May - June 2014

LPPORTAL.COM | V13.3 MAY - JUNE 2014 Think like a Chief Visibility Officer

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LOSS PREVENTION

MAGAZINE THE VOICE OF LOSS PREVENTION

USING BIG DATA

TO REDUCE LP INVESTIGATION WORKLOAD ROSAMARIA SOSTILIO: 25 YEARS AT SAKS FIFTH AVENUE IN-TRANSIT CARGO CRIME IS IMPACTING THE RETAIL SUPPLY CHAIN THE ROI FORRFID IN RETAIL

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CONTENTS

15

Using Big Data to Reduce LP Investigation Workload How new analyses improved JCPenney’s case leads

6

PUBLISHER’S LETTER A New Source Tagging Roadmap

By Jack Trlica

8

ON THE WEB

10

RETAIL SPONSORS

12

INTERVIEWING Does It Pass the Smell Test? Part 2

By David E. Zulawski, CFI, CFE and Shane G. Sturman, CFI, CPP

24

DIGITAL DIALOGUE A New Age of Natural Selection

By Jacque Brittain, LPC

38

CERTIFICATION On the Move? Let’s Start with the LP Foundation

By Jacque Brittain, LPC

52

EVIDENCE-BASED LP Decisions, Decisions

By Read Hayes, Ph.D., CPP

54

ASK THE EXPERT The Basics of Data Analytics With Nathan Smith, Sysrepublic

63

SOLUTIONS SHOWCASE - Agilence - Alpha - Axis Communications - Intelligent Loss Prevention - Corrective Education Company - Tyco Retail Solutions - Palmer, Reifler & Associates - Protos Security - The Retail Equation

76

PRODUCT SHOWCASE

79

CALENDAR

79

PEOPLE ON THE MOVE

80

ADVERTISER DIRECTORY

81

VENDOR SPONSORS

82

PARTING WORDS Show Me the Way

By Jim Lee, LPC

By Eduardo Coccaro, Elizabeth Jones, and Xiaoqui Liu, University of Texas

27

25 Years at Saks Fifth Avenue

The Evolution of Rosamaria Sostilio

By James Lee, LPC, Executive Editor

41

In-Transit Cargo Crime How cargo theft is impacting the retail supply chain

By John Tabor, All States Locate

55

The ROI for RFID in Retail

Use cases driving the current surge in RFID adoption

By Bill McBeath, ChainLink Research

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5/30/14 11:27 AM

11 10 of the top 50 retailers

use the retail equation to improve their return processes.

Leading retailers choose The Retail Equation to improve the customer experience at the return counter. Driven by predictive analytics, your return processes become more flexible and friendly while still managing risk and preventing abuse.

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PUBLISHER’S LETTER

A New Source Tagging Roadmap

C

oming on the heels of our two-part history of EAS source tagging, it was interesting to get an invitation to a National Source Tagging Symposium sponsored by Checkpoint and hosted at CVS Caremark headquarters outside Providence, Rhode Island. The forty-plus attendees were split roughly in half between retailers and consumer packaged goods (CPG) manufacturers.

The retailers attending included Mike Silveira, CVS’ vice president of loss prevention, and his team, as well as representatives from Rite Aid, Walgreens, BJ’s, Family Dollar, Pep Boys, The Wet Seal, Toys‘R’Us, and Australian department store Myer.

CPGs represented such brands as Beiersdorf, Elizabeth Arden, Johnson & Johnson, Merck, Nutramax, P&G, Pfizer, L’Oreal, and others.

A number of Checkpoint executives and support staff contributed to the discussion, including John Peterson who moderated the day-long meeting and presented the results of research that involved both consumers and offenders and their perceptions of product-protection efforts. Dan Reynolds discussed the results of the most recent Global Theft Barometer. Neil Matthews from their European operations presented case studies of tagging efforts by several EU retailers.

Part of the day featured presentations

by CVS, Family Dollar, and Rite Aid on the status of each retailer’s EAS tagging program, including wins and losses, challenges, plus the next steps they believe tagging must take to be effective. There was also a comprehensive look at Myer’s “my store my shrinkage” internal awareness campaign presented by Wendy Marshall, Myer’s general manager of operations support. Ms. Marshall’s presentation was a strong case study demonstrating how a top-to-bottom commitment to owning shrink results can

MAGAZINE

produce a significant cultural change in a retail organization.

An underlying theme to all the presentations could be summarized as “visible tagging.”

All the formal research and all the retailers’ results pointed to the need for visible tags on merchandise that defied removal or damaged the packaging if removed to counter organized retail crime and the reselling of stolen merchandise. The better part of the afternoon was spent in open discussion of how to achieve that goal.

As an observer and admittedly not an expert in EAS source tagging, it was enlightening to understand how difficult it is to pull together merchants, packaging designers, manufacturers, and other stakeholders to achieve a common goal, especially given the multiple EAS solutions in use by different retailers.

One of the most interesting slides shown indicates how important building a consensus is to both retailers and brand owners. Silveira and Bob Oberosler, Rite Aids’ group VP of asset protection, both gave Checkpoint their individual shrink numbers by item. As Oberosler said, “This is the first time to my knowledge where two competitors shared this type of data.” He was quick to point out that the two companies couldn’t see each other’s data and all sales numbers were removed. The end result was a ranking of the top 350-plus SKUs by shrink rate—the ultimate list of “hot” theft items, many of which were owned by the manufacturers present.

The end result of the day was Checkpoint’s commitment to develop a roadmap for achieving the visible-tagging goal that satisfies all parties—retailers, CPGs, and suppliers. By all accounts, it’s a daunting task, but one that would have a significant benefit to the industry.

Jack Trlica Editor and Publisher

LossPrevention, LP Magazine, and LP Magazine EU are service marks owned by the publishers and their use is restricted. All editorial content is copyrighted. No article may be reproduced by any means without expressed, written permission from the publisher. Reprints or PDF versions of articles are available by contacting the publisher. Statements of fact or opinion are the responsibility of the authors and do not necessarily represent the opinion of the publishers. Advertising in the publication does not imply endorsement by the publishers. The editor reserves the right to accept or reject any article or advertisement.

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700 Matthews Mint Hill Rd, Ste C Matthews, NC 28105 704-365-5226 office, 704-365-1026 fax EDITOR AND PUBLISHER Jack Trlica JackT@LPportal.com EXECUTIVE EDITOR James Lee, LPC JimL@LPportal.com EDITORIAL DIRECTOR, DIGITAL Jacque Brittain, LPC JacB@LPportal.com CONTRIBUTORS Robert L. DiLonardo Dave DiSilva Read Hayes, Ph.D., CPP Richard C. Hollinger, Ph.D. Walter Palmer, CFI, CPP, CFE Gene Smith, LPC Shane G. Sturman, CFI, CPP David E. Zulawski, CFI, CFE CHIEF OPERATING OFFICER Kevin McMenimen, LPC KevinM@LPportal.com DIRECTOR OF MARKETING Merek Bigelow MerekB@LPportal.com DIRECTOR OF DIGITAL OPERATIONS John Selevitch JohnS@LPportal.com SPECIAL PROJECTS MANAGERS Kat Houston Justin Kemp Karen Rondeau DESIGN & PRODUCTION SPARK Publications info@SPARKpublications.com 704-844-6080 CREATIVE DIRECTOR Larry Preslar ADVERTISING

ADVERTISING MANAGER Bonnie Dodson 828-479-7472 office 704-943-5797 fax BonnieD@LPportal.com WEST COAST REP Ben Skidmore 972-587-9064 office 972-692-8138 fax BenS@LPportal.com SUBSCRIPTION SERVICES

NEW OR CHANGE OF ADDRESS myLPmag.com POSTMASTER Send change of address forms to Loss Prevention Magazine P.O. Box 92558 Long Beach, CA 90809-2558 LossPrevention aka LP Magazine (USPS 000-710) is published bimonthly by Loss Prevention Magazine, Inc., 700 Matthews Mint Hill Rd, Ste C, Matthews, NC 28105. Print subscriptions are available free to qualified loss prevention and associated professionals in the U.S. and Canada at www.myLPmag.com.

The publisher reserves the right to determine qualification standards. International print subscriptions are available for $99 per year payable in U.S. funds at www.LPportal.com. For questions about subscriptions, contact circulation@LPportal.com or call 888-881-5861. Periodicals postage paid at Matthews, NC, and additional mailing offices.

© 2014 Loss Prevention Magazine, Inc.

The Analytics Ecosystem for Retail Enterprise solutions to reduce risk and protect profits APIS – Case Management

Come vis with us a it t the NRF-LP Conferen ce!

APISaudit – Store and Compliance Auditing Aspect – POS Exception Reporting LERPnet – Law Enforcement Retail Partnership Network CargoNet – Cargo Theft Prevention and Recovery Employee Training and eLearning Background Checks and Screening P&C Claims Analysis, Reporting and Investigations

We’ll be in 3 booth #101 June 11-13, 2014.

Driver Risk Management and Screening Chemical Regulatory and Compliance Weather Risk Management Medicare Secondary Payer (MSP) Compliance Catastrophe Modeling Healthcare Risk Management Location Risk Information

Learn more! veriskretail.com 888-777-0585 © Verisk Crime Analytics, Inc., 2014.

Verisk Retail and the Verisk Retail logo are trademarks of Verisk Crime Analytics.

ON THE WEB

EYEONLP Powered by LP Magazine

EDITORIAL BOARD

Didn’t have a chance to attend RILA’s asset protection conference this year?

Don’t worry, we have you covered with daily recaps from the show on our EyeOnLP page at LPportal.com.

Leo Anguiano, LPC Senior Director, Asset Protection Rite Aid

Bob MacLea Senior Vice President, Loss Prevention, TJX

Jim Carr, CFI Director, International Loss Prevention, Rent-A-Center

John Matas Vice President, Loss Prevention, Investigations, & Technology, Macy’s

Francis D’Addario Emeritus Faculty Member, Strategic Influence and Innovation, Security Executive Council

Chris McDonald Senior Vice President, Loss Prevention, Compass Group NA

Charles Delgado, LPC Vice President, Asset Protection, Meijer

You can also count on seeing EyeOnLP at the National Retail Federation LP conference in June. Stop by and let us get your observations of the conference on video as well as your views on the latest trends and big issues you see in the industry. If you are interested in appearing in an EyeOnLP segment, contact Kat Houston at katherineh@lpportal.com.

Patti Felz Vice President, Loss Prevention, Polo Ralph Lauren

Exclusive Offer for our Readers

Speaking of conferences, we recently partnered with the Cyber Security Summit to offer our readers 50 percent off conference passes for their two upcoming summits focused on the latest in cyber security. These events are scheduled June 5th in Washington, D.C., and September 18th in New York City.

Tim Gorman Divisional Vice President, Loss Prevention, Asset Protection and Business Continuity, Walgreens

The Cyber Security Summit is an exclusive conference series connecting C-level and senior executives responsible for protecting their companies’ critical infrastructures with cutting-edge technology providers and renowned information security experts. Visit cybersummitusa.com to learn more and use promo code LPMAG to receive a 50 percent off registration discount.

Barry Grant Senior Vice President, Operations & Loss Prevention, CPI Corp Bill Heine Senior Director, Global Security, Brinker International

The LP Magazine App Provides the Latest Industry News Whenever You Want It

Sonya Hostetler Vice President, Asset Protection & Safety, Walmart Stores U.S.

Be on the lookout in the coming months for the next version of the LP Magazine app.

Included in the next update is even more access to original content, video, podcasts, new content areas, and much more from LP Magazine. It’s available for both iPhone and Android devices. Download it today from your favorite app store.

Frank Johns, LPC Chairman, The Loss Prevention Foundation Gary Johnson Vice President, Loss Prevention, Vitamin Shoppe

LinkedIn Group

Paul Jones, LPC Senior Director, Global Asset Protection, eBay

Powered by LP Magazine LinkedIn is not only a place for networking and connecting with individuals across our profession, but it’s also a forum for group discussions. So, let’s get talking, sharing ideas, and collaborating. Our group, Powered

by LP Magazine, is growing daily. Join in the conversation. We want to hear from you.

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Karl F. Langhorst, CPP, CFI Corporate Director, Loss Prevention, The Kroger Co.

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Randy Meadows Senior Vice President, Loss Prevention, Kohl’s Melissa Mitchell Director of Loss Prevention, LifeWay Christian Stores Dan Provost, LPC Vice President, Global Loss Prevention, Staples Tina Sellers Director of Loss Prevention, Delhaize America Mark Stinde Vice President, Asset Protection, 7-Eleven Paul Stone, LPC Vice President, Loss Prevention and Risk Management, Best Buy Claude Verville, LPC Vice President, Loss Prevention, Safety & Hazmat, Lowe's Stanley E. Welch, LPC Vice President, Director of Loss Prevention, JCPenney Keith White Senior Vice President, Loss Prevention and Corporate Administration Gap Inc.

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RETAIL SPONSORS

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Join these great companies as an LP Magazine corporate sponsor. Email JackT@LPportal.com for more information.

LP MAGAZINE | MAY - JUNE 2014

11

INTERVIEWING

Does It Pass the Smell Test? Part 2

by David E. Zulawski, CFI, CFE and Shane G. Sturman, CFI, CPP

© 2014 Wicklander-Zulawski & Associates, Inc.

I

When we add the type of jobs available to those entering the workforce, it matches neatly with the lack of tenure associated with those who steal. To a large extent this age group is working in part-time positions with no long-term career path evident. As a result there tends to be a lack of commitment to the organization, which reduces the employee’s length of tenure and reduces his reluctance to steal from the company.

n our last column we looked at the red flags indicating a large scale fraud or embezzlement was likely being committed by employees. Now we will look at the behavioral indicators of the simple thief at work within the organization. Birds of a feather stick together—their behaviors and pasts are indicators of how they will act, and serve as predictors of future behavior.

While today’s analytics and data mining can quickly focus on anomalies in the numbers indicating probable theft problems, there was a time when investigators did not have this advantage.

Some companies do not yet have these systems so it might be useful to go “old school” and look for thieves by their behaviors.

Let’s take a look at the red flags we have found to be most useful in ferreting out the dishonest associate. As we noted in our last column, there are great differences between an employee who is a thief and one who is a fraudster or embezzler.

While at the end of the day both types are stealing from the organization, their methods are different as are the red flags indicating dishonesty.

While today’s analytics and data mining can quickly focus on anomalies in the numbers indicating probable theft problems, there was a time when investigators did not have this advantage.

Some companies do not yet have these systems so it might be useful to go “old school” and look for thieves by their behaviors.

Age and Tenure

In general the thief poses less of a threat to the organization than the fraudster. This is due simply to the level of access to the accounting function or ability to manipulate documents.

