The Evolution of LP to Supply Chain Omni-channel Experts

A Conversation with Maurizio Scrofani

Maurizio Scrofani

EDITOR’S NOTE: Maurizio P. Scrofani, CCSP, LPC, is a well-known supply chain asset protection professional with over twenty-five years of experience in retail and manufacturing, including leadership roles with Macy’s, Bloomingdale’s, Delonghi, and Toys”R”Us. He was cofounder and president of CargoNet, a supply chain theft prevention and recovery network solution of Verisk Analytics. Scrofani is a frequent speaker at industry conferences and a contributing writer for LP Magazine.

EDITOR: As someone with a wide range of expertise in loss prevention in both stores and in the supply chain, let’s start by telling our readers how you got into LP.

SCROFANI: I was an economics and finance major and went to college thinking I would end up on Wall Street. My first real summer job in high school, I worked at JCPenney’s in Garden State Plaza as a sales associate. It was there I first saw ladies and gentlemen walk mysteriously around the store talking into their jackets. I really didn’t know what they did, so I asked questions and found out they were security. They spent most of their time apprehending shoplifters and dishonest employees. I thought that was interesting even though I didn’t really comprehend there was a need for such a thing as I always assumed that most people were honest. Even though I was intrigued by security, in New Jersey you had to be eighteen years old to sign a complaint, so I was not eligible. Eventually, I turned eighteen as a freshman in college. There was an opening at Filene’s Basement for a store detective, which I was fortunate to get. That’s how it all started for me.

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EDITOR: When did you change your mind about Wall Street?

SCROFANI: It was a gradual transition for me. The funny thing about finance is you live in the detail of the numbers. When you think about all your accounting classes, you’re looking at your balance sheet and how things move to credit or debit and why. It technically was the same thing for me—you’re in the detail, and you’re following a very methodical path.

The more I got into LP, the more I learned about shrink, audit, inventory control, and shortage control. That really moved me into the paper part of the trade: how something can happen that’s not people-based. For example, for me it was being in a store where business was slow. It made me think, how can you have a high shrink number? Someone must be really hurting you, but you barely have any employees working on specific days. So you start looking at the paper. Then you realize that it may be a problem with respect to how the inventory control department is manifesting deliveries to the store. That sort of illustrates how my interest in finance manifested itself into loss prevention.

EDITOR: Did you then move more into shortage control?

SCROFANI: Yes, over time. But specifically, when I joined Bloomingdale’s in 1995 as the LP manager of White Plains, there was quite a bit I needed to learn about shortage control. I was lucky enough to transfer over to corporate shortage control, and that’s where I was able to dive into it head first.

At the time, Bloomingdale’s security department was headed by Bruce Williamson, the vice president, and shortage control was managed by Joe Medici whom I reported to. We really went after the whole audit piece first. We were able to break down the stores into traditional ABC classifications. We understood planogramming and its areas of opportunity. We understood the vendor view—which vendors do we have to pay more attention to than others and when. We worked with the security professionals and the merchants to reevaluate sales floor planogramming designs where we had buy-in, and multiple security technology tools were introduced to layer our shortage-reduction efforts. It was a great experience because that allowed me to really get my arms around the inventory control process and auditing compliance standards and practices.

EDITOR: Eventually, you transitioned from the store side into supply chain, logistics, and risk management. How did you make that move?

SCROFANI: I’ve always been the type of person who tries to understand things that people say are impossible to do or fix. Or why people are critical of a specific department. When you’re in loss prevention and responsible for aspects of inventory control, you hear a lot of inventory management conversation about problems.

In 1998, I moved to Babies”R”Us where I was lucky enough to work for seasoned LP professionals of the likes of Bob Serenson and Walter Palmer. At the time we were looking at all areas of opportunity. Bob was a pretty holistic thinker, which was refreshing for me. We were studying the merchant part of the business as well—how things moved and where they were going, essentially looking at the entire logistics side. That’s where I made my transition out of sheer curiosity, and I was lucky enough to have a supervisor that supported it and celebrated the transition.

I said to myself, “Okay, apprehension and investigation, I get it. I need to move over to the other pieces that might be opportunities for us to study.” So I joined the merchandise flow team at Toys”R”Us into what the industry today calls “sales and operations planning.” We really learned to leverage how freight was moving, what should’ve happened, and what wasn’t happening when we needed to influence our partners in the buying side. For me, that was the continued galvanizing of, let’s just say, the asset protection supply chain sword.

