Taking Auditing to the Next Level at Staples

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No retailer would ever want to go back to the pre-UPC days when cashiers rang up sales by hand, inventories were performed manually, and selecting product reorder quantities was based solely on the store manager’s best guess. Besides minimizing the potential for human error, today’s point-of-sale technologies save time and resources while collecting data essential to analyzing and improving business performance.

However, until recently, loss prevention professionals lacked similar technologies to help them glean insights from one of their most critical, data-intensive responsibilities—the LP audit. Today, most audits are still performed manually, a process that is both time-consuming and resource-intensive. The resulting inefficiencies can lead to delays in identifying and sharing information critical to the development of effective loss prevention strategies.

Formalizing the Audit Process

It was a desire to develop more effective loss prevention strategies that prompted those of us on the LP management team at Staples, Inc. to formalize the company’s auditing process back in 1998. A $13.2 billion office supplies chain today, Staples was on its way to passing the $7 billion revenue mark in 1998 and had recently established a centralized LP division after twelve years of dramatic growth. We were looking forward to having a fully-staffed LP field team to obtain the individual store and distribution center information we needed to properly evaluate the effectiveness of our LP programs and procedures.

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Shortly thereafter, the company began assembling the LP field team to work closely with store management, retail staff, and distribution teams on ways to reduce loss and improve customer service. After a new audit questionnaire was developed, refined, and tested, the new field team was sent out to audit all Staples stores and distribution facilities to determine the degree to which associates were complying with existing LP procedures and controls.

The initial audit was a success, providing vital data on what was working and what needed to be improved to reduce shrink. However, as the Staples LP field team began auditing all locations on a regular basis, several shortcomings emerged.

The process was inefficient. Audits were conducted manually using photocopied questionnaires with individual questions organized into sections, such as shipping and receiving, safety, inventory control, and front-end. Auditors assigned a numerical score to each item based on each location’s compliance with it, then added the scores to arrive at a total score for each section.

Upon completing each audit, the LP auditor would enter the section totals into Staples’ case management tool, a laptop-based software application. The results would then be uploaded to the Staples home office server. LP staff at the home office would track the completion of each audit by location, re-enter the scores into an Excel spreadsheet, summarize the results, and distribute the summary information to executives throughout the company.

Because it required too many steps and too much data re-entry between the collection and dissemination of audit data, the auditing process was time consuming and inefficient. This in turn limited the number of distribution centers and stores LP field personnel could audit within a given period of time.

The process did not allow the sharing of detailed information. Recognizing that it would be unproductive to ask auditors to re-enter the numerical scores on up to seventy-five questions from each audit form, we only required them to enter the total score for each of as many as eleven subsections of the audit.

This meant that, although we got accurate summary audit data, we could not delve deeper to discover which individual questions contributed to particularly high or low scores. Neither could we easily create reports that focused on specific audit metrics. Therefore, we were less able to identify specific root causes of shrink or areas of particular success. Without that detailed information, it was more challenging to develop new ways to improve audit scores, share best practices, and further reduce loss.

The process was not compatible with Staples’ continuing growth and expansion. When Staples began its auditing program, it was operating 800 stores in the U.S. and adding new stores at a rate of 100 to 200 per year. Even though Staples hired additional LP field staff, they were becoming increasingly hard pressed to maintain a regular auditing schedule as locations multiplied and each auditor had to cover a broader geographic territory.

By 2003, with the number of U.S. Staples superstores reaching nearly 1,100 and with twenty-seven distribution centers, it became increasingly clear that our existing process wasn’t providing us with everything we needed to know. We were capturing critical data, but detailed information was getting lost on theway—information we knew was critical to controlling shrink, improving customer service, and reducing inventory outages. It was then that we began actively seeking a way to automate and simplify our inefficient auditing process.

Automating the Auditing Process

Specifically, we wanted an auditing solution that would meet the following requirements:

  • Provide immediate access to all of our audit data at any level and the means to create custom reports.
  • Establish a database of historical information to help us identify trends and analyze the effectiveness of different LP strategies and tactics.
  • Automate the data entry process.
  • Automatically distribute audit results to store managers, distribution managers, and headquarters executives.
  • Enable auditors to review audit scores interactively on-site with store personnel and distribution facility staff.
  • Enable on-site printing of audit results.
  • Support the needs of Staples’ geographically-dispersed, mobile LP field team.
  • Enable a single, dedicated headquarters staff person to easily integrate all audit results with other metrics, such as safety and merchandising standards, for reporting purposes.