This group as a whole also tends to be less tenured, resulting in a shorter length of time to steal from the company. While the fraudster tends to be a longer tenured employee, thieves extend to the other end of the spectrum and tend to be newer to the organization. As a rough estimate, about 70 percent of employee theft is committed by associates who are with the company one year or less. Seventy percent of that 70 percent of theft activity is committed by employees having tenure of less than six months.

Not surprisingly, the age of the thief is also much younger than the fraudster. A thief by his very nature is impulsive, and acts impulsively to exploit a situation for his advantage. If one was to examine arrest statistics from the 1800s to the present, it becomes apparent that 16- to 25-year-olds are arrested more than any other age group. These are the years in peoples’ lives where they are most impulsive, and their thoughts are focused on today rather than what tomorrow will bring. It’s not until the mid-to-late 20s that an individual’s perspective on life begins to focus on the future, and the impulsive nature begins to diminish.

In the later 20s people begin to focus on their career, families, and homes, making decisions for the long-term.

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Zulawski and Sturman are executives in the investigative and training firm of Wicklander-Zulawski & Associates (w-z.com). Zulawski is a senior partner and Sturman is president. Sturman is also a member of ASIS International’s Retail Loss Prevention Council.

They can be reached at 800-222-7789 or via email at dzulawski@w-z.com and ssturman@w-z.com.

We now have the impulsiveness of the young person, and a lack of commitment to the organization, combined with minimum-wage positions and exposure to merchandise and money. This is an obvious combination that can be easily rationalized, releasing the impulsive nature of the part-time employee to commit a theft.

Personality

While the fraudster may exhibit a strong commitment to the organization and perhaps even excel at his position, thieves tend to behave just the opposite. Since there is no long-term commitment to the company, we will often find the thief is a disgruntled and lackadaisical employee. These continued on page 14 |

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are especially important. With their need to be in constant communication and well-liked by their friends, it is a simple step to engage in pass-offs or discount abuse.

An angry or disgruntled employee is also easily able to rationalize his dishonest behavior by blaming the company, high prices, his low pay, or the need to please friends to justify his theft activities. Since the associate does not plan on a long tenure with the company, if he is fired or quits, it makes little difference to his long-term career path.

This behavior is considerably different from the fraudster, who uses being well-liked and good at his job to conceal his fraudulent activities. The fraudster does not want to make waves or come to the attention of management since that might cause discovery of his activities.

continued from page 12

characteristics, especially disgruntlement, make it easy for an individual to rationalize his theft since he believes that he is not being treated fairly or paid adequately by the company.

The thief’s disgruntlement is often characterized by his shoddy workmanship and lack of attention to detail.

This disgruntlement may be seen in the cleanliness of the facility, a disorganized stock area, and the shoddy display of merchandise. A manager who allows his store to appear like this breeds theft in the same way a dirty food counter grows bacteria.

The disgruntled employee may have been disciplined by management for a variety of issues. Hollinger and Clark in their seminal study of employee theft pointed out that the thief participates in time deviance. In other words, they abuse time. The disgruntled employee is likely to come in late, leave early, take longer breaks, and have more missed shifts than the honest associate. These employees may spend time talking on their cell phones or visiting with friends who come to visit. Unless the manager is present, you will likely find them engaged in idly passing the time.

Motivation

While the motivation for the fraudster revolves around greed, it may be much more complex for the thief. The fraudster turns on a consistent flow of money, perhaps using several schemes to live a lifestyle he otherwise could not afford. However, for the thief we might find a more erratic and impulsive flow of money and merchandise that is dependent on the opportunities available during any particular day. It might be a certain manager on duty who spends an inordinate amount of time off the sales floor giving the thief an opportunity to create fraudulent refunds. Or it might simply be a purse left open and unprotected. The thief is opportunistic, seizing the moment and exploiting it for his own gain. The fraudster is more cerebral, turning on a continuous flow of money enriching him over time.

Sometimes the thief is not driven by greed, but rather the need to belong. This motivation encourages him to collude with his friends to steal from the organization. The gratitude of his friends provides a social reinforcement for his activities and endears them to him.

Clearly, the thief will not become rich waiting for an opportunity to steal. The theft may be a momentary solution to a personal financial need, but it is not a long-term solution to his cash problems. The thief’s impulsiveness is also often reflected in how he spends his money. One day he is destitute, and the next flush following his theft. He disposes of his proceeds impulsively and without a thought for the future. We have interviewed a number of drug dealers who talk about making thousands of dollars in a single day, only to wake the next morning totally broke.

There is a huge difference in the activities of the fraudster and the thief. The thief may choose to steal metal items to sell to scrap dealers, or break into a house to take a second-hand TV; but these provide only a pittance and are not capable of changing their lives.

However, if we think of Bernie Madoff, the distinction is clear.

It’s a scheme that is in place for a long period of time, providing a constant flow of money that is sufficient to change a person’s lifestyle. A city clerk here in Illinois embezzled over $50 million from her community. She became a rich socialite with a stable of horses, fine jewelry, and was able to take expensive vacations, which she did for years.

Remember, when trying to ferret out thieves from honest employees, it will often be their traits that will help us identify them. A good investigation will then clearly establish their dishonest actions.

There is a huge difference in the activities of the fraudster and the thief. The thief may choose to steal metal items to sell to scrap dealers, or break into a house to take a second-hand TV; but these provide only a pittance and are not capable of changing their lives.

However, if we think of Bernie Madoff, the distinction is clear. It’s a scheme that is in place for a long period of time, providing a constant flow of money that is sufficient to change a person’s lifestyle.

Considering their shoddy workmanship, time deviance, and lack of attention to detail as a group, they are likely to have been disciplined or put on warning. This group typically does not pull its own weight, and they tend to flock together separate from the honest employees. Since the age group of the disgruntled employee is most often in the 16 to mid-20s age group, peers

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COVER FEATURE

USING

BIG DATA TO REDUCE LP INVESTIGATION WORKLOAD

By Eduardo Coccaro, Elizabeth Jones, and Xiaoqi Liu

BIG DATA

D

eep inside the data warehouses of companies across the world, there are billions of dollars trapped in the subtle variations between the binary 0s and 1s that make up fraud and loss prevention data. For the 2014 Retail Industry Leaders Association (RILA) asset protection conference, JCPenney approached the University of Texas at Austin’s masters of science in business analytics (MSBA) program to identify a way to unleash that value, improve their existing risk- and fraud-detection system, and reduce loss.

The potential to re-conceptualize the way companies approach internal fraud through so-called “big data” and an analytics-driven approach is incredibly exciting and something that drew us to this field. Not to mention, the granularity of data within the retail industry provides a treasure trove of potential that requires a unique understanding of retail psychology, marketing, and analytics to fully understand. In fact, over the course of our four-month project, we were able to create an approach that could reduce the workload of the JCPenney fraud prevention team by over a month annually.

Although the methods we employed are already well established within the insurance industry, up until recently the cost of computing and analyzing each individual transaction posed a paradoxical cost-benefit. However, today not only does the cost of computing sit at record lows, but also open-source, freely available software allows companies to pilot robust data analysis with little-to-no risk. In fact, as McKinsey Global Institute has reported, the chief challenge for companies today in implementing analytics is more in their ability to attract and retain data professionals.

With that in mind, our MSBA team decided to walk through the steps of developing a model and highlight the importance of domain knowledge experts in developing robust data-driven processes.

“We allowed the graduate team from the McCombs School to analyze loss prevention data sets without bias or preconception,” said Mark VanBeest, CFI, director of global security and investigations for JCPenney. “Initially, we tasked the students to determine if we were getting the best results on case leads sent to the field. At the time we were very confident that current reports and data were identifying the bulk of our Mark VanBeest internal theft.”

VanBeest added, “Given the sensitive nature of data security and the critical importance of protecting consumer data, it’s important to note that no consumer credit card information was analyzed or shared with the students for this research project.”

they were actually non-fraudulent. However, that presumes that every single item within the report was investigated, which, pragmatically, is unrealistic.

To gain a better understanding of the data and how to go about modeling fraudulent transactions, our team began by computing some descriptive statistics for our data. More specifically, we uncovered that for the current delete ratio of 2, which indicated the number of deleted items was half or more of that total number of scanned items for a given receipt, out of our sample of 158,000 reported transactions, we found that only around 1 percent came back as actual fraud.

That posed a unique challenge in that the existing fraud-threshold reported so many transactions that it became almost infeasible for an LP professional to investigate all of them. With that in mind, we focused on answering two questions: 1. Is the report worth sending out?

2. If so, how do we more accurately predict fraud to reduce the number of flagged transactions and the workload of the LP associate?

This all had to be weighted by the fact that reducing the list too far would allow fraudulent transactions to pass through and cost the company money.

Our approach was to use logistic regression to improve the reporting threshold by creating a model that output a likelihood of fraud associated with each exception. With that prediction, we could rank order each transaction, determine a new threshold to cull weekly emails, and provide a prioritized list to loss prevention leaders.

Here is a simple explanation of how logistic regression works.

Graph A on the next page shows the linear regression of the observed probabilities (Y) on the independent variable X. The problem with ordinary linear regression in a situation like this is if the regression line is extended a few units upward or downward along the X axis, you will end up with predicted probabilities that fall outside the legitimate probability range of 0 to 1. As shown in Graph B, logistic regression fits the relationship between X and Y with a special S-shaped curve that is constrained to remain within the range of 0 to 1 on the Y axis.

Assumptions and Data Analysis

Our study is based on over 158,000 exceptions reported on the item-delete report generated from November 2013 to February 2014.

The information associated with each of the exceptions included attributes such as the employee ID, location, date, quantity deleted, and other data. Whether an exception was confirmed to be a true fraud was also indicated.

In order to formulate the problem, JCPenney and our team agreed on a few assumptions. The first assumption was that if an employee was eventually fired for fraudulent actions, most of the previous flagged exceptions were also fraudulent. The second assumption The Focus of Analysis Using the point-of-sale (POS) reporting system data from JCPenney, was that the results from our study could be extrapolated from four months to a year to calculate final yearly return on investment (ROI). our team decided to dive into the “item-delete” report that calculated Descriptive Analysis. Before jumping into the modeling the delete ratio and triggered emails to stores every week. From process, several descriptive statistics were conducted to obtain an there store-level LP personnel were provided a focus to investigate understanding of the exception data. While most of the descriptive potentially fraudulent activity. Unfortunately, there was a difficulty statistics helped to hone our intuitive expectation of the data, a in determining the success reports because the system only required number of things stood out. The most surprising came when we stores to report back with “true” fraudulent activity. In other words, created a histogram between the number of exceptions and the date of if no call back was made to corporate in response to the reported the exceptions, as shown in the figure at the bottom of the next page. list of “potentially fraudulent” item deletes, the report presumed that

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BIG DATA B. Logistic Regression

1.0

1.0

0.8

0.8

Y [probability]

Y [probability]

A. Ordinary Linear Regression

0.6 0.4 0.2 0.0

20

25

30

35

40

The upper half included the non-fraud exceptions, and the lower part included the fraud exceptions. An obvious division can be identified in the histogram. Comparing the two graphs from left to right, we see that they are highly similar up to the gray vertical line. At that point, the level of fraud deviates from the non-fraud distribution. As we can see by the time-series data, the distribution before the gray line represents the holiday season of November and December 2013. Whereas, after the split represents January to February 2014.

This huge change in seasonality could serve as a detriment to our model as it doesn’t follow a consistent pattern. In recognition of this, we adapted our original plan from creating a single model to creating two separate models, one for the holiday season and another for the normal shopping season as represented by the January–February timeframe.

Important Attributes Identification. Unfortunately, not all attributes—also known as factors, variables, the “columns” in Excel—are created equally. Instead some are much more informative than others. Before we began building the final model, we needed to see which attributes were actually indicative of fraud.

JCPenney reports seventeen attributes for every exception, including such items as store ID, date, and transaction amount.

JCPenney also developed an attribute to measure the risk level of each exception. Exceptions were categorized into “risk” and

0.6 0.4 0.2 0.0

20

25

30

35

40

“high-risk” levels. Our goal was to reduce the complexity of the model and improve the interpretability. With that in mind, we proceeded to identify the statistically significant attributes.

Our first method was to run each of the seventeen attributes individually through a logistic regression; through which, the model indicated if the attribute was statistically significant in determining fraud.

Extending the logistic regression, we also used a second technique called “LASSO” that provided a ranked list of all the attributes in order of relative importance.

Combining the results of the logistic regression and LASSO regression, six attributes for each shopping season were selected out of the original seventeen attributes.

Interestingly, we confirmed fraud is also influenced by seasonality. By comparing the attribute significance levels of the holiday season model and the normal shopping season model, we found that there were significant differences in terms of importance of attributes predicting fraud.

Modeling of Exception Fraud Probability. Two binary logistic regression models were built, one for each shopping season. The six identified important attributes were input into their season’s model and an estimated probability of fraud would be produced for each exception.

Count

Normal Season (Jan / Feb)

Non-Fraud

Holiday Season (Nov / Dec)

Fraud

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BIG DATA applied over all the data. It is also important to point out that the data was divided in two parts for this project—a randomly selected training set (70 percent of the exceptions) that was used to construct the models and a test set (30 percent of the exceptions) that was used to measure the accuracy and performance of the models.

We also implemented a more advanced model to compare the performance of different techniques and the tradeoff between model complexity and performance. Alpha Decision Tree is an advanced version of a simple decision tree.

A decision tree is a modeling technique that can split the entire exception set into subgroups based on certain criteria. Exceptions in the same subgroup will have similar properties. A ratio of fraud exceptions to the total was then calculated for each subgroup. This ratio was used to estimate the probability of fraud if an exception belongs to that subgroup.

The advanced part of the technique is that, instead of using a single tree model, we developed eight different decision trees. The average prediction will be used to estimate the probability of fraud for each exception. The figure on page 19 is a simplified graphic demonstrating our approach. Research has proven that combining results from multiple models that are equally good, but diverse, will result in better accuracy and performance. The rationale behind this approach is similar to the idea that higher synergy can be achieved by combining diverse smart minds.

Once we output a probability associated with an exception, each probability was weighted by total dollar amount associated with the transaction. These new weighted probabilities were then reordered from highest to lowest so our model would target the most likely to be fraudulent (and valuable) first.

Modeling Technique and Clarification. It is beneficial to remember that we created three different models, a binary logistic regression for the holiday season, a binary logistic regression for the normal season, and an alpha three classification model that was

Data Analysis Results

To evaluate our new models we needed to compare our results against the results from the current system used by JCPenney. The most easily understandable way to compare our new model with JCPenney’s old system was to fix a number of true fraud exceptions that we want to detect. By holding this number constant we would be able to compare the models at two different angles, in terms of both work-load reduction and cumulative dollar amount. We decided to include the old and new models that were capable of identifying 70 percent of the fraud exceptions.

