Internet as well as catalog retail merchandise.

EDITOR: Does your responsibility include food services?

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HIRCHERT: It does not include the commissaries or grocery stores, but we do have food courts. We also handle about 140 PPVs (public-private ventures). For example, on the Norfolk base, we have three McDonalds, Taco Bell, KFCthose are examples of PPVs.

EDITOR: Whats a typical size of one of your Exchanges?

HIRCHERT: We dont have a typical size. Our newest Exchange in Pearl Harbor is going to be 230,000 square feet. Our smallest is about 1,200 to 1,500 square feet. The largest Exchange might have about $150 million in volume. Our smallest would have $200,000 in volume.

Were kind of a cross between a department store and a mass merchandiser, including everything from high-end fashions to hardware to lawn and garden. Literally, every type of retail.

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EDITOR: Who are your employees?

HIRCHERT: We have about 16,000 civilian employees worldwide. We only have about10active duty military. About 30 percent of our employees are spouses or dependents of active duty military.

NEXCOM: Managing a Truly Worldwide LP Organization

EDITOR: With that many civilian employees working in your Exchanges, when a crime is committed by one of your employees, is it handled by civilian or military law?

HIRCHERT: If its on federal property, it is a federal crime. We go through the local base DoD (Department of Defense) police or through NCIS (Naval Criminal Investigative Service), who then go to the JAGs (Judge Advocate General) who present it to a U.S. attorney. Any conviction would be served in a federal facility.

EDITOR: Tell us a little more about who your customers are.

HIRCHERT: First of all, our mission is significantly different from outside retail. Our stated mission is to provide our customers quality goods and services at a savings and to support quality of life programs. So, were here for the military and their families. In the states, about 50 percent of our clientele are retirees. The other 50 percent are active military and their families. Overseas, almost 100 percent are active military and their families.

EDITOR: Considering that you have a somewhat different customer base, do your shrink numbers parallel what you might expect in a traditional retail setting?

HIRCHERT:No, were significantly lower and theres a reason for that. Were the Navy family and that definitely makes a difference particularly in shoplifting. If youre active duty military and youre apprehended for shoplifting, you risk losing your job. If youre a dependent, you risk your privileges for up to a year. So, particularly overseas, if you cant shop in the Navy Exchange, you have to buy your necessities on the local economy, which is typically a lot more expensive. Its a definite clear benefit. Shopping at the Navy Exchange is always near the top whenever surveys ask about the benefits of being in the military. Plus, theres an embarrassment involved. In the military, theres an emphasis on high morale values, so thats another factor inhibiting people from getting involved in dishonest acts.

EDITOR: What is your loss prevention structure and how do you manage all those facilities all over the world?

HIRCHERT: We have about 500 people or about 350 to 375 full-time equivalents. Were broken into corporate and field. The field is divided into 10 districts. At corporate, I have several specialists who focus on investigations; operations; systems; training, awareness and career development; audit and policy and procedures; and shortage control, with about five other people who either work for or with them.

EDITOR: Some of your senior loss prevention staff would be located outside the U.S., correct?

HIRCHERT: Absolutely, the district manager lives wherever his responsibility lies. For example, the district manager for Europe lives in Naples, Italy. In Japan, the district manager is in Yokosuka, Japan. He handles all of Japan, Singapore, and Hong Kong. Hawaii is in Hawaii. Guam is in Guam. The rest of the districts are in the continental United States. Of course, the store LP/safety managers are located on whatever base they are assigned.

EDITOR: Is your staff all civilians?

HIRCHERT: Yes. We work for the Navy as part of the Department of Defense. We are not civil service. We are a fairly self-sustaining operation. Seventy percent of our profits are returned to the Navy through whats called MWR morale, welfare, and recreation distributions to support other quality-of-life benefits.

EDITOR: When you came here almost seven years ago, did you inherit a structure this size?

HIRCHERT: No, I inherited a field structure. There was not a corporate structure other than a couple of specialists. The reason why I was brought in was to develop a more centralized, standardized loss prevention program that would be comparable to the best outside retail organizations.

EDITOR: Because your background prior to NEXCOM was in traditional retail loss prevention.