Software. Armed with this list of criteria, we began the search for an automated auditing solution. We turned our attention to externally-developed auditing applications. After some investigation, we discovered that, although there were a number of commercially available products that automated one or two aspects of the auditing process, only one product promised to meet all of our requirements, including data collection, management, and reporting. In addition, it supported a variety of hardware devices, allowed customization, and supported centralized administration, deployment, and management. That product was AuditSource from SecuritySource, Inc. of Andover, Massachusetts.

We are saving our LP managers about four hours of administrative time per week by eliminating the inefficiencies of the earlier process. Moreover, we have decreased the amount of time needed for home office administrative support by approximately twenty hours per week.

We had found the right auditing application, but to build a complete solution, we also needed the right input device and a telecommunications service provider that could support our needs.

Hardware. Because AuditSource runs on a variety of hardware devices, we had the flexibility to choose a device that our field team could also use for other, non-auditing business purposes.

With that in mind, and working in concert with IT management, we looked for an all-in-one device that offered the capabilities of a PDA, including Web and email access, as well as PC application support, telephone, and digital photography. The latter capability would enable our LP field team to document on-site conditions and share them immediately with senior management and our partners across the enterprise.

After evaluating a number of devices, we chose a device that combined a Windows Mobile™-based Pocket PC with a mobile phone and included a full-color display and built-in digital camera. Real time data transfer from the device was supported by Verizon.

Field Testing. Once we had gathered all the information we needed, it was time to build consensus within the Staples executive management team to adopt the new automated auditing solution. We demonstrated to them how the new solution would increase efficiency and compliance, promote better information sharing, enable better-informed decision-making, minimize the need to hire additional LP staff, and enhance the communications capabilities of our field team. To ensure that our IT organization would support the deployment and ongoing maintenance of the solution, we made sure to include IT management in all our discussions and decisions.

We received approval to proceed with a test of the solution in early 2004. Our hardware supplier provided us with demonstration units and the testing began shortly after the software was loaded in February of 2004. In the pilot test, two LP managers performed more than twenty sample audits using the demo devices, then rated the software on ease of use and performance. Their response was overwhelmingly positive, with both testers finding the solution fast, easy, and efficient to use.

Rolling Out. Satisfied with the test results, we moved forward and purchased devices for our entire seventy five-person LP field team with the goal of fully deploying the solution as soon as possible. We experienced one delay in the process due to our desire to have the latest version of Windows Pocket PC loaded on the devices.

While we were waiting, we loaded our audit questionnaire into the software, an easy process made simpler by the system’s flexible design and intuitive administrative interface.

The devices were fully loaded and operational by May. By mid-June, after less than two weeks of hands-on training, both the distribution and retail LP teams were ready to use the new solution. Above all, they were excited about streamlining the auditing process and having easy access to results that would help us identify trends.

Benefits of the New System

Under the new system, our LP auditors bring their devices to each store and distribution facility that they audit. After opening the application, they survey conditions following the audit questionnaire. As they answer each question via the touch screen, the software automatically keeps score. When the audit is completed, the LP auditor uploads the data, a process that takes less than thirty seconds.

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The results are then posted on a secure website, enabling our field people to share and review them directly with store and facility managers while they are still on-site. Results can also be sent directly to a local printer for hard copies. Audit results are also instantly available to any departments throughout the company.

Our initial analysis of the new auditing solution indicates that we are saving our LP managers about four hours of administrative time per week by eliminating the inefficiencies of the earlier process. Moreover, we have decreased the amount of time needed for home office administrative support by approximately twenty hours per week. The extra time afforded our team allows them to devote more of their energies to working in the field supporting managers and staff in better understanding how losses occur and how great customer service can help them reduce losses.

The Staples LP team now has an auditing solution as technologically advanced and information-rich as our POS and inventory systems. We are developing a clearer, more detailed understanding of how well our LP policies and procedures are working and where we need to do a better job.

Armed with this knowledge, we will be able to share best practices globally to reduce losses further and increase Staples’ profitability while ensuring a more enjoyable shopping experience for our customers.

We are currently considering expanding the use of the system to include our internal audit staff. We also plan to offer additional applications on the devices, such as email, to further enhance the capabilities and improve the productivity of our field LP team.

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