To detect the 70 percent of the true fraud exceptions—those that were predicted fraud and proven to actually be fraud—on the holiday season, our binary logistic regression model would require 20,000 exceptions to be investigated. Whereas, JCPenney’s existing system would have required over 24,000 transactions to be investigated to detect 70 percent of the true fraud exceptions.

In other words, our binary logistic model could reduce workload by 17 percent. In terms of dollar amount for our holiday model, of those 20,000 exceptions needed to reach the 70 percent of true fraud exceptions, we were able to detect $42,000 related with true fraud activity. This amount is approximately 11 percent more than the current system is capable of detecting.

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A Division Of Checkpoint MAY - JUNE 2014

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BIG DATA Tree 1

Tree 2

Tree 3

Tree 4

Average Percentage

Final Probability A similar comparison over the normal season, our binary logistic regression needs to study 7,000 exceptions to reach the goal of 70 percent true fraud exceptions. That number is 2,000 less than the amount of exceptions that the current system needs, which represents a reduction in workload of 17 percent over this season. Our proposed analytical approach shows about a 17 percent bump in the cumulative amount of dollars related with fraud detected, detecting $1,000 more than the current system.

Finally, the alpha tree model shows a reduction of 27 percent of the total workload between November and January, needing

only 24,000 of exception to detect the 70 percent of the true fraud exceptions. Analyzing this amount of exceptions, the model was capable to detect $56,000, or 27 percent more cumulative dollars than the current system. As the results show, the analytical approach proposed will help in all the scenarios to reduce the workload needed to achieve the results and improve the amount of dollars related to fraud that the system is capable of detecting.

“During data analysis by the students, some interesting findings emerged,” explained VanBeest. “The research did not uncover anything we were missing, but rather identified that we could

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BIG DATA Workload Reduction

Cumulative Dollar Increase

Holiday Logistic Model

17%

11%

Normal Season Logistic Model

17%

17%

Alpha Tree Model

27%

27%

Big Data and Retail

By Ed Tonkon, President, Zebra Retail Solutions

Big data is a huge topic in retail. This project was an example of the broader retail community working together.

This included the vision of RILA’s Lisa LaBruno and their Student Mentor Program, the generosity and guidance of Stan Welch and his LP team at JCPenney, and the direction and engagement of Dr. Greg Hallman and Dr. Mike Hasler, the two program directors at The McCombs School of Business at The University of Texas at Austin.

Ed Tonkon Business analytics is the science of translating vast amounts of complex data into clear, manageable information in order to make sound decisions. The Department of Information, Risk, and Operations Management (IROM) in the McCombs School developed the master of science degree in business analytics to fulfill a significant market need for individuals with deep analytical talent for dealing with the complexities and possibilities of big data in the business and organizational context. The program focuses on students with exceptional quantitative, technical, and communication skills and combines classroom experiences in statistics, data mining, and programming with functional applications such as marketing, social media, and supply-chain analytics.

The students involved in the research reported in this article were not only impressive in their work, but also appreciative to be presenters at the RILA asset protection conference and enjoyed networking with professionals in the retail LP industry.

The first cohort of fifty-one students is nearing the end of their program, anticipating graduation in July 2014. Graduates have already been offered professional analytical roles in firms such as Walmart, Deloitte Consulting, General Motors, Accenture, Dell, Capital One, and others. The second class of students in this program begin classes this summer for graduation in May 2015.

It was an extraordinary experience for me to serve as mentor and co-sponsor for our company, Hart Systems, now Zebra Retail Solutions. I am hopeful that this inspires greater collaboration for the support of the retail community and academia.

To learn more about this program, visit mccombs.utexas.edu/business-analytics.aspx.

send fewer case leads while achieving better results. This was a remarkable breakthrough that really made us reevaluate our POS case referral process.”

Research Recommendations

Based on our results we developed a set of recommendations for JCPenney, which are also applicable to any company looking to improve in this area.

First, create a separate fraud-detection model for each shopping season. By doing this we are able to create models that better fit the characteristics of transactions during this time period. Further, examine your data and separate based on the natural changes in patterns within the distribution.

Second, we encourage JCPenney to rank the exceptions based on an exception’s probability to be fraudulent instead of using a fixed threshold. As our results shows, the most improvement in workload reduction and largest amount of dollars recovered were provided by the probability ranking system, regardless of the model to which it was applied. In addition to the best performance and possibly the most important finding in this study, the probability ranking provides a dynamic method that could be adapted to specific situations within the company and the season. The fraud-detection team could reset the probability threshold to target only exceptions that are predicted to be 80 percent or more likely to be fraudulent during high-transaction seasons, while during low-transaction seasons the threshold could be set to target more. This is a powerful advantage because we can tailor our reports to reflect the amount of time the LP investigator has. Hopefully, this would increase the trust and usefulness of the reporting system.

Third, understand which attributes are important in detecting a fraudulent transaction. In this study we implemented this by using the LASSO regression and the simple regression over the data before building any models. After the analysis we were able to conclude the current system was based on a statistically insignificant attribute—delete ratio. In fact, the attribute was thrown out; reducing computational complexity and time needed to run the model. An analysis of this sort should be applied over other reports to determine if there are other statistically insignificant thresholds in use.

Fourth, based on the data provided and extrapolating the results over a calendar year of twelve months, this statistical modeling technique will reduce the exception load of the reports by 70,500 exceptions per year. This number of exceptions represents a workload of four weeks for an employee within this area. It is our recommendation that JCPenney implement a system such as the one we created.

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MS BUSINESS ANALYTICS Finally, we recommend that the study should be performed using year-long data in order to identify all the seasons, evaluate the list of important attributes, generate a model to each of them, continued on page 22 |

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BIG DATA

introducing

continued from page 20

and rank the exceptions based on probability. This will provide a robust system that works more efficiently and more accurately.

Of course, as the report becomes more used, we would hope that the LP professionals would gain faith in the report and potentially report more actual fraud. Fortunately, using the steps outlined above, we could quickly rerun the model with new data and potentially improve further.

In hindsight, the experience from completing this project and presenting our results at the RILA conference, we have come to see the huge potential for this kind of study in the retail world, especially in the fraud-detection realm. The amount of data available is limitless and full of hidden, but important, patterns that can be used to detect fraud.

The beauty of this project is the marriage of analytics and direct business outcome. Unlike many pure statisticians or software engineers, analytics professionals must be focused on realizing business value. Fortunately, with a little bit of cleaning, data mining, and critical interpretation, businesses can transform mountains of data into improved margins.

More importantly, as companies everywhere race to implement data analytics, the initiatives will move from a boost in efficiency to a competitive necessity. Fortunately, with such huge bottom-line improvements and commodity computing available, data analytics has never been faster or more accessible.

“Utilizing the findings from this exercise, we were able to streamline our operation and generate fewer unsubstantiated case leads; all while maintaining very high performance,” said VanBleest. “We hope to make process adjustments and fully validate the findings during the 2014 holiday season.”

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DIGITRAL DIALOG

By Jacque Brittain, LPC

A New Age of Natural Selection

Brittain is editorial director, digital, for LP Magazine. Formerly a director of learning design and certification, Brittain managed the development of the LPC and LPQ certification programs in collaboration with the Loss Prevention Foundation. Prior to that he was vice president of operations for the industry’s largest executive search and consulting firm. In his thirty-plus years in the LP industry, he has helped build and enhance many learning initiatives and provided career counseling for thousands of industry professionals. Brittain can be reached at jacb@lpportal.com or by phone at 704-246-3143.

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your office and consider all of the devices that we now depend on that didn’t exist just a generation ago. And what we often fail to remember is that most of these products evolved…with our input.

As consumers, we took control of what we had, provided feedback regarding what we liked, what we didn’t, and what we wanted, and actively participated in the growth and development of these products. Whether it’s a program, a device, a practice, or an application, this is the new wave of natural selection, and we are all part of it.

e live in a time of great change. We work in an industry where our ability to adjust to the needs of the customer and the dynamics of a global market sculpt the landscape of retail. We serve in a profession that demands that we adapt and adjust to business strategies, retail partners, and the many elements that can impact company profitability. This isn’t exactly breaking news. We know this. We preach this. We embrace these principles as a critical aspect of what we do. Why then, are there those that are so resistant to certain types of change?

Why do some applaud advancements in technology, but fail to take advantage of the technology that’s available right at their fingertips? Why do some advocate the value of training and education, but fail to support an industry certification program? Why do some lecture their teams on the power of information, and then not take simple steps to stay informed?

How is it that we can see the train coming and stand on the tracks rather than jumping on board?

What Are Some of the Hurdles Holding Us Back?

Unless the end result of using this tool is so compelling that it’s worth the hassle, the status quo is easier. That may be true, but easier doesn’t necessarily equate with better.

■ We don’t want to invest precious time learning something if what we’re doing now is good enough. I guess that depends on how we define “good enough.” But are we sacrificing long-term benefits for short-term gains?

■ When it comes to technology, we know that the minute we get comfortable, it will just be replaced by something else.

Is this just another way of saying “why bother,” or are we delaying the inevitable until some of the bugs have been worked out? Recognizing the difference is an important distinction. There will always be a “next.”

■ Lacking awareness that there is a need for change. When we fail to recognize or understand that the change can be valuable to us, we can easily fall behind and end up playing catch-up later. The benefits of staying current can be extremely valuable.

■ Fear of the unknown and concerns we will not have the necessary skills to do new things, or that previous skills will be deemed obsolete. Going into a dark room is difficult even for the bravest of souls, and we have a natural tendency to want to stay in control. However, most would argue that staying current provides the best opportunity to remain in control.

■ The change is perceived as a threat to job security, power, or influence. Resisting or opposing change for political or self-serving reasons is often poorly veiled and quickly revealed. This practice can just as easily threaten security, power, or influence.

■

Change is inevitable, and technology is an important part of that. It is a fact of life, and a law of business. As such it is our responsibility to amend, aspire, progress, and evolve. This is a new age of natural selection, and in order to survive, we must continue to adapt.

This all began as part of a conversation with a friend at the recent RILA conference as we traded stories about old cell phones and new technology, but it applies to each of us in many ways. Imagine not having access to your cell phone on an everyday basis. Imagine your work week without the convenience of a computer. Just look around your home or

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continued on page 26 |

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Is Theft a Priority?

continued from page 24

We are creatures of habit. We long for stability in our lives, which represents a comfort zone we want to live in. This is perhaps the most common reason that we resist change. But often these changes only require minor adjustments that simply modify our way of doing things and become new habits over time.

This phenomenon applies to the loss prevention industry in many ways. It’s posted in our news stories. It’s a topic of discussions. It surfaces in our practices, and ultimately in our results. There are strong organizations and intelligent people that are reluctant to embrace change. We face them every day. And occasionally, that face is the one staring back at us in the mirror. This isn’t to imply that we should randomly embrace every gadget or technology that comes along, but there are clearly times when each of us should challenge our own convictions.

Sometimes we alone are responsible for holding ourselves back just by failing to open a door. Five-year-olds are using technology on a daily basis that some of us still shy away from. I know my grandsons do circles around me, and I’m pretty sure that I’m not the only one. How about you?

There will never be a substitute for patience, good judgment, interpersonal connections, or basic principles.

But change is inevitable, and technology is an important part of that. It is a fact of life, and a law of business. As such it is our responsibility to amend, aspire, progress, and evolve. This is a new age of natural selection, and in order to survive, we must continue to adapt.

■

The Spice of Life

Variety seems to be the topic of choice among our readers over the past few months, with a healthy balance of interest in different types of news stories. This was reinforced by attention to specific articles as well as participation in discussion groups and other online media.

This balance offers a welcome insight into the heart of the industry, and the desire to approach our information on a broader, more global scale.

We don’t want our information presented in tabloid formats flooded with shootings, tragedies, and scandal.

While these incidents may be important and newsworthy, it’s not enough. We also want growth. We want to hear about the positives. We want to take lessons from what has happened and learn from those that can help us develop our skills.

At the same time, we want the occasional opportunity to escape to a lighter side, which can also be healthy and productive. After all, nothing says “loss prevention” like a woman entering a supermarket wearing no pants and stealing two cases of wine. The story did, however, emphasize that she was wearing slippers—an important detail as they tried to track her down among all the other drunk, half-naked people walking the streets carrying two cases of wine.

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Perhaps one of the more polarizing stories that we saw recently involved a “Theft is not a priority” comment made by a director of operations for a large retailer while appearing in court during a lawsuit. Several news sources reported the comments. Feeding the fury, company stores were victimized by two separate burglaries less than a week apart immediately following the initial story, with tens of thousands of dollars in merchandise stolen in each incident.

Most of the discussions, as one would suspect, were not exactly supportive of the company comments. However, there were others that did support the director’s remarks.

One operations leader commented that they “don’t necessarily believe the article was that far off… The reality is that especially if we look at our stores, they have so many priorities with sales, visual, customer service, etc. that if you asked most of them to be honest, LP is not going to rank high on their list.”

Is this a “reality” in the stores, as these comments might suggest? Is it a lack of awareness or training? Is it that a loss prevention culture has not been instilled in the organization? Is this an issue of approach to the subject of theft and loss? Were the comments misconstrued? Is this simply a matter of semantics? With the passion that we carry for our profession, there were some strong opinions.

What do you think?

Tragedy in Buffalo

Although difficult to discuss, we would be remiss not to mention the tragic events that occurred in the Buffalo area involving a regional LP manager for a major retailer that was arrested and recently plead guilty to manslaughter charges in the death of an assistant store manager in one of his stores. Claiming to be in “desperate financial straits,” authorities believe the RLPM went to the store at about 4:30 a.m. to steal money, but he unexpectedly encountered the manager, who arrived to unload a truck.

The victim was believed to have been stabbed following a physical encounter in the store office. Hours after the killing, the RLPM returned to the scene to “console workers” after the incident was discovered. In the weeks following the killing, the 39-year-old went on to burglarize at least three other stores before his arrest, prosecutors revealed. As a part of his plea, he agreed to pay $223,000 in restitution.

Far too many robberies and burglaries occur in our stores, and violence is an ugly reminder of what can happen when desperate people do desperate things. Every incident is tragic, changing lives and devastating families.

But as legal closure is brought to this case, personal and professional closure is still hard to find. Tonight in northwestern New York there is a wife without a husband, and children without a father. It should never happen. It should absolutely never happen like this.

Information is best when we put it to use. Take the steps to get involved and stay informed. There are no more excuses.

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INTERVIEW

25 YEARS AT SAKS FIFTH AVENUE THE EVOLUTION OF ROSAMARIA SOSTILIO

By James Lee, LPC, Executive Editor

LPM 0514-A.indd 27

5/29/14 10:34 AM

INTERVIEW EDITOR’S NOTE: Rosamaria Sostilio was recently named senior vice president of asset protection for Hudson’s Bay Company after twenty-five years in various LP roles with Saks Fifth Avenue. She began her career on the sales floor at Bloomingdale’s in Boston before moving into loss prevention as a detective. She joined Saks Fifth Avenue as a store LP manager before moving into a corporate role. Sostilio has been active in the National Retail Federation and recently took over as chair of their LP advisory council.