What that did for me was allow me to see things from a completely different point of view and honestly different language as well. Instead of hearing about the words that dominated most of the LP discussions like “apprehension and shortage,” now you’re talking about an all-out assault on “defect management.” What are the bits and pieces that you can absolutely touch and grasp that you can help manage and mitigate, expose, train teams, and fix? That’s where allocation and sales and operations planning became a big to-do for me. I was a kid in a candy store and tried to absorb as much as they could throw my way.

EDITOR: It sounds like that was a tremendous education for you.

SCROFANI: No doubt. I learned quite a bit about SKU rationalization studies. How SKUs and categories were planned and forecasted. How purchase orders were written and how they were supposed to flow and from what origin to what destination and lead times. All the pain points that people scream and yell about were literally in front of me. And I could actually see the individual transactional problem in front of me and attack it.

Then in a short window of time, I learned who to work with, and that allowed me to build smart strategic solutions and work with the people who were responsible for the systems and the processes. Sometimes it was the solution provider. Sometimes it was our wonderful databases and Excel spreadsheets [laughter].

Eventually, I moved over to logistics, and then I had all of the domestic inbound operations. I managed everything coming into the organization with a pretty substantial budget of a little over $120 million. That’s where I began to really understand things like lead times, in-transit risk, capacity planning, and how your vendors are moving product and building consumer packaged goods and sourcing for raw materials when they tell you something’s going to be made, and it’s not on time. It was a continued eye-opening experience.

I think, however, it’s important to always acknowledge, “We’re really not subject-matter experts. We’re maniacally passionate students of the supply chain.” The more you take that approach, the quicker you’re going to learn because people will always share with you things that you thought you knew but didn’t. That’s the beauty of having an open mind and acknowledging that you’re nothing more than a student for a long period of time.

EDITOR: Objectives on the store side are often pretty clear. It’s a theft problem, shrink problem, or operational discipline issue. What are the challenges on supply chain side in your experience?

SCROFANI: I think there are four dominant challenges that have become strategic pillars that supply chain executives must continue to address—compliance, visibility, risk mitigation, and efficiency.

First, you want to have compliance standards at all areas of your operation that will benefit you. So you’ll hear about Six Sigma standards, Kaizen projects, gray-space management, or another term that rallies the organization around success. So compliance is a pretty big deal.

Visibility can cost millions of dollars. For example, you put your team together waiting for volume to arrive. You have this projected volume, and it doesn’t show up at the location. You have 2,000, 10,000, 20,000 cartons waiting to be unloaded, and you have people literally standing around getting paid, and your burn rate is through the roof but still waiting on the shipment to arrive. Visibility can become a rather large pain point for many areas of the company. Novelty items that are late, lost, stolen, damaged will create a feverish pitch of discomfort. Imagine a new-generation smartphone missing its launch date. Technology that breaks down in the middle of an event can be catastrophic.

Lastly is efficiency. Can we get better, faster, and smarter at what we do? How do you take a company to a Six Sigma standard, where they are really firing off on all cylinders? Those four pillars are the biggest headaches that most logistics or supply chain executives have today.

EDITOR: You have become a very hands-on, work-your-way-up supply chain expert in the business. How have things changed over the last several years?

SCROFANI: Obviously, technology has gotten better and faster. The ability to say omni-channel comfortably, and be right, has really proven to the consumer that they can buy anything they want at any time, anywhere, and have it delivered any place they want in an expeditious or extremely reasonable window of time. So I think that has changed dramatically. What omni-channel has forced though is that you are now tasked to make really good decisions quickly. Before you had some time on your side, and you had some manual intervention. For example, lead times for some origins and destinations were as high as nine or ten days. Where today your system is telling you, “Nope. The item is moving now.” You’ve got four days, two days, ten hours, four hours, which is a complete shift in paradigm. So I would say that time has compressed, and speed has increased and forced good decisions to be made at times immediately.

