Retail Alarm Monitoring—In-House Or Third Party?

Retail Alarm Systems Monitoring

Those of us who have been loss prevention professionals for any length of time can likely share some horror stories about experiences with national alarm 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 company 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 and loss prevention budget dictates 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 are quite good and 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.”

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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, such as LAN or Internet, which can greatly 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 and in a way 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. Internet-based 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 loss prevention investigations.

Comparing the Costs

Alarm Monitoring—In-house Or Third Party?“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 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. Here are 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 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.

The Benefits for CVS

A proprietary alarm monitoring program is clearly not the best approach for all companies to take, but, for some, the benefits can be significant and far outweigh the risks. This was the case when CVS/pharmacy evaluated the pros and cons of bringing a program in-house.

• Monitoring costs were soaring.
• There was no consistent approach to the design of new store installations.
• Repair costs and false-alarm fines were increasing year after year.

Rather than just address the monitoring opportunity, CVS opted for a complete and comprehensive approach in 2006. In addition to having a UL-certified alarm central station, the CVS Asset Protection Services group designed and coordinated the installation of alarm systems for new stores and remodels, troubleshot and coordinated alarm system repairs, and even established a proprietary lock-and-key program. The management of these activities significantly reduced costs and maximized the benefit to CVS. After all, who better can understand what a company needs than a team dedicated solely to that purpose?

Case Study: Transitioning from In-House to Third Party

A monitoring center must provide timely, consistent, high-quality services using state-of-the-art technology to customers 24 hours a day, 365 days a year. Sears successfully owned and operated a monitoring business providing these solutions to over 4,000 accounts. Annually, our monitoring center’s equipment and capabilities were evaluated to ensure our service, technology, and performance levels met or exceeded the industry’s best-in-class retailers.

Keeping pace with the changes in technology and maintaining retail alarm system data integrity were crucial to maintaining our goal of providing best-in-class alarm monitoring service. In 2003, we understood that our equipment was becoming outdated and would be in need of significant upgrades.

In addition to our equipment needs, enhancing retail alarm data integrity was also necessary to ensure the highest level of security was continuously maintained. Through years of in-house monitoring functions, our monitoring center associates and store operators established relationships that began to jeopardize our security levels. Requests from stores to force-arm buildings and arm systems remotely began to increase and exceptions to our standard operating procedures were creating risk to our associates, assets, and facilities.

Faced with the requirement to upgrade our systems and infrastructure, the key question was whether Sears should remain in the monitoring business or outsource to a third party. We believed that we should only continue alarm monitoring if

• We could do it better than a third party or
• We could do it cheaper than a third party.

If both of the answers were “No,” then our decision was to outsource.

A thorough equipment and financial review was completed to position Sears with a long-term alarm monitoring solution. Our internal review concluded outsourcing alarm monitoring services to a third-party supplier was the most cost effective and provided the best solution to capitalize on state-of-the-art equipment and services.

The planning phase was launched and five critical elements would become our foundation to successfully convert our in-house alarm monitoring platform to a third-party supplier:

• Transition team identification
• Decision process to determine the service provider
• Project planning
• Implementation
• Post implementation (continuous improvement)

Transition Team

To successfully convert retail alarm monitoring to a third-party supplier, a transitionAlarm Monitoring—In-house Or Third Party? team of customer-focused leaders were selected to design, analyze, and implement the alarm monitoring transition project.

In addition to loss prevention, our transition team included stakeholders from the following departments: procurement, finance, business unit leaders (mall-based stores and specialty businesses), IT, real estate, legal, facilities, and operations.

Transitioning our 4,000 account signals to a third party’s monitoring system took seconds to complete, but the preparation and implementation required ten months of teamwork to create a successful conversion. Our team met regularly, defining the objectives, building success criteria, creating performance metrics, and representing the organization to ensure a seamless transition of alarm monitoring.

Sears’ project plan for the alarm monitoring transition included:

• Understand the buy – interview stakeholders
• Establish operating procedures for supplier
• Develop draft scope of work for review by stakeholders
• Present sourcing strategy (scope of work, list of suppliers, and timeline)
• Develop, distribute, and analyze request for information
• Complete supplier bid meetings and site visits
• Suppliers complete and return request for information
• Present request for proposal (RFP) supplier short list recommendations to stakeholders
• Develop, distribute, and analyze RFP
• Suppliers compete and return RFP
• Analyze RFP
• Negotiate with suppliers
• Present overview to stakeholders
• Notify suppliers and stakeholders of contract award
• Execute contract
• Develop performance metrics
• Establish quarterly performance meetings to review and track performance metrics

Determining the Service Provider

Collectively, our transition team identified five suppliers that provided the most comprehensive, customer-focused capabilities to Sears. Criteria for a successful service provider included the following:

• Fitness to technical and functional requirements
• Total cost of ownership
• The ability to support current and emerging equipment
• Industry reputation and experience
• Experience and qualifications of the company and resources
• Quality assurance commitment
• Financial strength
• Proven methodologies, tools, and value added services

Sears was sourcing the “best value/total cost” decision. While cost remained a critical decision factor, the quality of the equipment, service, and operating efficiencies that would be realized were the primary and most critical aspects.