EDITOR: That doesn’t mean that you will move to Canada, does it?

SOSTILIO: I’ll continue to live in New

York, but will have the pleasure of visiting Canada often. We have stores across Canada from the Atlantic to the Pacific, so I’ll have a great opportunity to explore the country. I have a whole new awareness of Canada and the Canadian culture, and I love it. It’s very exciting.

EDITOR: Has the integrated company been established long enough for you to know what your loss prevention organization will look like?

SOSTILIO: Yes. Tony Caccioppoli took

on Saks and Lord & Taylor as the asset protection vice president for the U.S. In Canada we have Don Jobe as the divisional president for Hudson’s Bay. He and Tony work together.

EDITOR: How do you personally manage your time and presence between the different entities?

SOSTILIO: I’m very hands-on. The

people part of this business is my favorite part. Developing teams is what I really love to do. It’s my passion. The

As we move into omni-channel retailing, unit integrity is as important as shortage control.

We’re on a cost stock ledger, so we take cost inventory, which makes it even more important to know where the units are. We’re getting very involved in unit integrity and omni-channel, and leading the way with that in the organization.

EDITOR: It’s been twelve years since the magazine last featured you and Saks.

Much has changed. Tell us about the new company that exists today.

SOSTILIO: The new company is an

amazing organization. Saks is now owned by Hudson’s Bay Company.

The three banners operated by HBC are Lord & Taylor, Saks Fifth Avenue, and Hudson’s Bay. I’m so delighted about getting to know the HBC team and the extraordinary heritage of the company. The explorers for HBC were those that essentially discovered Canada.

Lord & Taylor, of course, is one of the oldest department stores in the United States, and Saks Fifth Avenue has its own heritage.

EDITOR: Is Hudson’s Bay Company the predominant owner?

SOSTILIO: Yes. Hudson’s Bay Company

is the parent company that each banner is operating under.

28

SOSTILIO: When I took this job

on November 4th of last year, I immediately did a compare and contrast of the organizations, looking at the entire LP group and determining how to best structure the team. By January I had my synergies aligned and my go-forward team in place. In early February I was able to bring the three corporate banners together in New York. We got to know each other and set our new direction. We’re an asset protection division now, which includes traditional LP and shortage control under one banner. We’ve taken the best components of all three teams and developed one unified program. From a people and a program standpoint, the division is fully integrated.

EDITOR: Do you have specific individuals reporting directly to you that represent the Hudson’s Bay, Lord & Taylor, and Saks divisions?

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Rosamaria Sostilio

whole organization has teleconferencing capabilities, so I feel like I can be in Canada at a moment’s notice. I’m really getting to know my team, but I’m getting to know all the store people as well. I take care of the corporate team, but I also try very hard to stay in touch with what’s going on in the field.

EDITOR: Have you established specific key objectives and accountabilities for asset protection?

SOSTILIO: Absolutely. We’re adding more

accountability to the process. I want to make sure that everyone understands that we own the process and we own the results. Accountability and teamwork are really the two primary pillars that we’re focusing on.

EDITOR: From a financial standpoint, is the key objective shrink performance?

INTERVIEW SOSTILIO: As we move into

omni-channel retailing, unit integrity is as important as shortage control. We’re on a cost stock ledger, so we take cost inventory, which makes it even more important to know where the units are. We’re getting very involved in unit integrity and omni-channel, and leading the way with that in the organization.

EDITOR: Over the years you and the Saks organization have had a reputation of low turnover and high associate involvement in LP initiatives.

I would imagine that remains a key objective of yours. How do you accomplish that and why is it that people want to stay?

SOSTILIO: I think it’s important that

EDITOR: How did the Canadian team react to that?

SOSTILIO: The Canadian team is

incredible. I feel like I’ve already known them for years. I didn’t know what to expect, but it works both ways. I’m sure they were nervous meeting me as well. They were very welcoming and forthcoming.

EDITOR: Speak about where you are today with training and people development, and the commitments that you have in place.

SOSTILIO: Training is the strength

within the organization. We have programs for associates as soon as they come on board. We have a recognition program for top talent that gives specific direction to help prepare for future management positions.

We also have a succession and recognition program for top talent

ValeStock / Shutterstock.com

everyone feels that they belong and everyone has a voice. It’s very important for me to have diversity and to reinforce that every opinion matters. I don’t make decisions in a silo. I like hearing everyone’s input and opinion and make my decisions accordingly.

I look for people who are engaged and committed, which are two very

investigations. And when things get dicey, as they sometimes do, I stand shoulder-to-shoulder with them, which I think they appreciate.

separate things. You can be engaged and not committed, or committed and not engaged. I look for both and work really hard with the team to achieve that.

We have a spirit committee that develops suggestions on how to recognize team members and an appreciation day to celebrate successes. We are a team.

We do things together. I’m right there with them on programs, situations, and

that I have more people with more ideas on the team.

Our asset protection managers need to understand the business and work with the teams in the stores. They work side-by-side with the general managers, supporting business initiatives within the organization. Whatever the company is moving toward, we are there for support.

We have a very strong role within the organization and are looked at as go-to people.

EDITOR: What are the priorities of an asset protection manager in a store? Is it shortage, apprehending shoplifters, investigating employee theft? You mentioned that they’re considered a business leader in the store. Is that where you start in terms of their priorities?

SOSTILIO: They develop a strategic plan

with their general manager. Together they analyze the shortage results and put together key measurable initiatives.

Once finalized, they work within that plan all year long and, course-correct as necessary. Functional direction comes

Part of our overall success is that everyone is cross-trained. Although I have specialists, we take steps to ensure that the regionals and the store teams have diverse training. They work to understand the business in its entirety, and I don’t have silos within my functional area.

When we strategize, it’s about sitting at a table and working together. This is really key for us.

that provides exposure to corporate projects and the opportunity to work with corporate teams. It takes associates beyond the store level, giving them a better understanding of corporate and organizational agility, business acumen, and other important competencies that they will need to move forward. Training is a passion for me, and I’m looking forward to creating more programs now

LP MAGAZINE | MAY - JUNE 2014

from the corporate AP team, but they work day-to-day with operations and the general manager to meet the various needs of the local stores.

EDITOR: What technology initiatives do you have in place currently or are thinking about putting in place?

SOSTILIO: We have a very strong

remote-viewing program. From the

29

INTERVIEW corporate offices I can remote view all of the stores.

team working on solutions to those challenges.

EDITOR: What is the predominate goal of the remote monitoring that’s in place today?

SOSTILIO: We can use it in many

EDITOR: One of the issues that has received significant notoriety since we last interviewed you is ORC. Twelve years ago you were putting ORC initiatives in place. Where are you today specifically within the Saks organization, and how does that apply to the Canadian stores?

SOSTILIO: As we all know, organized

different ways. We can use it to help the stores from an internal investigations standpoint. We can marry up POS transactions with video. We don’t use it as much right now for shoplifting. That’s still handled locally in the store. But we

retail crime doesn’t have boundaries.

We’re still very aggressively trying

They work to understand the business in its entirety, and I don’t have silos within my functional area. When we strategize, it’s about sitting at a table and working together. This is really key for us.

EDITOR: In terms of your personal management style, beliefs, or how you attack shrinkage, how would you say you’re different today than you were twelve years ago?

SOSTILIO: I’m definitely a lot more

patient. I’m calmer than I used to be,

I want people who think differently than I think. I like to be challenged. I focus on diversity in thought, and that’s very, very important. There are still challenges for women in asset protection. There are people who still don’t want to take you seriously.

That’s something that I’ve always had to overcome. You need to have faith in yourself. have the ability to use it however needed. We can monitor parades or disturbances. Whatever is happening, we have viewing capabilities on the streets and in the parking lots. We can use it in many different ways.

EDITOR: There’s much talk about emerging retail trends, such as mobile POS, omni-channel, and smart technologies. How are you responding to those new developments?

SOSTILIO: The company is

exploring all of those channels.

Omni-channel is very important in this organization. We need to be able to ensure that merchandise is fulfilled for customers through every channel possible. It should be seamless for the customers with whatever channel is used. If they want to order online and pick up at the store, we’ll make that happen. Our division is right there with the rest of the corporate

30

to attack it. We’re working very closely with the NRF [National Retail Federation], lobbying to get stricter laws and distinguishing it from shoplifting. ORC is at a higher level than shoplifting, so we’re working on it on many different fronts. From a legislative standpoint, my team is very involved in legislative committees and work closely with the NRF, working with the stores and local, state, and federal authorities trying to break up these rings. We’ve had some successes. We have to take a very holistic approach. There isn’t one easy answer, and there isn’t one easy way to attack it.

EDITOR: What do you think is key to your approach to ORC incidents?

SOSTILIO: Part of our overall success

is that everyone is cross-trained.

Although I have specialists, we take steps to ensure that the regionals and the store teams have diverse training.

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which I think just comes with age. But a lot of my core values have stayed the same. My love of people and watching people develop and grow has always been one of my passions. Mentoring teams is really what I love every single day. I love developing strategies and watching the success and execution of the strategies. I’m still doing that today.

My approach is a bit more global today. I’m not as tactical as I was because my job has evolved. I definitely have more long-term vision. At that time I was more of an executor. I can still execute when I need to, but my day-to-day job is a much more strategic and long-term focused. In this new role having to develop a vision and a strategy for the three banners, I’m definitely using those skills a lot more. But my core values haven’t changed. I’m still the same person. I lead with my heart. I think I always have. I don’t believe those core values really change. continued on page 32

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INTERVIEW

We have a spirit committee that develops suggestions on how to recognize team members and an appreciation day to celebrate successes. We are a team. We do things together. I’m right there with them on programs, situations, and investigations.

And when things get dicey, as they sometimes do, I stand shoulder-to-shoulder with them, which I think they appreciate. continued from page 30

EDITOR: As you look across the LP profession, we still have lots of things that we can do better. If you could snap your finger and make some changes, what might be some of those changes?

SOSTILIO: As a profession the business

is very much defined by the organization and the needs within that organization.

Contact_halfPageAD_FINAL_7x4.625.pdf It’s not something that you can say you

would apply the same way across the board. There are unique aspects to it. To be successful, you have to understand what your company really needs. You can’t just apply generalities to the business. I think that’s what makes our industry unique. Retail is so vast and so different. Teams are called by the same names, but if you really dig in, things can 1 4/29/14 5:22 PM be handled very differently. You really

have to understand the culture of each company and then what their needs are.

That’s very different across retailing.

EDITOR: You are a woman LP executive at a premiere retailer. The reality is that even today you are still an exception.

What are your views of women and diversity in asset protection? continued on page 34

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INTERVIEW continued from page 32

SOSTILIO: Diversity is defined in so many different ways. I like people with diverse backgrounds on my team. I have a woman on my team that runs investigations who is a former prosecutor. I have a woman on my team who is a CPA. I have a gentleman on my team who is getting his masters in technology. I try to bring in people with all different types of backgrounds.

I can teach anyone the fundamentals of asset protection and how it fits into our team and into our company. That’s easy for me to do. I’ve been doing it for twenty-five years.

I want people who think differently than I think. I like to be challenged. I focus on diversity in thought, and that’s very, very important. There are still challenges for women in asset protection. There are people who still don’t want to take you seriously. That’s something that I’ve always had to overcome. I dig my heels in deeper and just move forward. I don’t focus on negativity. I surround myself with people who are positive. You need to have faith in yourself.

I try to help everyone—not just women.

I try to help and mentor. I love to do that.

I’m very involved with NRF’s Women in LP group, and I really support that organization. Joan Manson does a fantastic job running that group. I encourage women to take advantage of what’s out there. It’s still difficult being a woman in LP, but you just have to deal with it.

EDITOR: Speaking of the NRF, you’ve been involved for a long time and are now the chairperson of their LP committee. Tell us how you see yourself in that role over the next few years.

SOSTILIO: The NRF is clearly a very

important organization for the industry.

I think every person in retail should take advantage of the NRF and what the organization offers. I’m really proud to be in that position. Being voted into that position by my peers was an incredible honor.

I remember twenty-five years ago when I went to my first meeting. We were in Atlanta, and I think I was one of three women who were in attendance. I

remember my eyes were just as wide as saucers. Having evolved and grown, I’ve seen how the organization has changed and developed. As I walked on stage last year to accept my nomination, it was a very proud moment for me.

I’m hoping that I can continue to inspire and work with the loss prevention community. I want to understand what individuals in the industry need and help organizations get there. The NRF is an incredible organization. They just have so many resources available, and they’re working to change the conference. Steve Ippolito is now the content-planning chair. Vicki Cantrell, who is the NRF’s senior vice president of communities, is wonderful and really smart. She brings a fresh perspective and helps us decide new ways of tweaking the conference. The board members are now really much more involved in the content and allowing the NRF to do what they do best, which is planning and delivering a great conference experience. I encourage everyone in the loss continued on page 36

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INTERVIEW continued from page 34

prevention community to take advantage of all that the NRF has to offer.

EDITOR: The 2014 conference will be held in Fort Lauderdale. What are a few things particularly exciting about the agenda that we should be looking forward to?

SOSTILIO: There are going to be a lot

of really interesting aspects to this year’s conference. One new component is a debate that will take an important topic and feature opposing points of view on the subject, which is very exciting. There’s going to be greater ability to interact during presentations by using technology to help further engage the audience members. But this is only the beginning. You’re going to see the NRF conference evolve even more next year, once we get feedback from the tweaks that we’re making this year.

EDITOR: You’ve been a key industry leader for a long time. What’s next for Rosamaria Sostilio?

SOSTILIO: I’m never happy with the status

Loss Prevention 4.pdf quo. I always challenge myself and1my 14/04/14

team to do better. We reinvent ourselves constantly. I think a lot of it has to do with the environment, what’s going on in the world, and what we’re facing. That’s going to be important to our company, and we’re going to continue to tweak and hone our program to be the best in the industry. My goal is to always be best-in-class. I have to get to know my talent. I have to continue to advance our programs. There’s a lot out there to do, and I’m really looking forward to it. Every day that I come to work I feel like I’m starting a new job again. I’m really happy that after twenty-five years, I can’t wait to get up in the morning and come to work. I’m terrible at taking vacations because I really enjoy being here. Hopefully, it will continue to stay this much fun.

EDITOR: I can hear it in your voice.

SOSTILIO: I’m not just saying it. I have a

passion for what I do. I work in midtown Manhattan. It doesn’t get more exciting than that. I’m surrounded by amazing people. I’m getting to know different executives in the organization. It’s all new to18:37 me, but the management team in the

company is great and very supportive. Of course, I think my own team is the best team in the company. They’re amazing.

