The Continuing Evolution of LP in the Grocery Industry

The Continuing Evolution of LP in the Grocery Industry

EDITORS NOTE: Kathleen Smith, CFI, is vice president of loss prevention for Safeway where she is responsible for security and loss prevention for over 1,800 stores in the U.S.and Canada, thirty-three manufacturing facilities, twenty warehouse facilities, and buying offices worldwide.

With over thirty years of security management and law enforcement experience, Smith is chairperson of the Food Marketing Institutes loss prevention committee. She is also on the advisory committee for the Center for Interviewer Standards and Assessment, the loss prevention committees for the California Grocers Association and California RetailersAssociation, and the board of directors for California Shopping Cart Retrieval Corporation.

Smith has earned a masters degree in communications from Pepperdine University, Advanced Police Officer Standards and Training certificate from the State of California, and was elected to the Whos Who of American Women in 1999.

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EDITOR: You have an interesting educational background for a vice president of loss prevention. Tell us a little about your background before coming to Safeway.

SMITH: I have an undergraduate degree in psychology and a masters degree in communications. Prior to joining Safeway, I was a senior deputy for the Los Angeles County Sheriff s Department.

EDITOR: What did you do for the sheriff s department?

SMITH: After the academy, I worked the womens jail for a year and then the mens jail for a second year. That was right about the time women began going out on patrol. The sheriff wanted a female to be the first responder on any sex crime, so they had to have a patrol-trained female on every shift. So after two years in the jails, I went out on patrol and did that for five years. The last year I did some undercover narcotics work, a lot of rape-prevention training, as well as taught some classes for Pepperdine University, which is where I earned my masters.

EDITOR: How did you get started at Safeway?

SMITH: I started my career at Safeway in 1981 as an investigator. In the Safeway environment, an investigator would be the equivalent to a regional manager responsible for, at that time, about thirty stores in a geographic area. An investigator handled anything from assessing and recommending solutions for the shoplifting- and shrink-prevention needs of those stores to internal investigations. That experience helped me learned the loss prevention business from a managers perspective.

After about four years, I was promoted to chief investigator, where I managed a region of investigators. I was then promoted to the division director of the Seattle division, which covered Washington, Idaho, Montana, and Alaska. There I was responsible for about 250 stores and ten regional investigators. At that time, each division ran autonomously, so it was similar to a company with 250 locations. We didnt report anything centrally. After nine years in Seattle, I returned to California as director for the Northern California division, which included Northern California, Hawaii, and Nevada. In 2001 I was promoted to the vice president position.

EDITOR:: How many stores and divisions do you have today?

SMITH: We have about 1,800 stores across the U.S. and Canada with ten divisions. We have traditional Safeway stores in Canada, Washington, Idaho, Montana, Alaska, Oregon, Northern California, Colorado, Wyoming, South Dakota, New Mexico, Arizona, Maryland, Virginia, Delaware, and DC. We own Vons in Southern California and Nevada, Randalls and Tom Thumb in Texas, Genuardis in Pennsylvania, and Dominiques in Chicago. Each division has a director with a loss prevention group under them.

EDITOR: What are some of the challenges that you face in coordinating so many directors and divisions?

SMITH: We’ve gone through an evolution from operating autonomously to operating in a consortium. I have the benefit of coming from a division, so I understand the necessity for them to be able to make decisions and operate on a day-to-day basis. I think we’ve done a good job of assessing the best practices in each division and getting people to accept that they dont have to recreate the wheel; they can take from others. By doing that, they become more effective and dont have to spend time developing programs that are already working elsewhere. Our structure also allows us to try new programs on a smaller scale to find out what works before we roll it out across the company.

If you can convince your directors that they have other people out there working for them, that they can tap into the resources across the company, and yet still be a change agent in their own area, that mentality makes us successful.

EDITOR: Do you have centralized purchasing on LP products and services?