HIRCHERT: Right, 25years in five different companies.

EDITOR: What about your reporting structure?

HIRCHERT: Here, I report to the command itself. The command includes a triumvirate, if you will. One is the commanding officer, who is a rear

NEXCOM: Managing a Truly Worldwide LP Organization
Figure 1.

admiral; one is a captain, who is the vice commander; and one is the chief operating officer, who is a civilian and the person I report to on a daily basis.

EDITOR: Does this command structure have a retail background?

HIRCHERT: Of course, the admiral and captain are Navy Supply Corps officers. They change out every two years. The top civilian and all the other top executives are either home grown with lots of experience internally or from outside retailers. For example, my boss came from the May Corporation with a traditional retailing background.

EDITOR: With your unique type of organization, how did you go about finding people and filling positions, particularly when that person might be in Italy or Japan or somewhere else in the world?

HIRCHERT: Because of how widespread we are, I felt like my job was to look for a strong person to put in place and then support them in every way I could. I used the contacts I had to bring in some really talented people from outside retail to add to the great people who were already here. Several of my district and corporate people have been either directors or VPs with traditional retailers.

I was able to attract them because of the uniqueness of this organization. We do have competitive pay and benefits, plus we believe we have a great working environment. We provide stability and a good quality of life, both for our customers as well as inside our organization. And we try to have fun. We have an expression within the department: Life is good.

EDITOR: What type of individual did you or do you look for?

HIRCHERT: I look for people who have a very balanced loss prevention background. I also look for people with a well-balanced personal life. I think thats very, very important to a successful loss prevention department. For example, each year whenever we set our individual and department goals which I believe is an extremely important exercise I ask each of my people to set goals in their family life, their financial situation, their spiritual life, their rest and relaxation, and also their physical well being. I truly think that its important to be balanced in life. Work is one thing, but its not everything.

One of the things we put together when we first came here was a loss prevention vision a kind of mind map that communicates our direction. Each year we revisit it and update it. Its based on six cornerstones: communication, teamwork, professionalism, discipline, diversity, and standardization. Each one of these lists all the various people and departments we have to work with. (See Figure 1.) Theres one common theme in each of these six areas, and thats attitude. I truly believe that you can take someone with a great attitude and theyre going to be successful.

Besides being well rounded, thats probably the biggest thing I look for when I hire a loss prevention person. I also look for someone who has a competitiveness not an arrogance but a drive to really do well. But mostly attitude. And part of attitude is having fun. If youre not having fun in your job, you ought to find another one.

EDITOR: Does your organization have different responsibilities than a traditional LP department?

HIRCHERT: I originally came in to handle only the security and loss prevention area. Since then, weve been given safety. And just recently, claims management to go with the safety. Our accountability is based on shrink, investigations, accidents, and now claims dollars. We basically have the same goal as traditional outside retailers, to provide a safe and secure workplace and shopping environment for our customers.

EDITOR: I understand you have a strong internal training effort. Tell us something about it.

HIRCHERT: One of our training initiatives centers around what we call the shrink-buster team. This team is made up of the specialists I mentioned before, plus the district managers. The shrink-buster team goes out each year after inventory results come in and hits target stores. We pick whatever the hot areas are. The key ones are always, of course, receiving, the front end, price changing, charge backs, things like that. But we also look for areas of improvement. For example, last year we recognized that our own department didnt have sufficient knowledge to do a good job with operational audits. So we did a lot of training on audits as well as training on investigations, interrogations, and report writing.

EDITOR: Do you also provide training for the management of a facility?

HIRCHERT: Absolutely. About three years ago we changed our merchandising system, our distribution system, and our accounting system all in the same year. That, of course, had a potentially enormous affect on our paper shrink. So our shrink-busters efforts were geared towards the general managers, operational managers, LP managers, and the receiving managers in the stores. We felt that if we trained those four positions well on our systems, we would have a great impact on our shrink and it worked.

EDITOR: Talk a little about your loss prevention philosophy.