EDITOR: Who has been instrumental in helping mold you and your career?

SOSTILIO: I take a lesson from everyone

that I meet—people that I like and people that I don’t like. I try to take every interaction as a learning interaction. It’s not all wonderful. Sometimes you meet and work with people that you really don’t like.

For me, even that is a learning experience.

I’ve had great bosses throughout my career, but more than that, I try to really pay attention. I’m very present when I’m meeting and interacting with people.

There’s a take-away from every interaction I’ve had. It’s really all about the people. I love what I do, and I feel blessed that I’ve had the opportunity to do what I like to do. This doesn’t feel like work to me.

EDITOR: It comes through loud and clear.

I suspect you’ll say the same thing in another decade as well. Thank you for speaking with us.

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CERTIFICATION

On the Move?

Let’s Start with the LP Foundation I

By Jacque Brittain, LPC Brittain is editorial director, digital, for LP Magazine. Formerly a director of learning design and certification, Brittain managed the development of the LPC and LPQ certification programs in collaboration with the Loss Prevention Foundation. Prior to that he was vice president of operations for the industry’s largest executive search and consulting firm. In his thirty-plus years in the LP industry, he has helped build and enhance many learning initiatives and provided career counseling for thousands of industry professionals. Brittain can be reached at jacb@lpportal.com or by phone at 704-246-3143.

to its members. But there are different ways that value can be measured. For some, the greatest value falls within the educational resources provided by LPF. For others, it’s the networking, mentoring, and team-building aspects that come with membership.

Still others are looking for other sources of value, to include more tangible benefits. Identifying and understanding the needs of the membership is a fundamental building block of the program.

t’s been a busy year for the Loss Prevention Foundation (LPF).

When the LPF was established in 2006 there was a clear mission to advance the retail loss prevention profession by providing relevant and challenging educational resources that would promote positive growth and strengthen our value to the retail community. While the business of retail has faced its challenges since those early days of the LPF, the leadership of the loss prevention industry has been persistent in establishing a stellar platform for growth and development by implementing a strategy designed to move the industry forward in a positive and constructive manner.

These efforts, under the leadership of the LPF team, the board of directors, and the committees that guide the many initiatives of the Foundation have provided both opportunity for its members and direction for the industry in general. But what’s next? We recently sat down with the LPF team—Gene Smith, David Phillips and Donna Murphy—for their insights on what we can expect.

As membership has grown, so has the reach of the possibilities. Corporate membership programs are now available. There are partnerships benefiting students, veterans, and fallen loss prevention professionals.

There are even local chapters forming so that like-minded professionals can come together to reap the benefits of collaboration and cooperation.

Laying the Groundwork

Supporting the LP community and the diverse needs of the industry requires an effective portal where information and support can be effectively channeled to its members. As the Foundation takes its next steps, a solid delivery platform is a primary objective. This helps establish a strong foundation for learning while providing the groundwork for guidance, direction, partnership, and communication.

“First, we wanted to ensure that we provided a quality website,” says David Phillips, operations manager. “We believe that a crucial aspect of our continuing growth is implementing a robust program that ties all of our assets together. While we felt we had the groundwork, we wanted to take it to another level. We’ve completely retooled our website, organizing the content into clean categories to make it easier to navigate and find information. We wanted to consolidate information and make it more user-friendly.

By taking steps to make it simple and convenient to access the information, we make the entire process more manageable.

Considering the mobile demands of our membership, we also wanted to make it easier to use with different devices.”

“The LPQ and LPC certifications and our other learning tools are naturally an important part of what we offer,” says Phillips.

“But we wanted to do more. Our membership includes many different benefits that support the growth and development of the loss prevention professional. In addition to the different learning resources that are available, we also have internal resources for interactive networking, assistance in publishing white papers that includes a committee review, first access to breaking news, a future leaders program, and many other features that provide benefits to our members.”

As membership has grown, so has the reach of the possibilities.

Corporate membership programs are now available. There are

Enhancing the Membership Program

An important element of the LPF mission is the ongoing development of a quality membership program that provides value

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partnerships benefiting students, veterans, and fallen loss prevention professionals. There are even local chapters forming so that like-minded professionals can come together to reap the benefits of collaboration and cooperation.

As mentioned, some are more interested in tangible benefits.

While the professional advantages of membership may be clear, it’s only natural that financial considerations are going to weigh on our decisions as well. When budgets are tight, value is at a premium. These concerns have also been addressed.

“We’ve recently expanded our membership offerings through our ‘Member’s Only’ program, which significantly boosts these benefits,” adds Donna Murphy, LPF’s marketing and operations coordinator. “This is an exceptional program that will not only save members money, but will likely beat most other member and retail discount programs. The program offers discounts on thousands of products, from theatres and department stores to hotels, car rentals, and plane tickets. Members can get deals at some of their favorite restaurants, or even buy a car at tremendous savings. There is a small opt-in fee, but we are sure that they will save far more, easily besting the cost of membership.”

Raising the Bar for Academic Excellence

A core component of the LPF mission remains the development and implementation of the industry certification programs, LPQualified (LPQ) and LPCertified (LPC), the retail industry’s only internationally sanctioned certifications.

These accredited courses have drawn professional accolades as well as academic recognition, to include an academic honor of excellence—the first academic distinction of its kind to be granted to a loss prevention industry association.

“While we’re very pleased with the depth and quality of the courses and the way that the industry has responded to LPC and LPQ, we understand that the bar is constantly being raised,” states Gene Smith, president of LPF. “This requires that we approach certification—and all of our learning resources—as a living process that must evolve with the changes in the business and the needs of the loss prevention community.”

Updates and revisions to the content have been part of an ongoing process with the certifications. However, more enhancements will be forthcoming that will support exam preparation and additional developments that enrich the courses and presentation.

Upgrades have also involved the exam facilities. “We recognized that this was an important aspect of the process, and an area of opportunity,” says Smith. “Following extensive research, we then identified the best proctored exam provider available and secured the services of Pearson Vue. More site options are available for students, with a large percentage of those facilities found on college campuses. This also gives us greater flexibility moving forward as we continue to expand our reach.”

That reach has continued to grow as well. While the focus of certification efforts remains in the U.S., the LPF recently announced additional expansion into India and the United Kingdom. “Although the certifications were constructed based upon U.S. laws, these are global concepts. Most of the policies, procedures, and loss strategies are universal, and will

apply across a broad retail spectrum,” states Smith. “We have organizations around the world coming to us and asking us to support their efforts. We’ve identified top markets and partners within those markets that can help get the message to the people.

Additional expansion is anticipated very soon, with Australia, South America, and the Caricom Nations of the Caribbean showing significant interest in certification.”

This Is Your LP Foundation

While Smith, Phillips, Murphy, and the rest of the contributors to the Loss Prevention Foundation deserve accolades for their efforts and winning attitude, Smith reminds us that this is your LP Foundation. “Everything that we’ve accomplished has been part of the collective efforts of the loss prevention community. Without the tremendous support that we’ve received from LP practitioners, solution providers, our academic partners, and everyone else who have contributed to our success, we would never be where we are today. We’re standing on the shoulders of giants, and those shoulders are growing broader every day.”

With membership expanding, the number of certified professionals growing and interest continuing to mount, this year promises much more of the same. “We’re never sitting still at the Foundation,” proclaims Smith. It’s hard to know what will happen next.

Newly Certified

Following are individuals who recently earned their certifications.

Recent LPC Recipients David Alvarado, LPC, California State University at San Bernardino Dave Collins, LPC, Sterling Jewelers Richard Connell, LPC, Staples Christopher Harris, LPC, Weis Markets Christopher Harris, LPC, University of Massachusetts at Lowell Pamelyn Harvin, LPC, T.J.Maxx Jeff Hetherington, LPC, 7-Eleven Ryan Hogan, LPC, Lowe’s John Hudson, LPC, Weis Markets George LaCorte, LPC Aaron Lawyer, LPC, TJX Justin MacIntyre, LPC, Von Maur Adam Post, LPC, Spartan Stores Tonya Sjolin, LPC, Sur La Table Brent Smerczynski, LPC, 7-Eleven Darrel Timan, LPC, 7-Eleven Bryan Varns, LPC, Rite Aid Jason Weiss, LPC Keith White, LPC, The Gap Inc.

Recent LPQ Recipients Jeremy Carr, LPQ, Walmart Larry David Halbe, LPQ, The Sports Authority Katie Hultman, LPQ Jean-Henri Laprime, LPQ Marissa Ramon, LPQ, PETCO Lamar Underwood, LPQ, Amazon Sharon Wiltshire, LPQ, 7-Eleven Patrick Zweber, LPQ

LP MAGAZINE | MAY - JUNE 2014

39

PARTNERING WITH RETAILERS

By Paul Jones

Polk County Sheriff’s Office Training Week Partnerships among law enforcement, retailers, and eBay have improved during recent years. The result is a more advanced collective effort in the fight against organized retail crime (ORC) and property crimes. A part of the improving partnerships is knowledge sharing that comes through focused training seminars and conferences. These activities are helping to improve understanding and provide real-world solutions. eBay’s Global Asset Protection Team actively participates in these activities on a regular basis. For this column I have asked one of our AP managers, Stoney Burke, to provide his observations following a recent training session held by the Polk County Sheriff’s Office to offer some insight and encourage you to participate in these events.

number of officers from the Polk County Sheriff’s Office to conduct a two-day blitz on local boosters. This allowed the attendees to apply their learnings from the first half of the week by putting them into action.

The Polk County Sheriff’s Office partnered with Bealls, Walmart, Target, and Home Depot during the blitz. Officers were staged outside a number of stores in the Lakeland area, coordinating with store LP teams to help catch boosters that attempted to steal from the stores. There was a control center where all suspects were taken after being arrested. The blitz was extremely organized and successful.

Working behind a computer to catch criminals is satisfying, but catching them in action is equally fulfilling. Either way, the most important thing is these criminals are being caught.

Observations by Stoney Burke

Throughout my career, I have had the privilege of attending numerous seminars, training events, and conferences. Most recently, I attended a unique training session that took place in Lakeland, Florida. The Polk County Sheriff’s Office invited law enforcement officers from various locations throughout Florida to attend a weeklong training event. The training included both classroom and practical, sting-operation training.

The first two days were classroom-style sessions that included a number of presentations by law enforcement officers, retail LP teams, and other partners that focused on the many unique aspects of working ORC cases: ■ How to identify booster crews ■ How to make an apprehension ■ How to partner with regional and store-level retail partners on surveillance, apprehensions, and investigations ■ How to investigate fences ■ How to search for product sold online and partner with third-party companies like eBay ■ Online tools that can help identify potential stolen property ■ Resources available when partnering with eBay to obtain records—Leads Online, LERS, LEP, Advanced Search Training also included a number of breakout sessions focused on interview training. Attendees would partner and interview “boosters” and “fences” with various lines of questioning to practice how to obtain the needed information for their investigation. The feedback from these sessions was very good, as there were few officers who had previous training in conducting ORC-related interviews.

On the third and fourth days, the trainees partnered with a 40

MAY - JUNE 2014

As I rode along with an officer, we waited patiently for hours until someone was finally spotted taking items from the Bealls Outlet around 2:00 p.m. When the two individuals exited the store, law enforcement approached the man and woman to apprehend them. The woman cooperated, and the man fled, but was caught 100 yards away. Only a few items were taken during this particular boost. Everyone taken into custody was booked and served with a court summons.

Attending these events help give each of us a greater understanding and appreciation for unique yet similar ways of combatting organized retail crime. Whether we are working in an office behind a computer, in retail stores, or on the streets around the world, we are all fighting to stop criminals from stealing, as well as committing other heinous crimes. Working behind a computer to catch criminals is satisfying, but catching them in action is equally fulfilling. Either way, the most important thing is these criminals are being caught.

In addition what we learned from the presentations and blitz, relationships between law enforcement and retail investigators were strengthened throughout the training. Partnerships are a key to our success in combatting ORC. The results and information collected during the training and from those apprehended, illustrated the scope of this reoccurring issue.

The week spent with the Polk County Sheriff’s Office was both exhilarating and invaluable. Attendees were engaged throughout the training and appreciative of the value provided.

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FEATURE

IN-TRANSIT CARGO CRIME

IMPACTING THE RETAIL SUPPLY CHAIN

By John Tabor

IN-TRANSIT CARGO CRIME

A

full trailer-load thefts, but has done less than two years in prison…total, for all of these offenses.

In most cases the cargo thief goes undetected in the commission of his or her crime and is very rarely confronted by law enforcement, who aren’t made aware of what has occurred until long after the shipment is gone.

A key event that increased the popularity of this type of crime occurred in 1986, when the government passed the Anti-Drug Abuse Act. This placed mandatory minimum sentencing guidelines in a continuing effort to fight the war on drugs. The guidelines were stiff, with long minimum prison terms if one were caught selling drugs. These stiff sentences forced certain criminal elements to find new revenue streams. With its low risk versus high reward, cargo theft presented a new business opportunity for these criminals.

recent survey of retail security directors showed that almost half of those polled had been the victims of a supply-chain disruption directly related to cargo theft in the past year. This is a significant increase from just five years ago.

Envision the following scenario. You are at home around 8:15 at night watching television with your wife or kids when the phone rings. The caller is one of your regional LP managers in the Southeast. He tells you that you just had a tractor load of high-end apparel worth $2,000,000 stolen in Florida while parked at a truck stop. The driver had gone in to use the facilities, and when he came out ten minutes later his tractor and trailer were gone. While no one ever wants to receive a call like this, you can be prepared for it.

In order to fully understand the issue of cargo theft, you need to know why it exists, who is perpetrating it, how you can reduce your risk, and ultimately how to react to a loss.

Most of those reading this have had some level of store- or logistics-security exposure. Good loss prevention programs involve some form of a “layered” approach.

Based on the exposure, some, if not all, of the following countermeasures may be employed—surveillance cameras, alarms, locks, lighting, EAS, safes, employee awareness training, and others. Loss prevention professionals would be remiss in their duties if they did not explore all of these attributes to secure their stores.

That said, remember that virtually 100 percent of the merchandise in retail stores is delivered by truck. In many cases the only two preventative measures put in place to secure that same merchandise in transit is a key to the tractor and a seal on the rear doors.

On any given night there are hundreds of thousands of loads of merchandise parked in unsecured locations around the country. This is a well-known fact to various criminal elements, from organized Cuban and Eastern European cargo-theft crews to local gangs like MS-13.

A Rising Trend

In the past five years cargo-theft crimes have risen over 150 percent and are still climbing. The annual losses attributed to these thefts are estimated in the billions of dollars. The disparity in attention attributed these numbers is tied directly to the common perception that these types of crimes are essentially “victimless.”