Now, the reason I highlight “decisions” is because some of the time in wearing an LP hat, you have to make a decision on what you’re going to do when as it relates to detaining or prosecuting a suspect. In supply chain asset protection, the same applies. However, as you are now freight-centric as the focal point for taking care of the customer, you are challenged with some of the times making decisions about releasing or not releasing freight. Or the parcel package is somewhere in your pipeline that you may have to pull back, stop, or let go, and continue to build your criminal case around that shipment. So that is a very different way of attacking business today. And I don’t think it’s going to get any slower.

In fact, I think it’ll get faster. But what I believe is going to be required is that the technology is going to have to be smarter and asset protection friendly. We are seeing machine learning, artificial intelligence, and blockchain strategies that can, over time, be applied to really smart maneuvering of not only how the data gets filtered and purified, so you can make a good decision, but also how the system can make a good decision for the supply chain AP professional. This will allow for the filtering of defects to draw out incidents that will ensure you’re really only going after criminality versus defect management. I think that’s where eventually over a long period of time, we could end up in a successful way.

EDITOR: Give us a short description of what omni-channel is and what challenges it creates.

SCROFANI: I’ll do my best because it’s still complicated to me. When most of us started out, we were accustomed to just logistics delivery, which was very linear—[distribution center] to store one and then to store two. Then we began to use multichannel—store or online. Now we’re in an omni-channel world where the transaction is at the center of your retail universe. The sale can happen anywhere, the delivery anywhere, and returns anywhere. Now try to put that combination on a white board with 300,000 SKUs, 500 stores, and forty warehouses while inventory is also in-transit in multiple modes of transportation, customers are dynamically buying and returning online and in stores with store locations in different states under different climates and economic conditions and lead times.

I would say the transaction has really grown in complexity to where you have to be able to not only retain the customer through that one transaction but absolutely deliver to that customer’s expectation and at the same time a phenomenal experience. So if the customer wants to buy something now, you have to get it to them any way that you can, the fastest way that they want with no damage and at a reasonable cost. And if they don’t like it, you have to give them the easiest way to return it to have an experience that is unforgettable. At the same time, I am trying hard as a retailer to bring them into my store many times and not just once. So that experience that I allowed the customer to have on their smartphone, desktop, [point-of-service] stand, or on the salesfloor with somebody working a tablet, I have really amplified that to make them want to come back to this store because there’s no one that can do it better than we can.

Omni-channel is not only a transactional technology experience but also an experience that is supposed to bring you into a real social event that allows you to fall in love with the store and amplify the customer’s desire for that store, regardless of the store being the vendor owner or the vendor distributor.

Let me use Macy’s as an example. As a consumer, I love Macy’s. They have every brand that I love. And every time I buy, they never make a mistake. I get it earlier. I have great service. The people on the phone are great. The people at the store are great. Every store that I have shopped in is the same as far as behavior. And I love the omni-channel experience. So they’ve created an outstanding experience that makes me want to continue my relationship with the Macy’s brand.

EDITOR: Let’s talk about the people standpoint with supply chain. If you look back maybe twenty years ago, the professionalism of the people working in supply chain was not what it is today. How has that changed?

SCROFANI: That’s a great observation. I’m going to be as transparent as possible because I think it needs to be heard. When I first started in supply chain asset protection specifically, not just supply chain and logistics, I was told the people who went into the distribution centers were either close to leaving the business or they were ex-law enforcement. What that created was a very rudimentary way of looking at things. It was very physical-security focused. Are the doors locked? Is the gate locked? That has completely changed.

I can only speak from my experience, but when I came out of college, I was told only 10 percent of your time was going to be spent on analytics. Today, a logistics professional, including supply chain AP, spends a good 50 percent of their time on analytics because they’re really studying how to get better, faster, smarter while managing their definition of defects.

Today’s asset protection professional has to have those skill sets. Today we look for a logistician with an expertise in asset protection, not the other way around. We used to bring ladies and gentlemen from the store side, and they would really have a hard time. We knew that their shoring-up cycle was about eighteen months to two years. So we redesigned our onboarding and made sure we had the right sponsors, partners, and leadership oversight throughout their cross-pollination journey. Today’s supply chain AP professional needs to have the ability to attack the four pillars I covered earlier through the same systems that are available to the logistician or the supply chain professional, which can be at times like reading a book in a different language.

So I would say that twenty years ago we were shaking doors, making sure everything was closed. Today we’re studying data, looking, literally, for the blank space. What can I not see that I need to manage? What do I not know that I need to know? That’s going to be the golden chalice that everyone’s going after, the “what I don’t know, that I don’t know.”