HIRCHERT: Well, its not rocket science, as you know. Successful loss prevention programs are ones where you take care of the basics very well dayin and day out, starting with physical security, locks, keys, alarms, CCTVthose kinds of things all the way to things like POS exception reporting. Its not just looking for new and better ways to do your job. Its doing your job well every day. Lets face it, its easier and more fun to install a program than it is to maintain a program. Maintaining a program is tougher and requires a lot more discipline. But that day-to-day program management is what determines success.

EDITOR: Have you implemented new loss prevention systems or technologies that have made your department more effective?

HIRCHERT: We put in a POS exception reporting system by Aspect Loss Prevention about three years ago. There was a little bit of a slow start whilewe did lots of training on the system. But last year we really started to reap the rewards by identifying about a dozen large cases in excess of six figures.Another system we implemented about a year-and-a-half ago was a webbased incident reporting and tracking program from Wazagua. We are just beginning to add our loss prevention audit on the system as well. Were also looking at the restitution package. With the incident tracking, you get the automated civil recovery package as well.

EDITOR: What is unique about your incident tracking program?

HIRCHERT: I believe we were one of the first to implement the LP incident tracking program. Whats great about it, by using one standardized report, we were able to eliminate a lot of local forms and reports. Information is entered once into the computer and that generates a report for the DOD police to pick up the shoplifter, for instance. Or, it produces the report for a dishonest associate. Basically, it covers any kind of incident that takes place. It was unique because the vendor customized it for us to capture data that outside retailers wouldnt want to know, like what military NEXCOM: Managing a Truly Worldwide LP Organizationservice they came from, military status, things like that.

The best thing about this LP information system is that its Internet based, so any of my people anywhere in the world have access to it for inputting incidents or responding to reports. Plus, here at corporate we can go in and see whats going on throughout the world. At the district level, you can view what other districts are doing. And at the corporate level, we can see what any store is doing.

As for other systems, we have started to use our intranet quite a bit as well. We have our own internal loss prevention web site maintained by a web expert in the department. We have LP news on it. We have links to our vendors. Information on physical security and pre-employment. All our policies and procedures. We just put our entire LP and safety manual on there, among other things.

EDITOR: Who are the major users of the intranet site?

HIRCHERT: The whole company can read it, but 90percent of the users are our own department. We have all the case statistics, operation reviews, topicsof the month, lessons learned, worldwide map locator. We are currently working with the 9/11 situation. We are required to provide what is called AT/FP training that’s Anti-Terrorist Force Protection training level one for all associates. Its a very difficult thing to do. The Department of Defense had a level-one training on their intranet, but it was very difficult to get to because of the heavy use, so we customized it for our own use.

Right now, were halfway through a LP training module for our investigators so they can be accredited if you will as a full-fledged store detective. There are six modules involved. I think we have three of them done.

EDITOR: With staff all around the world, how do you conduct meetings or get together with your organization?

HIRCHERT: We have conference calls once a month for district LP/S managers. Plus, we have a week-long worldwide conference each year, primarily for the district managers and specialists. But we also bring in the loss prevention managers from the area wherever we hold it. Last year, for instance, we had itin Pensacola (Florida), so we brought in all the LP managers from our Gulf coast we call it mid-America district. In this conference, we try to have two days focused on internal LP-specific information and two days of career and personal development topics. For example, weve brought in financial planners once. We brought in a doctor for one whole day to run us through all kinds of tests with blood work that was all focused on wellness issues. Weve had seminars on wills and trusts and insurance. Leadership was our theme for last conference. As I said earlier, we try to encourage all our people to be well rounded.

EDITOR: One last question. If you could have three wishes that would make your job easier or make you and your people more effective, what would they be?

HIRCHERT: Well, because the numbers one, two, and three keys to success are the people you surround yourself with, I wish there was a sure fire way of knowing that the person you are hiring will be successful. Second, I wish we could all use the same technology so that source tagging would become more widespread. I suppose my third wish might be that all companies would recognize loss prevention for the value-add that it is beyond just physical security and investigations. I think that the talent that has come into loss prevention has gotten better and better every year. Over the thirty years Ive been in the industry, I have observed the slow transition of how companies have come to value the talent involved in loss prevention. Because of that weve been given more and more responsibilities.And that in turn tends to increase the talent level of the people drawn to loss prevention. So, in reality today we are business people with a specialty in loss prevention.

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