The lack of formal reporting of cargo-theft incidents has also been a significant hindrance in getting any assistance from the government. In 2006 as part of the Patriot Act renewal, an amendment was added that designated cargo

Risk vs. Reward

The average value of a stolen shipment in-transit last year was $300,000 according to FreightWatch International, a risk management service provider. Compare that figure to two other serious crimes—bank robbery, which according to FBI statistics nets roughly $2,000 per event, or a typical organized retail crime (ORC) that nets about $8,000. There’s obviously a large disparity in the net profit out of each of these crimes. There is also a great disparity in the punishments if apprehended for each of these offenses.

Someone convicted of ORC can face up to three years imprisonment. A convicted bank robber typically receives a five- to ten-year prison sentence. An apprehended cargo thief, however, routinely faces very minimal incarceration and, more often than not, receives some form of probation…yes, probation. One example is a career cargo criminal from South Florida who operated out of New Jersey. This Hispanic male was arrested nine times for

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The author speaking with Detective Sergeant Robert Von Schalscha and Patrolman Kurt Massey of the Paramus, New Jersey, Police Department. |

LPPORTAL.COM

IN-TRANSIT CARGO CRIME

The average value of a stolen shipment in-transit last year was $300,000.

Compare that figure to two other serious crimes—bank robbery, which according to FBI statistics nets roughly $2,000 per event, or a typical organized retail crime (ORC) that nets about $8,000.

theft as a Part 1 crime that must be reported within the Uniform Crime Report (UCR) system. Unfortunately, as we sit here eight years later, the FBI has still not completed the collection and dissemination processing of that data.

Although cargo theft occurs all over the country, there are higher than average concentrations centered in states that have major port activity, as many of these thieves desire access to as much freight as possible. It’s important to understand that these criminals fall into two significantly different types. The first type of cargo thief is simply looking for the opportunity to steal virtually any load; while the second targets specific merchandise.

Both illicit groups are professionals, yet they go about their trade using different methodology.

The opportunistic thief typically targets any loaded trailer left unattended in a relatively unsecure location. This could be a truck stop, mall parking lot, or even in or near your store or distribution center.

The thieves targeting specific merchandise operate quite differently. They will first decide, or be directed to, a particular desired product—a certain brand of cell phone, a particular pharmaceutical product, tobacco products, and so forth. They will conduct pre-trip research looking into locations of associated distribution centers within a specific geographic area. They will also look for proximity to interstate highway systems, the locations of law enforcement facilities and activity, as well as weigh stations.

There have actually been times when these particular thieves have been caught with shopping lists, either on their person or in their vehicles. The lists describe specific items to steal, as well as where to find them. These same criminals have also been found with police scanners and other forms of cargo-theft tools.

The perpetrators will typically work in teams, conducting surveillance on both facilities and drivers to

LP MAGAZINE | MAY - JUNE 2014

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IN-TRANSIT CARGO CRIME are countless methods for gaining access to a trailer’s contents and still making it appear as if the trailer doors were never opened after being closed for delivery. The easiest is simply to break the seal on a trailer. More complicated, but not by much, is to bypass the seal. In bypassing a seal, thieves have been known to remove rivets on the locking hardware so that the handle assembly essentially remains intact and sealed, but no longer engaged as the entire assembly is removed. Thieves can also remove the trailer doors altogether, again maintaining seal integrity, but affording access to the trailer’s contents.

One of the newest forms of theft, the fictitious pickup, is growing in popularity because in many instances it is unusually simple to execute. Would-be thieves target a load they are interested in via any of the thousands of electronic “load boards” used by the shipping industry to advertise loads available for tender. Once the thieves select a load for theft, they begin the process of illicitly obtaining the identity of a real certified carrier. These thieves will use disposable cellphones, create bogus email addresses, fabricate insurance paperwork, and ultimately represent themselves as the legitimate carrier. The unsuspecting victim assigns them a pickup time and location to obtain the shipment. All the thief then needs do is show up. The load is given directly to them.

Only after the delivery has failed to reach the intended customer does the theft become realized.

understand how those in the facility distribute shipments and how the drivers act when picking the loads up.

Sometimes the thieves will hit drivers on the road, following them in multiple surveillance vehicles and trailed by another tractor. The tractor will be utilized as a substitute once the rig has been stolen. This type of surveillance sometimes lasts for hundreds of miles, or until the driver needs to make a stop. Once the driver leaves the tractor-trailer unattended, it typically takes the thieves less than one minute to break into the locked cab, hotwire the unit, and subsequently drive off with the load.

In these scenarios the thieves look to get rid of the original tractor as soon as possible, substituting it for the one they brought along. The original tractor is almost always recovered a few miles from the original theft location. All of this is done to better disguise the two-part unit as the getaway is being made, but also to attempt to evade any GPS tracking that may have been installed in or on the original tractor.

The thieves may do something similar with the trailer, also attempting to see if GPS tracking technology is being used to locate it. In many instances they’ll take the trailer to a remote location, place it under surveillance for several hours, and wait to see if someone comes for it. If no one does, their natural assumption is that there isn’t any tracking technology either attached to the trailer or buried inside the shipment.

If the plan involves the burglary of a facility, as opposed to an in-transit theft, once the target location has been selected, a team of specialized criminals will attack it. Each member of the team will have a specialized talent, such as picking locks and defeating alarms and CCTV. They will have team members trained on operating material-handling equipment as well as general laborers to load the stolen goods.

Leakage and Fictitious Pickups

Two other forms of theft have become much more common in recent years—“leakage” and “fictitious pickups.”

Leakage occurs when a thief, which could even be one of your own employees, gains access to the contents of a trailer without your knowing about it. There

44

Cargo thieves prefer to steal loads on Fridays, Saturdays, Sundays, and holidays, when drivers are often forced to leave loads unattended for long periods of time while they await delivery appointments.

Thieves also use these weekend periods to steal shipments in the hope of delayed detection.

Impacts of a Cargo Loss

What are the impacts beyond just the loss of the merchandise?

Consider the following: ■ Cost of Replenishment—A trailer load that is stolen and can’t be delivered must be replaced rapidly. The costs associated with this, together with re-picking orders, transportation, and staffing costs, all affect bottom-line profits.

■ Customer Retention—Losing an existing customer because product they desired has been stolen in-transit or in-storage can be even more damaging to a retail operation. continued on page 46

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IN-TRANSIT CARGO CRIME insurance programs as they usually are designed to protect the shipper at cost.

■ Loss of Brand Reputation—Once you are identified as an easy target, it is difficult to rebrand yourself, and you may begin the downward spiral where, not only does the bad guy see you as an easy target ,but your brand begins to be marginalized among your consumer base.

If you feel this is painting a pretty grim picture, then good, that is precisely what you should be feeling.

However, there is light at the end of this tunnel.

continued from page 44

New Customers—We essentially live in a society that demands immediate satisfaction. If you do not have an item in stock because it’s been stolen from you, that customer will likely not wait for you to replenish your inventory. They will simply shop somewhere else.

■ Lost Sales—Often these stolen products are reintroduced back into a secondary, albeit “grey market,” supply chain, which erodes the chance for that same sale in your store.

■ Fraudulent Refunds—Stolen merchandise often reappears in local stores in the form of fraudulent refunds that drag down same-store sales numbers.

■ Increased Insurance Premiums—The cost to insure your goods in-transit will obviously be passed on to customers.

These higher insurance premiums will make a retailer less competitive on sheer price point.

■ Lost Margin—The difference between the cost of the item and the retail value is not recovered by most ■

Mitigating Programs

The thieves don’t always have to win. There are several security layers that can be added into a supply chain to significantly reduce risk and, hence, your exposure to loss.

One of the first things to understand is what your exposure to theft actually is. For instance, what areas of the country do you operate in? There are several cargo theft “hot spots” in the United States that include certain areas within the states of California, Texas, Georgia, Florida, Tennessee, Illinois, and New Jersey (see the graph left column). If you move or store goods in any of these states, you have a much higher probability of becoming a victim of a cargo theft as opposed to other states in the country.

Also you need to consider the current popularity of the particular commodities sold in your store. The chart on page 48 shows that virtually all commodities, at one time or another, represent desirable targets to cargo thieves.

Do you control the delivery of your merchandise with an in-house proprietary trucking fleet? Many retailers are moving away from maintaining their own transportation to focus more on their core business of retailing. Those that do maintain their own fleets, however, have a distinct advantage; from screening and hiring their own drivers; to making investments in security devices to add to their fleet of tractors and trailers; to establishing proprietary in-transit policies and procedures that your specific drivers use while transporting shipments.

More often than not, however, many companies contract out their transportation services and do not, necessarily, have direct control over their transportation providers. That being the case, there are many best practices that can be put into place contractually to ensure that your exposure to potential theft is reduced.

Some of these mandated best-practice policies for third-party providers should include the following: ■ Requiring stringent background checks for all drivers and anyone who has visibility of your critical shipment information.

■ Producing policy-and-procedure manuals that include security requirements and can be randomly audited.

Cargo-Theft Incidents by State 0

50

100

150

200

250

300

California Texas Florida Georgia Illinois New Jersey Tennessee Alabama Indiana Pennsylvania Michigan Mississippi Virginia Kentucky North Carolina South Carolina

2012 2013

New York

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Litigating theft cases is an important investment as it sets a clear public precedent. How public? Theft offenders are learning all about civil recovery with some basic online homework of their own. A program that combines civil demand and litigation provides a solid education to theft offenders about retailers’ true legal rights and their intentions to recoup losses caused by theft.

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IN-TRANSIT CARGO CRIME continued from page 46

10% 7% Maintaining excellent DOT compliance and “out-of-service” records.

7% ■ Requiring drivers to produce a valid driver license and 10% vehicle registration, upon demand, before any shipment loading can take place.

6% ■ Making drivers aware of, and signing off on, your specific security requirements on each individual trip.

■ Ensuring that drivers know how to contact you in any Cargo Theft by emergency.

6% Product Type ■ Obtaining drivers’ contact information so that you can 14% readily reach them at any time during a shipment trip.

■ Having drivers arrive with a fully fueled vehicle to 5% minimize the number of stops necessary to make a delivery.

■ Ensuring drivers route themselves directly to the point of 4% delivery, as safely and efficiently as possible within lawful 4% bounds and with a minimum number of stops.

■ Requiring that there are no stops made within the first 200 miles of a delivery trip.

27% ■ Installing GPS tracking technology on both tractors and trailers.

■ Instructing drivers to lock any unattended tractor-trailer Food/Drinks Electronics Home/Garden Metal Building/ Clothing/Shoes with the engine turned off.

27% 14% 10% 10% Industrial 7% 7% ■ Suggesting that trailers should be parked with their rear doors against a fixed object to prevent them from opening whenever possible.

Auto Parts Alcohol/ Miscellaneous Pharmaceuticals Personal Care ■ Ensuring that loaded trailers are secured with a sufficient 6% Tobacco 6% 5% 4% 4% locking device at all times. If a loaded trailer must be resources available that can provide city-level risk mapping “dropped,” some form of approved locking device such based on historical data that can be used to set up a as a king pin, glad handle, or landing gear lock should driver’s particular route. All that is required is to enter be deployed. the pickup and delivery locations. The risk-management ■ Giving store security the right to inspect the driver’s program will map out the driver’s trip, highlighting areas tractor and trailer for stolen merchandise before the that have been prone to cargo theft in the past. Using this driver leaves. type of analysis, you can create “no stop” zones based Let’s not forget that professional drivers are our on the prior history of theft in that community. Many knights of the highways and should be recognized for their companies instruct drivers to not stop at least one hour top-shelf efforts and incentivized for superior performance before or one hour after these known “hot spots.” as well. Don’t create an unbalanced program that focuses on the punitive without recognizing the positive.

■

GPS Technology

Other Areas of Opportunity

Many logistics-security professionals believe that cargo thieves literally have a manual of their own that could be entitled “Cargo Theft 101.” From the repetitive methodology used to commit these types of crimes, one of the chapters in this manual includes the disabling of any visible GPS tracking technology on the tractor or the trailer.

Over a relatively short period of time, GPS tracking technology has become much more sophisticated than in the past. Although a layered approach to cargo-theft prevention and detection is always recommended, GPS tracking capability is probably the single greatest asset that exists in investigating and ultimately recovering stolen cargo.

It is important that you work with your distribution and store operations group to fully understand delivery schedules. It is noteworthy that thieves prefer to steal loads on Fridays, Saturdays, Sundays, and holidays, when drivers are often forced to leave loads unattended for long periods of time while they await delivery appointments.

Thieves also use these weekend periods to steal shipments in the hope of delayed detection. Therefore, shipping Monday through Thursdays, with a contemporaneous delivery before the weekend period greatly reduces a retailer’s chance of being targeted by a cargo thief.

It is also critical to perform route risk analysis on individual lanes, particularly within areas that you may not be entirely familiar with. There are now information

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IN-TRANSIT CARGO CRIME may be headed, and who to contact to assist in making a recovery. It is imperative that you or someone within your organization know and remain in perpetual contact with these important law enforcement entities.

Most important is to maintain cellphone contact numbers with these men and women. Why? As previously stated many of these thefts occur after business hours—at night or on a weekend—and you want to be able to reach out directly to the most seasoned cargo-theft investigators as possible.

I also try to attend as many regional cargo-security meetings as possible. There are numerous local and regional “councils” strategically located in the Northeast, Southeast, Southwest, and Western areas of the United States. Their meetings bring law enforcement, transportation providers, shippers, insurance companies, and retailers together to discuss issues affecting their particular regions of the country. These meetings are invaluable for the information that is shared.

Kurt Duesterdick, chairman of the Eastern Region Transportation Security Council (ERTSC) explains: “The ERTSC is one of the oldest, if not the first transportation security council in the U.S. It was started in the late ‘80s by a number of former members of law enforcement who had transitioned to transportation-security managers. These individuals discovered that they were all experiencing the same types of problems, yet had no way of sharing information. They made inquiries to one another and found there was a need to help one another out, as they all trying to safeguard the business of their respective companies.

“The original council consisted of only transportation-security and law enforcement personnel.

However, as cargo theft continued to increase, they saw the need to involve loss prevention professionals and investigators from the retail and shipping businesses to assist them in their endeavors by identifying stolen product, tracing serial numbers to specific losses, assisting in investigations and recoveries, and educating law enforcement in the movement of stolen goods.

“Today there are eight different private-sector councils located throughout the U.S. in the fight against both cargo theft and supply-chain enterprise crime. Our council has changed over the years with members reporting thefts and hijackings, as well as providing educational opportunities in the transportation, manufacturing, shipping, retail, and cargo world.