EDITOR: If you are an LP professional with responsibilities for supply chain, where do you go to get smarter about how to do your job in this new world?

SCROFANI: My humble opinion would be that it’s a layered approach. The Loss Prevention Foundation’s LPC program gives you a very strong, broad view. Within that broad view is a nice chunk of education that centers around supply chain.

There’s also a great program put together by the American Trucking Association called the Certified Cargo Security Professional that gives you a lot of that logistic physical security view that also ties in carrier claims and some of the behind-the-scenes paper pain.

I have also worked with some of the universities that have a supply chain certificate program. Whether at Penn State or Rutgers, whichever one is closest and convenient for you, they have fantastic programs both on-site and online.

Also, I was fortunate to reach out and work with folks that the industry and I considered subject-matter experts, like Bill Turner, John Tabor from NRS, and Mike Combs at Home Depot. There are others that I am unintentionally leaving out that would be willing to help people coming into our field as mentors and sponsors as well.

Also, there is the piece on “how things work,” the actual processes, great events put together by trade associations like RILA (Retail Industry Leaders Association). Lisa LaBruno and her team do a very good job in bringing in the latest technologies, and the solution providers are always eager to share their new, innovative products. The Council for Supply Chain Management Professionals (CSCMP) puts together a pretty amazing conference. They also have great panelists speaking about the latest things happening in the industry.

There are great logistics trade magazines, like Logistics Management, DC Velocity, CCJ, and the Journal of Commerce, which is my favorite as I read just about anything that Peter Tirschwell shares. Let’s not forget the columns in LP Magazine on supply chain security.

On the technology front, you need to know your systems. Sit down with the system owner. Don’t stop at the person who’s using the system. Get yourself in front of the IT person who has to really explain how the system can crash and what data fields are used and which ones are not, because sometimes those golden nuggets are the ones that you do not have visibility to, but they’re somewhere in this giant system database that you can get your arms around.

Study those three things, commit to your academic foundation, and then really invest. Definitely don’t sit and wait for it to come to you in training classes. You’ve got to go from department to department and carve out your own career path. Ensure you touch base with the planning and allocation teams. Really get to know your buyers. Get into the loading and unloading department in your warehouses. Go to the picking-and-packing department of your 3PL. Sit down with the IT people who built the system that handles all of the hardware and software in your network. Spend time with transportation to understand how the contracts are written and what the exposure is on the parcel side when something is delivered and a person says they never got it. You are possibly getting ten cents on the pound while you just tried to deliver a $600 bracelet that weighs ounces. These are the little things that you’ve got to do to build a comprehensive plan. It may take you three to five years if you are aggressive. I am twenty-plus years in and am still learning and studying.

EDITOR: Your expertise is not just as a practitioner but also as a solution provider. What’s that like experiencing both sides of the table?

SCROFANI: I’ll speak to the solution provider first because I believe it is bit unique. As a solution provider, you’re able to inhale, gorge let’s say, all the problems that the community is feeling. You’re able to catalog all the problems that are consistently identified. Then, if you have a plan and process built to deliver product to the industry, you can create a solution for the industry. Of course, that takes a lot of collaboration, a lot of brain trust, and really that’s where my other side of the business was a blessing.

Working for a retailer or a manufacturer, let’s call them shippers, you realize what you don’t have but wish you had while putting out fires. Eventually, you get to a place in the shipper community where you know something bad is coming, and you can get ahead of it, but it’s expensive, and teams are competing for capital dollars, and your expenses are budgeted with minimal flexibility.

Also, as a retailer, you’re trying to bring in your vendor community partners to solve for these problems you are facing. The solution providers have their niche and are unique to one another, and they don’t typically work together. You try to connect the vendors to create one holistic solution. Fortunately, I was able to bring vendors in, walk them through the problem, educate them in detail of the problem, and start having them work with one another on select initiatives at their discretion. They weren’t competing but were complementary to one another, and that was why it worked. The solution providers knew they were creating something where one plus one is four. But it’s never easy. There are internal politics, financial demands and constraints, and multifaceted ways of looking at things that do not always align.