SMITH: Yes, but everybody has input. I challenge each and every one of the directors to come up with something new, something different, to be looking for things that will benefit us all. When you have ten people looking at programs or technology as opposed to one, you are better off. Also, by giving them a say in the decision making, its easier to buy into the centralized concept.

I view myself as their voice at the corporate level. Sometimes they may think that they are removed from the decision makers here because the funding comes from here down. But thats not the case. I am their voice here.The Continuing Evolution of LP in the Grocery Industry

EDITOR: What are some of the shrink or loss prevention initiatives that are unique to your industry?

SMITH: In the grocery industry, probably more so than other LP segments, food safety, bioterrorism, and compliance issues are critical. We have far more compliance issues in this business than in many of the soft goods. For example, were governed by a lot of the Patriot Act issues. We are also a money service business because we cash payroll checks and handle Western Union and MoneyGrams. Were also into gift cards now. This industry is moving in a lot of directions.

EDITOR: How do the challenges of shrink figure into that equation?

SMITH: We are very much involved in the shrink initiative because our departments integrate themselves into the retail environment. Some of our divisions partner with what we call shrink specialists that parallel an investigator. When we identify a store with a significant shrink problem, the investigator works hand-in-hand with the shrink specialist to develop action plans to attack both the internal and external causes of the shrink.

EDITOR: The store manager in a supermarket will often have shrink and waste as part of their objectives. How do you partner with store managers to assist them?

SMITH: We can come in to help them identify critical areas that either they’ve overlooked or when they’ve been focused in another area. But we dont just identify the problem and walk away. We provide the resources to help them solve the problem. I think that makes a loss prevention person successful. By not only identifying the problem, but providing them with solutions, that makes them of value to the operator instead of being the criticizer and the finger-pointer. Theyre now part of the team because they helped with a solution.

EDITOR: I would guess that training and educational programs are important in your environment, both from the standpoint of your own team, as well as helping the store-level associate better understand LP initiatives. Talk about the types of training that you do.

SMITH: At the store level, we do a lot of awareness training. In the grocery industry, we look at pennies, nickels, and dimes because they add up very quickly. So we train our employees on everything from restocking issues all the way through prevention measures for shoplifting or organized retail crime. We also provide training to management on substance abuse and workplace violence, those types of issues, as well as identifying and managing shrink.

From the LP team perspective, all our investigators are trained in traditional loss prevention areas, such as interviewing and interrogating techniques. We train a lot in report writing, because its a reflection of this department. We also provide them with retail training. We pair them with office managers so they can understand how they do the books. We pair them with receiving clerks where they spend time actually working in that area. Understanding the various retail functions helps them as an investigator.

EDITOR: You mentioned organized retail crime (ORC). At last years Food Marketing Institute conference, we heard one of your loss prevention executives make a dynamic presentation on Safeways ORC efforts. What are you doing in that arena?

SMITH: We’ve put a lot of resources into the ORC arena, but, again, we have the benefit of being able to try programs in several divisions to find out what works the best and then share those best practices. So, for example, in one division we started with identifying a shoplifter and building a case from the bottom up. In the Randalls and Tom Thumb division, we worked the same problem but more from the top down, working with government agencies and the state legislature on the problem of baby formula theft. In fact, you published an article on that effort [A Formula for Fighting Organized Retail Theft January/February 2005].

What we decided was that we needed to do both a ground up approach as well as a state- and federal-level approach. To get started we had to first educate our senior-level executives. But we couldn’t educate them until we had something to literally show them, so we started with developing a quick report that the store could provide. They didnt have to stop anybody; they merely had to see that their shelf was empty or see that somebody walked out with a cart of groceries. Then we went back and used our camera system to get pictures of these individuals swiping shelves. It was very eye opening to the senior executives. By showing it to them, they agreed that we needed to address this issue because of its contribution to shrink.

We started by developing an awareness video for all senior management across the company. Then we developed a video training tool for our employees across the company. Now, weve partnered with other retailers and are providing training to law enforcement. At the same time, Im working on legislative issues to, hopefully, ultimately bring it all together.