We have approximately 425 active members from both the private

continued from page 48

The accuracy of current GPS units is now at all-time highs—to within a hundred feet— which aids locating a stolen shipment fairly rapidly. As stated above in contractual best practices, if you have a transportation provider that does not offer GPS tracking of its tractors and trailers, you should definitely mandate it. It not only serves in the recovery of full trailer-load thefts, it also helps to identify potential acts of pilfering. Finally, it’s invaluable in tracking driver behavior as well.

Devices no longer need to be installed or placed in visible areas to “see the sky” so to speak. Technology has advanced to the point where devices can be inserted either within the vehicle itself or within individual shipments being transported inside a truck or trailer.

Portable GPS tracking devices are now routinely used by retailers to ensure that their service providers are following proper procedures and to add an additional layer of security in the event of a theft. Some of these units are so small they can fit inside a 100-count pill bottle and are easily rechargeable. The progress of shipments containing these devices can easily be monitored on a computer, tablet, or smartphone. Automatic alerts can also be configured for any of these devices if there is ever an unscheduled deviation from designated route.

Changing of the Times

Ten years ago it was relatively rare for transportation risk managers to interact with a retailer’s supply-chain loss prevention representative…if they even had one. That has changed significantly over the past few years. Virtually all major retailers now have someone responsible for supply-chain risk analysis and security who is responsible for ensuring safe and secure delivery of their respective merchandise.

In my years in this profession, I’ve had the opportunity to speak on this topic at loss prevention, logistics, and law enforcement conferences. I try never to miss an opportunity to meet with law enforcement entities who may someday be working a case when one of my trailers turns out to be missing.

The states noted earlier that have significant cargo-theft activity typically have their own dedicated law enforcement team of seasoned cargo-theft detectives and taskforces. These teams typically know who is operating in their areas, where the merchandise

On any given night there are hundreds of thousands of loads of merchandise parked in unsecured locations around the country. This is a well-known fact to various criminal elements, from organized Cuban and Eastern European cargo-theft crews to local gangs like MS-13.

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IN-TRANSIT CARGO CRIME sector as well the law enforcement community. Our law enforcement partners include, but are not limited to, the state police from New Jersey, New York, Pennsylvania, Illinois, Louisiana, Virginia, Georgia, and Florida. In addition, we have participants from Customs, the FBI, the Waterfront Commission, and several local police departments. We share our intel with the other seven councils, essentially getting this information in the hands of thousands of people who work and investigate these types of crimes.”

The Rest of the Story

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Now let me finish the story from the beginning of this article. The case was not hypothetical. I had just received a call that we have lost a $2,000,000-plus load of clothing. The driver claimed to have locked the tractor and had the truck keys in his possession. We immediately checked the tractor’s GPS unit, which indicated the truck was stationary approximately a mile and a half off the highway. I called the local police who responded to find the tractor abandoned.

We then pulled up the GPS tracking data on the trailer, and it last showed the conveyance was only a few more miles further down the road. Law enforcement was sent to that location, but essentially found nothing.

We then contacted the customer’s supply-chain security department and learned they had embedded a portable GPS device inside the shipment. Their GPS data supplier

was able to call me with the last known location of that portable device. I notified a contact I had developed over the years with the Florida Highway Patrol. That officer dispatched several of his men to that last known location, and within 45 minutes a full recovery was made of the stolen shipment.

This is a textbook case on how collaboration between a retailer, a transportation provider, and law enforcement led to a multimillion-dollar recovery.

While in-transit cargo theft is a significant issue, as industry professionals we are fortunate that the tools are there for us to combat this problem and significantly reduce our organization’s potential for loss.

JOHN TABOR is the principal of All States Locate, a supply-chain security and logistics consulting firm based in the New York metropolitan area, providing risk-mitigation strategies to retailers, shippers, and transportation companies as well as conducting cargo-theft investigations and training seminars. Tabor has 25 years of experience in loss prevention, most recently as the senior security executive for a national transportation and warehousing company. He can be reached at 201-294-6866 or jtabor@allstatesupplychain.com.

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Educating an Industry, One Leader at a Time LP MAGAZINE | MAY - JUNE 2014

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EVIDENCE-BASED LP

by Read Hayes, Ph.D., CPP Dr. Hayes is director of the Loss Prevention Research Council and coordinator of the Loss Prevention Research Team at the University of Florida. He can be reached at 321-303-6193 or via email at rhayes@lpresearch.org. © 2014 Loss Prevention Research Council

Decisions, Decisions C

own search template as they learn which cues signal easy versus risky targets.

Buildings meeting a criminal’s template criteria are likely to become a crime target. Protective cues might mean a red light to offenders not to strike since they let the offender know that place might not be worth it, might create too much detection risk, or be too difficult to get into. Risk cues indicate a given location is more desirable and vulnerable. Recent research indicates offenders may not notice or respond to clusters of cues as much as to a single or a couple of obvious and important indicators.

It is always important to bear in mind that most offenders not only look at a specific building, but are moving through and noticing the surrounding area, including the roadway and nearby buildings.

Based on current theory and recent research, our team is developing research projects around how predatory and opportunistic criminals select stores, DCs, or offices to rob or burglarize using real-world exposure and simulations. Go, no-go cues we’ll be examining include the following “attractive” risk factors: ■ High potential pay-off location—Upscale neighborhood; high-value assets of merchandise carried; outside cues like costly decorations ■ Low probability of quick detection by neighbors, police, or guardians—Isolated location; other structures and roadways are empty or blocked; blocking items like fencing and vegetation; darkness; low lighting; no occupancy indicators such as lack of vehicles and interior lighting; detection and alarm cues such as alarm and dog signage ■ Ease of effort indicators—Quick ingress/egress routes; ability to back up to a door or window; ground-floor entry point Obviously offenders may note all or some of these cues or the opposite of them as they make a hasty target selection choice. I’ll keep readers up to date as this research unfolds with possible implications.

rime reduction is our goal. Especially since individuals deciding to commit crimes against us or visiting our retail property usually create negative outcomes, regardless of whether they are “successful” or not. We know all crime actually results from individual voluntary decisions. Examples include individuals making decisions to become a criminal, to specialize as a certain type of criminal like a thief, and to commit a specific crime.

And while offenders’ backgrounds might or might not include troubled childhoods, deviant peers, or suffer genetic or other criminal pre-disposition factors, the environment must present desirable crime opportunities to generate crime events.

Crime-pattern theory argues local places emit signals or cues about the characteristics of the site, and criminals use these cues to locate and identify easy targets.

Criminals tend to develop their own search template as they learn which cues signal easy versus risky targets.

So our Loss Prevention Research Council (LPRC) and University of Florida (UF) research teams put most of our energy into improving our understanding of how different people make these crime decisions, and how we might cost-effectively influence their destructive choices by shaping commercial environments. Hence, we use routine activity, crime pattern, and rational choice theory, and our action toolset—situational crime prevention to shape our focus and efforts.

Working Groups Update

The LPRC Supply-Chain Protection Working Group has over fifteen retail chains involved now. The group is looking at virtual gate guard shacks and GPS tracking options and analytics, as well as exploring a series on distribution center interior projects.

The LPRC Video Solutions Working Group is installing multiple video-based solutions to address a series of parking lot and interior crime and loss scenarios in the Gainesville, Florida, T.J.Maxx store including the following: ■ Parking lot deterrence and fear reduction R&D treatments ■ Vehicle ID, tracking, and unusual activity notification ■ Parking lot pedestrian movement tracking and unusual movement notification

Curb Appeal

Canadian researchers Brantingham and Brantingham (1993) contributed to the development of a theoretical model of crime-site selection (crime pattern). Their model of crime-site selection views crime attempts as a result of a decision process, where the individual happens upon or intentionally locates a desirable target in time and space. Crime-pattern theory argues local places emit signals or cues about the characteristics of the site, and criminals use these cues to locate and identify easy targets. Criminals tend to develop their

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■ Armored

vehicle and pickup analytics entry ePVM and other analytics ■ In-store movement analytics and ePVM and other CCTV deterrent R&D ■ POS line cuing and fitting room exit analytics This group will be using the location as one of their StoreLab innovation and learning stores. Other retail stores will be brought online in short order as a means to expand the process and learnings.

■ Store

Subscribe or read online at LPportal.eu

Conference Participation

The LPRC team participated in an excellent RILA asset protection conference in Indianapolis in early April. We were able to interact with so many LP and solution professionals this year it was amazing. Thanks to the RILA staff for their hospitality, and the RILA AP steering committee for all their efforts.

Our team will also have the good fortune to participate in the upcoming NRF LP conference in Fort Lauderdale in June.

Please look for us in the exhibit hall. We also look forward to your comments on the educational sessions that we will be involved with.

LPRC’s 10th Annual Impact Conference hosted on campus by the University of Florida October 13 – 15 is being planned in detail at this time. Toys and Babies‘R’Us vice president Chris Gillen is heading the conference’s development. The planning team is laying out an even more interactive experience for all participants. Please contact me at rhayes@lpresearch.org to learn more about the conference or how you can become involved with the LPRC.

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ASK THE EXPERT Nathan Smith

The Basics of Data Analytics B

Nathan Smith is a cofounder and owner of Sysrepublic, and CEO of Sysrepublic’s American business unit. Smith has held diverse roles for a number of high-profile retailers. He has a degree in information technology for business and over the last decade has presented at major retail events and trade shows around the globe highlighting how technology can be used more effectively for retail businesses.

There is a plethora of ways that LP departments can benefit from the information that analytics can provide, whether identifying suspected incidents of theft or fraud, compiling evidence to support an investigation, or identifying and improving badly designed business processes. LP professionals have long understood the value of information, and data analytics provides an invaluable tool to help identify and resolve a wide variety of departmental needs. That’s why it’s so important for LP professionals to have a strong understanding of data analytics and how they can best put the information to use.

uilding on common ground improves comprehension and enhances professional development. One way to accomplished this is to seek input from those with exceptional ability and expertise to explain concepts and functions in terms that can be easily understood and applied in everyday situations.

Data analytics is a subject that is extremely important in today’s retail environment, and an essential concept for every LP practitioner to understand. LP Magazine recently sat down with Nathan Smith, CEO Americas for Sysrepublic, to help explain some of the fundamental concepts of data analytics and how it can be best utilized in loss prevention.

Why is integration so important to data analytics?

What exactly is data analytics?

Within every retailer there are many different applications that are designed to support company operations, and most of those activities generate data. This can include any and every aspect of the business, from scanning items as you check out to validating the receipt of goods at the back door.

All of this information is generally stored in the company’s computer systems.

Data analytics provides us with the opportunity to put that information to use. It is the process of taking raw data, typically from computer systems and applications, and using it to create information and insight. We take the information created from all the various business processes and look at it in one consistent way. This allows retailers to derive value by making decisions based on factual information derived from their operations. It opens doors to discover things that may not have been apparent otherwise.

Integration is the process of getting data out of one application and applying it to another to produce useful and meaningful results. It’s critical to have high-quality integration solutions to secure the correct source of data and ensure that the highest value is obtained from the resulting analytics.

By implementing high-quality integration and analytics solutions, retailers are able to leverage data that they already have to better understand their business and make highly informed decisions.

Where should retailers start?

It’s always best to start with a solid foundation. In order to create strong and useful analytics, we must have high-quality data. It’s like using quality ingredients when cooking—the better the ingredients, the better the meal. When ingredients are sub-par, it comes through in the quality and taste of the finished product. High-quality data works the same way. Many will try to perform analytics on data that has been sanitized, changed, or otherwise altered. Analytics works best with high-quality, clean data that comes straight from the source.

The latest generation of products not only have the flexibility to consume various types of data from core systems, social media, and everything in between, but have the ability to tell you what you don’t know. Contemporary solutions help sort through the mountain of data, wrapping those technologies into a package that can be wielded by users of all abilities.

Is there an aspect of LP that you don’t fully understand or have a question that you’d like to bring up, but didn’t know how to ask? Reach out to us at expert@lpportal.com.

How can this help in the retail setting?

By exploring and dissecting this data, new patterns emerge that paint a picture of how the business is running. It can tell us where we might have holes in business processes and make us more productive. It can help predict business trends and provide insights that can help us adjust, adapt, and evolve. By understanding analytics, changes can be made to systems, processes, or behaviors to address problems, improve performance, and add value. This is the present and future of retail. The possibilities are practically endless, and the results can drive the success of the business and the future of the organization.

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FEATURE

THE ROI FOR RFID IN RETAIL

USE CASES DRIVING THE CURRENT SURGE IN RFID ADOPTION

BY BILL MCBEATH © 2014 ChainLink Research

THE ROI FOR RFID IN RETAIL

O

ver the past few years we’ve witnessed a resurgence of interest and substantial growth in the use of RFID in retail—a veritable RFID Renaissance—with well over a billion tags used this year, not just in apparel, but for other categories and uses as well. It is being used in some truly innovative and high-value ways. In fact, there are many different potential ways to use RFID in retail, but a real dearth of solid data on what specifically is being done in actual implementations.

We wanted to find out exactly what is driving this new surge of interest. Which use cases are being implemented? Which of these use cases have the potential to deliver the most value, and what best practices ensure that value is actually realized? What is planned for the near future? What strategic goals are retailers trying to realize? What can others learn from the current wave of implementations?

To find answers to these questions and draw a clearer picture of exactly what is happening with RFID in retail, ChainLink surveyed and interviewed over 120 retailers, primarily headquartered in North America and Europe, but many with a global retail footprint. From this research, we learned some important lessons on why RFID projects succeed or stall.

EDITOR’S NOTE: This research was sponsored by Tyco Retail Solutions.

By a wide margin, the top reason for implementing RFID is to “improve inventory accuracy.” This makes sense, since improved inventory accuracy is central to driving sales uplift and many of the other benefits and goals of RFID. Let’s break down how this works.

RFID enables cycle counts to be completed about 25 times faster than traditional manual bar code scanning. Frequent, accurate cycle counts improve inventory accuracy, typically by 20 to 30 percent, allowing a number of retailers to achieve 99 percent inventory accuracy. This enables replenishment alerts to be reliably generated, increasing on-floor availability, and decreasing out-of-stocks (OOS), typically by 15 to 30 percent. This in turn results in sales uplift in the range of 1 to 10 percent or more for those categories.

The resulting increase in sales is the fundamental financial driver of most RFID implementations in retail and illustrates the central importance of improving inventory accuracy and reducing OOS. The dominance of this particular driver for RFID implementations is even more pronounced when you consider that three of the answers to our question in Figure 1 are just different aspects of the same core driver—inventory accuracy, reduced out-of-stocks, and increased on-floor availability. When added together, these encompass the prime reason retailers implement RFID.

What Are Retailers Using RFID For?

We asked retailers what they are using or planning to use RFID for (Figure 2 next page). At first blush, this data appears to tell a different story from Figure 1, since “loss prevention in stores” was selected as the most common planned use of RFID. However, we caution against interpreting the results to mean that loss prevention is the primary driver of most RFID implementations. For this question, rather than forcing respondents to rank their priorities as we did in Figure 1, we asked them to simply check “all that apply.”