On the vendor side, you are sort of a creative maverick, but you have to be with a company that is accepting of that profile. You have to say, “I’m from the retailer’s side. These are the twelve things that I know have been broken for the last fifteen, twenty years. Here’s how we tried to fix them. We were probably 40 percent, 60 percent of the way there. However, this is the total solution. And if we build it, then we can present it to the marketplace, and we will begin to gain momentum. But it’ll be like everything else. It’ll take a little while.” If the solution provider is all in, then it becomes a fantastic journey for not just you but also the industry as they have been waiting.

EDITOR: How do you see the asset protection world changing over the next few years?

SCROFANI: This was a question asked of me about five years ago from someone in risk. Nothing has changed in my mind from five years ago to today. We have all seen security go to LP, LP go to AP, and now AP has become supply chain as stores become shipping environments. They’re basically mini warehouses because now everyone’s shipping out of a store. So AP will become a supply chain AP department.

Then that will take one more step where you’ll become a supply chain risk management department. At that point, you need to figure out where it all flows. It’s going to go from the operations to finance and then audit. Risk at the end of the day is under finance. So I wouldn’t be surprised if the evolution is probably from traditional security to true supply chain risk management finally feeding and reporting under the financial pyramid.

EDITOR: In the past, we have predominantly seen store-line professionals move into the VP or senior level positions in asset protection. Do you see a day where the supply chain expert will become just as credible and may in fact move into those positions as well?

SCROFANI: Absolutely. Omni-channel is forcing that to happen. There’s now a global demand for a holistic view and understanding of how to manage people, process, things, and data under one’s care and custody. I remember a big-box retailer some time back when their supply chain leader took on the senior role as a CEO.

I absolutely can see it happening on the AP side because forty facilities and 600 stores equal 640 facilities that are shipping and receiving product. There is a human management piece in the forty facilities where you have rules that cover coming into work only and not shop. In the 600 stores, they’re also coming in to shop. So you have to definitely have someone who has had store expertise. But as the world of retail continues to evolve to a truly omni-channel way of thinking, you’re going to see supply chain professionals take a leadership role. I wouldn’t be surprised if someone from supply chain AP actually moves over and has a solid number two that is managing the brick-and-mortar sales floor part of the business.

EDITOR: Did you gain all your expertise on your own, or did you have people who helped you and mentored you along the way?

SCROFANI: Both. I was pretty ambitious and driven, and I knew the only way to make sure I can solve something that was really big was to study it. And then I had phenomenal mentors. At Toys”R”Us between Bob Serenson and Randy Underwood, those guys were game changers for me. Joe Young as well, who taught me everything about planning allocation and sales and operations planning. John Matters, who was a phenomenal logistics executive, and Michael Jacobs, who was our senior VP of logistics and was supportive of cross-pollination recruitment, training, and development.

At Macy’s I had Joe Medici, Ralph Betancourt, and I was able to watch one of the most remarkable strategic logisticians, Tom Cole, who built that entire program over his iconic tenure before retiring as the [chief administrative officer], really get things done.
I was blessed to have always been around great business mentors. Outside of my mom and dad, those were the people that really helped in my professional development.

EDITOR: You mentioned your mom and dad. Tell us about your family. Are you a first-generation Italian-American, and what traditions are important to you?

SCROFANI: Yes, I am a first-generation immigrant. I came here in 1976. My family is traditional Roman Catholic Italian, so we celebrate all the religious holidays that are near and dear to us in a big way. Funny story about a non-religious holiday: when I first came to this country at age seven, it was two days before Thanksgiving. When we went to my uncle’s home for Thanksgiving, and they put the turkey on the table, I asked my mother, “Why the large chicken?” Everyone laughed at me, and I later figured out why.

Our traditions are very rooted into our family. From family dinners where we sit at the dinner table nightly with my wife and sons, when I am not traveling. We also spend weekends with the extended family as well. So we’ll see mom, dad, my two brothers, and aunt. Birthdays are a big deal for us, and as I also have quite a few nephews, nieces, and godchildren, there can be quite a few get-togethers monthly. My boys have phenomenal uncles and aunts. It’s a very close-knit type of a community. The culinary arts are pretty deep rooted in our family.

EDITOR: I’ve always thought of you as one of the most articulate persons I’ve ever known, and yet English is your second language, correct? How did you make that transition? There’s not even a hint of another language in your speech.