EDITOR: I alluded to the Food Marketing Institute (FMI) loss prevention conference thats held each February. Explain your relationship to that organization and what FMI is about.

SMITH: FMI is a federation of grocery retailers for the most part, representing the grocery industry in legislative and regulatory issues. It also has a loss prevention committee that I’ve been on for ten years. I took the chairperson position last year.

EDITOR: What does the committee do?

SMITH: We put together an annual conference. This year it is January 29th through February 1st in San Diego. Every other year we co-locate with another FMI group called Marketechnics that focuses on IT solutions. This allows our loss prevention professionals to gain insight into both what their IT folks are looking at as well as loss prevention solutions in other arenas. It also gives the LP person the opportunity to train their IT partners to look at things that were looking at from our loss prevention vendors.

EDITOR: Ive seen the agenda and not only is it a full two-and-a-half days, but I believe Frank Abagnale is your keynote speaker.

SMITH: Yes, and were very excited about that. If you look at the agenda, there are a wide range of topics that, I think, shows how were integrating our world into the other disciplines that run our businesses.

EDITOR: FMI also conducts an annual survey on loss prevention and shrink (see page 80). It was interesting to me that the most recent survey showed shrinkage continuing to go up in supermarkets. Is there a reason for that in the food retailing segment?The Continuing Evolution of LP in the Grocery Industry

SMITH: I’m not sure that shrink is necessarily going up. I think that were getting better at identifying shrink. Everything was a guess before, particularly in our industry. Were getting better at focusing and identifying what shrinkage is.

EDITOR: Have food retailers been able to separate the waste in the perishables area from the shrink in other areas?

SMITH: Again, were getting better at doing that. Were getting much better at getting down to item detail. In the soft goods arena theres a higher price value on things, so there has traditionally been more item detail. In the grocery world there hasnt been that detail, and yet we are now moving there because it makes us better operators when we can focus on specific items.

EDITOR: One of the things that is a challenge in your type of business is vendor fraud, because so much of your merchandise is directly stocked by vendors. Would you talk about how food retailers are addressing that?

SMITH: In our world, probably 35 percent of the product comes from an outside vendor. To help us better identify this problem, weve gone to computer-based receiving. By going to a computerized check-in process where we check-in every item, its easier to identify someone stealing or overcharging. So were getting a handle on it. We are actually more vulnerable to janitorial problems, where outside companies come in to clean the store and steal from us while theyre there.

EDITOR: In the last five or ten years, what positive changes have you seen in the security and loss prevention discipline as it pertains to food retailing?

SMITH: Integration into the operation. Its a sharing of knowledge and best practices across the industry. Its a change in attitude. As loss prevention experts, we think we know the best way, the only way. But I think weve opened up over the years and are more willing to listen to other approaches. I think you get better that way.

EDITOR: What trends or initiatives moving forward do you think could be positive for the LP discipline?

SMITH: Definitely technology. As in any business, were tasked to do more with less, so we need to be able to tap into those resources that can help us do that. Yet technology has traditionally been one of our weakest knowledge-based areas. Some people are afraid of it. We all need to dive in and embrace it.

EDITOR: How aggressive has the vendor community been in supporting the needs for new initiatives in the food retailing segment?

SMITH: We tend to isolate ourselves in the loss prevention industry when we talk about issues and problems. I think its important to interface and talk to vendors about our problems because they develop the solutions. But what sometimes happens is that they come up with a solution to a problem that weve already addressed. We need to brainstorm with vendors on the important issues we need to solve. Unless we give them our input, they may not produce the solutions that meet our needs.
I also think its valuable to bring in people that have absolutely nothing to do with loss prevention, but are developing new technologies. If they can tell me what they’re doing, Ill try to think outside the box on how this new technology could apply to me. We dont traditionally do that. You dont have to give away your secrets, but listen to what they are developing or give them direction to what you want developed.


EDITOR: My observation is that FMI traditionally has not invited vendors into their conferences.