Once the initial review was completed, Sears identified a short list of suppliers. Each of the suppliers was sent a request-for-information package to complete. The focus was to identify potential suppliers and provide more detailed data as required for the purpose of the RFP.

As a second step, Sears choose to pre-qualify the suppliers’ services and products prior to issuing a RFP. The goal of pre-qualification included formal presentations, site visits to facilities, service-level assessments, testing of products, and customer referrals.

Sears’ procurement department conducted the final negotiations and ADT Security Services was selected as the provider of burglar and fire alarm monitoring for the company.

Project Planning

The planning phase of the project was split in two specific aspects—the project team coordinated by Sears and ADT’s project team. These teams identified the tasks involved in the conversion, including both established tasks from the process flow and additional tasks that are outside or not included in the current scope of work.

A project task list was created to identify key issues that can affect the overall project and allowed assignment of tasks such that primary and secondary owners can be established. Tasks were assigned milestones in the project file to help balance workload for project planning. Both project teams established a plan for transition.

Sears’ transition plan involved collecting the proper information in order to assess what relevant information and services needed to be provided by our organization. Clear communication, precise operating procedures, and partnership with our selected solutions provider were the building blocks of our transition plan.

ADT’s transition plan was formed from data retrieved from Sears concerning the current standard operating procedure, current database, and service information concerning the current customer base. Data included:

• How many locations
• How many systems (panels) per location
• Manufacturer and model number of panels
• Breakdown of panels per location
• How the systems communicate
• The type of receiving equipment currently used
• The type of automation
• Notification plan

ADT defined the material and systems required to transition from Sears’ current monitoring center to ADT’s monitoring center. This included:

• Receiver needed
• IT support materials
• Phone line ownership
• Current monitoring company staffing model
• Operation scripts for inbound traffic
• Review of current monitoring companies standards

Our teams worked closely together on an effective transition plan to ensure our target dates and success criteria would be achieved. A test plan was created consisting of a documented test procedure to test current monitoring methods and the ability for ADT to monitor the same methods during the transition.

Implementation

Converting retail alarm system monitoring, whether from in-house to third party or third party to in-house, requires absolute understanding of a defined scope of work. Sears and ADT partnered together to develop a scope of work to ensure all systems were transitioned without interruption and end users were aware of their facility’s signal transfers.

The initial goal described in the introduction was to perform alarm monitoring better and more cost effective. To achieve this goal, ADT’s mission was to fully understand the standard operating procedures of Sears, replicate these standards, and enhance the integrity of data and services prior to the conversion.

To implement the alarm system monitoring change, the data from the existing Sears monitoring facility was gathered and scrubbed to determine its accuracy and freshness. The data was then formatted in order to be inserted into ADT’s monitoring systems and reviewed again for accuracy.

Once all data for each Sears location was in place in ADT’s monitoring systems, the stage was set to develop the schedule for the change over. Backup plans were developed and notification of the change in monitoring was sent out to all locations.

The change over involved not only the conversion teams from Sears and ADT, but the telecommunication providers as well. As phone lines were switched, signals from the involved locations were verified for format and content and operators from the Special Operations Group at the ADT National Monitoring Center handled the signals. The actual phone line change over was a four-hour process. Once all phone lines were converted, receiver traffic and individual signals were monitored carefully for any anomalies.

Post Implementation – Continuous Improvement

The retail alarm monitoring conversion from Sears’ proprietary monitoring platform to the ADT National Monitoring Center was a seamless, successful event. During the conversion, all 4,000 account signals were transitioned without interruption and when each panel was activated to arm for the close of business, signals were transmitted and building protection was achieved. Day one of a new solutions provider of alarm monitoring was completed and our focus turned to ensuring performance metrics were achieved and capitalizing on ADT’s value-added services.

Meeting and exceeding performance metrics was ADT’s new goal. Performance metrics included:

• Alpha service levels (fire, hold-up, burglar alarms)
• Beta service levels (supervisory signals)
• Gamma service levels (scheduled related alarms)
• Inbound service levels (alarm-related calls)
• Activity reduction efforts

Each metric was assigned a target goal, for example 90 percent of burglar alarms within 60 seconds. To ensure continuous improvement, Sears and ADT developed quarterly performance business reviews. Business reviews provided the avenue to assess performance metrics, identify opportunities to strengthen our partnership, and continue to focus on achieving both companies’ internal and external goals. Business unit leaders from inside and outside our transition team participated in the business reviews and together we are able to continuously evaluate performance and improve our service levels.

Our post-implementation goal was to enhance retail alarm system data integrity through timely reporting of alarm activity. ADT’s web-based tool, ADT Select, provided our end users this feature. Obtaining alarm system activity history through ADT Select enabled our end users to view their information in 24 hours versus waiting for thirty days. In addition to more timely retail alarm system activity, end users were able to view call lists, alarm codes, and schedules daily. The detailed information required to reconstruct a situation was readily available and assisted with making decisions and taking action as quickly as possible.

This article was originally published in 2006 and was updated December 16, 2015. 

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