SCROFANI: Yes, English is my second language. When I came to this country forty-plus years ago, we did what most Italians do. We came to a part of New Jersey, Paterson, that was filled with Italians. I started first grade at a Catholic school in Paterson called St. Anthony’s. Anyone that spoke Italian was put in a corner with Italian-American kids who spoke Italian. That’s how you assimilated.

I had two challenges. First, I spoke proper Italian, but the kids I sat with spoke a dialect. It was difficult to communicate. I would go home and ask my mom and dad, “They said this word. I have no idea what it means.” They would say, “That’s from this part of Italy, and this is what it means.”

Second, I did not like when I was poked fun of. So I forced myself to really learn English as fast as I could. It took me six months to be comfortably conversational. The one thing that saved me was math. Math is universal and the same in every language; one plus one is two. And I was really good at math. So I quickly learned to speak English well, so I wouldn’t ever have to deal with language as an obstacle.

EDITOR: You wrote an article for us a few years ago on your vision of the mall of the future. I’m guessing that your vision has probably evolved at this point. Talk about what you see, not just LP or supply chain, but how you see the retail world evolving in the near future.

SCROFANI: We’re seeing it happen right now. You walk in some of the big retail department stores, and there are multiple vendors that have leased departments in the store, which technically means that their stores are inside your store. Now you’re seeing layers of restaurants being added. You’re starting to see that they’re bringing in people to talk about health and wellness. So it’s really beginning to happen.

What is going into the malls today that is nontraditional? They are putting in more financial institutions. Some kind of e-learning classes or schools. All that’s happening. So malls are becoming somewhere that you go to be in an environment that has everything in it. It’s got your urgent care. It’s got virtual universities, so you can take classes. Your gym is in there. And everything inside the mall becomes like a small community. And think about if you have a dog or a child—you drop the dog off at a pet park with a veterinary clinic next door. And you drop the baby off at the daycare center. Malls can slowly evolve to safe-haven communities.

EDITOR: How will this affect asset protection?

SCROFANI: It will force AP to really think about how to manage human capital within this giant community, almost like they do at very large theme parks. So people that come to visit this mall would receive an RFID wristband. Now you know the family unit includes the parent, the child, and the dog. They’re all inside. You’ve got full, smart technology, so the mall security understands how many people are in there, where they are, what’s going on, what the relationship is to what ID badge. That’s the easy part.

Then comes the store associates. Now that social media is everywhere you are, how do you make sure that every person in the AP world is well-versed in how to engage an individual? You’ve got a lot of different types of identifications out there as far as how people want to be identified. How do you engage that individual without putting the brand of the company at risk by referring to them by something they don’t want to be called?

That kind of soft-skill demand is coming really fast because it’s not just about the person making a mistake. It rolls up quickly to the CEO of the company. And before you know it, your brand is tarnished. I think that’s starting to happen in individual stores at the transaction level, but when this new evolution becomes real, it’ll be a big to-do.

EDITOR: One more question. You are on the board of ISCPO (International Supply Chain Protection Organization). For those who don’t know, give us a short description of what that organization is all about and what we could expect from the upcoming conference in March.

SCROFANI: The board is made up of a great group of people. The best part of what we do is, we’re not tied into a specific segment of the industry. On our board there’s someone from the insurance industry, someone from retail, manufacturing, third-party logistics, and law enforcement. We try to address what the problems are that we continue to face in the marketplace that we can educate the industry.

We have certification programs where we allow specific trucking companies to certify themselves with our work. We make sure that their standards are above board, and we help them build strong, solid, transportation security and distribution programs. We do a lot of training, education, and information sharing.

You can expect this year’s ISCPO conference March 6-7 in Dallas will be a solid event. We’re going to deliver the right message to the right audience at the right time. We fully understand that omni-channel is going to take over much of the conversation. Once you walk into the ISCPO door, it’s ginormous. You have to kind of pick your avenue, go down the hall, because we’re going to be able to walk you through a lot of what we’ve talked about today with a lot more detail, a lot more resources, and a ton of passion and vigor.

It’s an exciting time to be connected to ISCPO, and I truly look forward to a lot of our good industry friends making their way this time. It’s not just for supply chain professionals. It’s the right time for brick-and-mortar associates to start shoring up their glossaries because supply chain AP and store AP will all be talking the same language sooner or later.

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