SMITH: I think thats part of the evolution, the new direction were going in. We are also including other retail organizations, like RILA (Retail Industry Leaders Association) and NRF (National Retail Federation). Maybe our day-to-day operations are not the same, but there may be something you can learn from the grocery perspective. Certainly there are things from traditional retailers that we can apply to our world. Ill give a perfect example. The grocery world is getting involved in gift cards in a big way right now. The companies that are represented by RILA and NRF have been involved with gift cards for some time. We need to learn from them the pitfalls and solutions they ve already identified.

EDITOR: One new technology that the grocery industry seems to be trying is biometrics for preventing fraudulent check cashing. What are your thoughts on biometrics?

SMITH: While other grocery retailers are trying biometrics for check cashing, we are not. We have a good process for payroll check cashing thats not in-lane. Its only at one location and we have some good checks and balances in our process, so our group is not focusing on that as much.
Where the grocery industry differs from other retailers is much of our productivity is time-based. For example, going through the checkout quickly is important in our industry, where in other industries the checkout process is not necessarily as fast. Using biometrics to speed the checkout process would make sense. So I would tend to push biometrics for other applications first and then tag onto the check cashing later.

EDITOR: What are some of those other uses?

SMITH: Things like signing on to your register, payroll verification, time clock, or locks. For example, if you use biometrics to sign on to your register rather than using a card or entering a password, you absolutely know whos on your register. You dont have to carry a card around for your overrides. And, they cant pass your card around to somebody else to do refunds. You know its the proper management person doing the override. So, integrating it into the operations to make you more efficient is a better solution than simply for check cashing. Again, its how I think loss prevention people should look at new initiatives. Consider how it would benefit and integrate into the operations first, then tag on your security applications afterward.

EDITOR: Another difference between grocery and traditional retail is the use of contracted LP personnel and off-duty police officers. Is that still the case?

SMITH: Yes, thats fairly widespread in the grocery industry. Our in-house loss prevention organization is focused on investigations as opposed to reactionary things, so we contract uniformed guards and shoplifting prevention, what we call store detectives. While its budgeted by each director across the company every year, its not a charge to the department. Rather its charged to the store. We have thousands and thousands of contracted hours.

Its very costly for us to have somebody in every store at all times, so we randomly schedule store detectives to give the appearance that they are there all the time. We also do some greeter programs, but we try to have them multi-task. So if theyre greeting and doing customer service, theyre also checking the bottom of the basket. We also use uniformed guards in specific locations based on needs. All the contract personnel are managed by the area investigators.

EDITOR: Are you using exception reporting?

SMITH: We developed our own exception-monitoring program. Its a flexible enough program that we can modify it at anytime. Every division has a data analyst who runs it for their division. Plus, I have a person here in my office that does trends and training. If we find that one division has found a new twist for manipulating data, well bring in all the division data analysts and share with all.

EDITOR: What other centralized functions do you have?

SMITH: Although we centralized our check-collection processes, we have a check management person who oversees that function for the division. We also have a cash management person that works with divisions and investigators in identifying cash shortage problems. They report under our umbrella.

EDITOR: Finally, we cant end this interview without asking an obvious question. As a woman who has risen to the level of vice president in a traditionally male-dominated industry, do you have any comments on your career as a female in this industry?

SMITH: I dont think you focus on male or female; you focus on the person and whether or not they are capable of doing the job. It may have been in my career that I had to demonstrate I could do the job. But I think anybody who succeeds should first demonstrate their abilities. Then its a logical transition. I believe Ive always been the best person for every position Ive held. I offer a different perspective, but I also have the expertise and the credentials to back that up. Ive provided solutions to problems over the years that may not have been conventional, but worked. So I dont think that Im looked at…at least in our world…as differentiated by being a female or not.

EDITOR: What word of advice would you offer a woman in LP?

SMITH: For a female, you need to get in there and do the job and dont expect things to be given to you. But, frankly, thats true for males and females. I dont think anybody should do otherwise.

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