Based on the responses to all the other survey questions and our interviews, we conclude that the use of RFID for loss prevention, while popular, is in most cases being used in combination with an inventory/replenishment application. The relative importance of inventory-based RFID applications is also supported by the data in Figure 2, where “item-level replenishment from backstock and

Why Are Retailers Adopting RFID Now?

RFID technology has made huge strides. The retail user community has conducted pilots, learned many lessons, and identified strong use cases. Standards have been established to create interoperability across the supply chain. RFID technology performance has improved greatly while at the same time costs have come down dramatically—item-level tag costs are about a fifth of what they cost in the early 2000s. The technology promises new insights as retailers transform their business operations. To find out what is driving the current wave of adoption, we asked retailers for their three top reasons why they were implementing RFID now (Figure 1).

Figure 1. Top Reasons for Impementing RFID Competitive pressure

Reduce out-of-stocks

Mandated by our customers

Improve customer experience

Provides operational effieciences

Ensure display items are on sales floor

Other

25%

12.5%

Test the technology

Support omnichannnel strategy

Reduce shrink Top priority

56

Improve inventory accuracy

Improve promotions performance

Second priority

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Ensure on-floor availability

Third priority

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Don’t know

Source:

THE ROI FOR RFID IN RETAIL inventory accuracy, driving reduced OOS, and increased sales.

Then once the retailer is utilizing RFID, they explore other possible uses and benefits. Loss prevention is the most common among those other possible uses, but there are many others as well.

Supply-chain uses are almost as popular as LP. “RFID in the DC to verify goods receipt, pick, pack, and ship” was selected by over 40 percent, and over one third of respondents are tracking goods from the source.

As we look further down the list at the wide variety of use cases, it is important to consider there are many types of retailers, store formats, operational models, and product categories, each combination having different use cases that make the most sense for them. Nearly a third of respondents are using RFID for both in-store fulfillment and to allow store associates to check on item availability, location, price, and other information. That shows that RFID can be an important component of an omni-channel program (more on this below). Also of note, though source tagging is increasingly common, a surprising number of retailers (nearly 25 percent) are still tagging in the store.

Product authentication, selected by just over 20 percent of respondents, is primarily the domain of luxury goods such as high-end handbags. A few private-label retailers are using RFID for sample management to try and streamline and compress the upfront development process. In addition, private-label retailers are more likely to do source-to-store tracking using RFID. Display and promotion management, home delivery, and using RFID for warranty purposes have seen some piloting, but few widespread implementations. Using RFID for home delivery is being explored by e-commerce providers, especially for large, complex deliveries requiring on-site assembly and installation, in order to ensure accurate picking and optimized logistics processes, such as precise truck loading sequence and delivery confirmations.

Customer experience applications of RFID, such as smart mirrors or kiosks, have gotten their share of media buzz, but are seeing very little adoption to date.

Figure 2. Current Use Cases for RFID Loss prevention in stores

Item-level/on-floor replenishment from backstock

Cycle (inventory) counting in stores RFID use in your DC (receipt verification, cycle counting, pack/ship verify, etc.)

Other

Tracking from source (pallet, case, or item)

In-store fulfillment (to customers, interstore transfers) Associate item look-up and/or locate (price check, inventory status/avalablility/location, additional info) Source tagging (at manufacturing location)

In-store tagging Product authentication

Check out using RFID Reciept verifications at stores

Sample/asset tracking

Display execution and compliance (track display items)

The Path to ROI

Home delivery (delivery tracking, proof-of-delivery)

Promotion management (setup, uplift measuring)

Warranty and returns

Kiosk with RFID reader (price check, product info, provenance/origin, etc.)

Smart mirror/smart dressing room

0%

10%

20%

30%

40%

50%

60%

Source:

cycle counting in stores” are practically tied with loss prevention as the most widespread use of RFID. With the exception of some very high-value products such as jewelry, it is not common for RFID implementations to be justified on the basis of loss prevention alone.

In fact, this is a fairly common pattern we’ve seen—RFID is justified based on the ROI for a prime use case, which is typically

Many retailers are achieving a strong enough ongoing ROI to justify continual expansion of their RFID programs. We explored these to understand how benefits are being realized, what these have in common, and how these programs tend to evolve.

The survey data and interviews reveal certain “ROI centers-of-gravity” as illustrated in Figure 3 (next page). Others can use these experiences to help determine a value-based path forward for themselves.

Focus on High Mix Complexity Items. One common thread we found in successful implementations is that they usually start with the area of fastest ROI. For most retailers this is a focus on products with “high mix complexity,” such as size/color/ style-intensive items in apparel and footwear, inkjet cartridges, certain cosmetics such as eye shadow, fragrances, and certain sporting goods. What these categories have in common, besides relatively high price points and margins, is the need to keep many different variations on display, so that when the customer walks in the door, they find just the one they are looking for. The primary driver here is very tangible—sales uplift resulting from on-floor

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THE ROI FOR RFID IN RETAIL Figure 3. Retail RFID “ROI Centers-of-Gravity” Supply Chain Effectiveness

Sales Uplift OOS Reduction

store associates to check availability of the customer’s size without leaving their side.

Still others—especially private-label retailers—are using RFID to improve supply-chain performance, especially for labor-intensive, error-prone processes, by using RFID to verify pick, pack, ship, ASN generation, store receiving, and inter-store transfers. As a result of RFID-enabled supply-chain processes, some retailers have seen a substantial reduction in errors and increase in accuracies, coupled with a sizeable decrease in the amount of labor required for scanning, inspection, and rework.

Almost everyone who implemented RFID in their DCs and supply chain found that it exposed many opportunities for process and performance improvements.

However, with some notable exceptions, many LP and supply chain uses of RFID were follow-on efforts that happened after the retailer realized an ROI with the core inventory accuracy and on-floor availability improvement use cases. The exceptions included jewelry or other very high-value categories, where loss prevention was the primary driver, as well as some private-label retailers who decided from the start to implement RFID end-to-end across their supply chain.

Supporting Omni-Channel Programs. Omni-channel has become one of the most promising areas of growth for retailers.

For many retailers this requires implementing a “fulfill from anywhere” strategy where they treat all of their inventory as one giant pool—whether that inventory resides in the DC, stores, in-transit, or on order from the supplier—and make it available for fulfilling customers’ orders from anywhere (online, in the store, or via call center) and to anywhere.

This deft supply-chain management capability requires highly accurate inventory information to guarantee the reliability of the order-promising process. Telling customers “Yes, we have one in stock for you,” only to renege on it later because the inventory data was wrong or out-of-date is very bad for business, customer satisfaction, and reputation.

Improved inventory accuracy enables retailers to confidently provide item stock availability to customers via online and mobile lookup, and to reliably promise availability for orders placed online, by phone, or in the store, whether delivered to the

Loss Prevention

Replenishment and Backstock Items Labor Intensive, Error-Prone Processes

High-Value Items

High Mix Complexity Items

All Items Omni-Channel Fulfill from Anywhere

Initiative/Goal Target Processes, Items

All Items

Customer Experience

Type of Initiative or Goal Achieved Size = Approximate ROI Potential Overlap = Shared Sources of ROI Target Items or Processes for RFID

availability. As mentioned earlier, these are largely a result of the increased inventory accuracy and timely replenishment alerts that RFID applications bring to the table. This is why many retailers start their RFID efforts focused on high mix complexity/size, color, and style intensive products.

Loss Prevention and Supply-Chain Uses. Retailers may expand their RFID footprint in one or more other dimensions.

Some have moved from a high mix complexity core set of items, to tagging a broader set of general merchandise encompassing all replenishment items. Others are using RFID as part of their overall loss prevention programs.

Loss prevention benefits can be derived at virtually any point where inventory applications are deployed and are not limited to “RFID as EAS” (electronic article surveillance) installations.

As such, RFID for retail LP continued on page 60 applications are occurring across the store floor and supply chain—in receiving, in high-theft “The business case for expanding our RFID implementation to more zones on the selling floor, at stores and departments has been driven almost entirely by one key the point-of-sale, and in DCs. objective: identifying and correcting inaccurate inventory in the system.

RFID gives much more precise information about exactly what This is especially critical when the system believes there is stock in the is being stolen and where, which store, but in fact none is there. That inventory will not be replenished, allows retailers to more effectively sometimes for weeks or months, during which time sales opportunities target their prevention efforts.

Footwear has been an are missed. We have measured sales improvements in every category interesting category where RFID we have used RFID. The best improvements have been where we have has been used for loss prevention size and style complexity, such as footwear.” and also for making sure pairs stay together, ensuring the right - RFID program lead for a major multinational retailer shoes are on display and enabling

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LPPORTAL.COM

STOP shrink

LockUp employee lockers are an essential element of any store’s loss prevention strategy. Clear, polycarbonate locker doors show everything stored in employee lockers and the patented, manager flex key puts locker control in the hands of store management, not employees. LockUp offers secure, personal storage for employees and a shrink reduction plan for stores.

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THE ROI FOR RFID IN RETAIL continued from page 58

home or picked up in-store. Improved RFID solutions offer LP departments insights never before available. real-time inventory accuracy, by item and For instance, variances at receiving are known immediately, instead location, is RFID’s prime contribution towards enabling a more effective of being discovered at the next physical inventory. The proper omni-channel program. source of shortages can be identified and corrective action taken.

RFID and the Customer Retailers are also investigating the use of RFID at the storefront for Experience. Our research showed that the use of RFID for enhancing LP protection. However, their approach depends in part on current the customer experience—such as LP infrastructure. Retailers already using EAS may elect to keep that smart mirrors, smart dressing rooms, program intact, with RFID focused on inventory management. Those RFID-enabled kiosks, or instant checkout—is still low. The primary without LP technology at the storefront may elect to adopt “RFID as customer experience impact of RFID EAS” right away, as a sort of “free” LP. Still others are deploying dual today is increasing the on-floor EAS/RFID technology to get the best of both in a single package. availability of the specific products the customer wants, which directly drives increased customer satisfaction and higher sales. cancelled, as well as the successes. We asked those who ended up Unique category, format, and process requirements can lead to cancelling an RFID program why those initiatives were halted. The innovative starting points for RFID. Project champions can come top three reasons were “lack of a well-defined use case,” “lack of from various functions across the enterprise. Hence they discover executive support,” and “superseded by other business priorities.” and derive the best use cases and ROI based on their domain This highlights the importance of selecting the use cases with the experience and then champion RFID across the enterprise. most rapid ROI and with benefits large enough to win against competing uses of capital and other initiatives that consume management attention.

Avoiding the Missteps For some categories such as groceries and certain uses such Not all RFID programs succeed. As part of our research, we as magic mirrors, the ROI for RFID hasn’t appeared to be strong wanted to learn the lessons from projects that stalled or were

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THE ROI FOR RFID IN RETAIL

availability. Off-price stores, who primarily make one-time buys for overrun goods, item order cancellations, and closeouts, by definition are not replenishment-driven and do not have a strong business need for item-level store visibility. In fact, some of these discount stores do not utilize technology for loss prevention and are still struggling with 2D barcodes and other scanning technologies.

A few retailers also commented on difficulty with certain items and materials or environments. However, fewer and fewer retailers are running into these issues, as many of these challenges have been addressed by advancements in technology.

This emphasizes the importance of “Our key criteria in selecting an RFID implementation partner was selecting the right solution, experienced RFID application providers and their experience with RFID in retail; in particular their knowledge implementation partners who have faced, of retail business processes and ability to realize new ways to understand, and overcome the challenges improve those processes using RFID. Our RFID pilot drove big from the physics of RFID. Those that use source tagging and changes to many processes across our supply chain. Substantial ask suppliers to change their packaging changes have been made to our suppliers’ pick, pack, and ship and processes, such as using RFID to operations, our entire stock booking process between warehouses verify correct pick, pack, and ship, often struggled with getting suppliers to comply, and stores, the replenishment processes within our stores, our especially when those suppliers were merchandising, and more.” smaller, overseas, and/or being asked to - VP of supply chain for a major fashion retailer who implemented bear all the additional costs. Successful RFID across their entire supply chain from source factory to the store implementation has required a concerted

enough to drive adoption. When we asked retailers who decided not to implement RFID why they made that decision, the top two reasons were “too expensive” and “insufficient ROI.” Retailers who gave those reasons for not adopting RFID-based solutions were disproportionately represented by grocers and off-price discount/dollar/liquidator stores. For those categories, RFID often doesn’t make sense—it is too expensive relative to the benefit, which is a factor of the profit margin per item and the importance and difficulty of replenishing items to ensure on-shelf

continued on page 62

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THE ROI FOR RFID IN RETAIL

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RFID has come a long way in the last few years.

Standards have been established. Prices for systems and tags have plummeted. RFID technology has become much more reliable—read rates and ranges are much higher than they were, and technologies and techniques to deal with metals and liquids have been developed. Software applications that can be integrated into retailers’ IT systems and that are user-friendly at the store level are now available. Solution providers and systems integrators have much more experience with retail RFID and integrating to operational systems. There are many more experienced implementers who understand the pitfalls and how to avoid them. RFID providers have evolved to more of a complete solution approach, rather than requiring such heavy-lifting component-by-component integration, engineering, and customization.

But perhaps most important has been the end-users’ accumulation of expertise and deftness in understanding the different uses and the ability to derive a compelling ROI. They have realized that ultimately success is not about the technology, but understanding what to do with the new data, capabilities, and insights—what business and process changes can be made that have the most value for a retailer’s particular set of products and operating model.

The original wave of adoption in the early 2000s focused on tracking pallets and cases. But the real growth in adoption occurred as retailers realized value from item-level tagging, especially by improving on-shelf availability at the store. This has driven the implementation of RFID on billions of items by retailers like Macy’s, Walmart, Marks & Spencer, American Apparel, and others. As a result, they are realizing a sizeable operational, financial, and customer satisfaction advantage over competing retailers who are not using RFID. If you are one of those competing retailers, you should probably take a serious look at implementing RFID now.

Two-Way Business Radios

BILL McBEATH is chief research officer for ChainLink Research, a supply-chain research organization based in Newton, MA, dedicated to helping executives improve business performance and competitiveness through an understanding of realworld implications, obstacles, and results for supply-chain policies, practices, processes, and technologies. The ChainLink 3Pe Model is the basis for their research—a unique, multidimensional framework for managing and improving the links between supplychain partners. For more information, contact ChainLink Research at 617-762-4040 or info@clresearch.com.

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SOLUTIONS SHOWCASE AGILENCE

Retail 20/20—Blurring the Line between Exception Reporting and Business Intelligence

A

nyone who works in retail loss prevention knows what exception-based reporting (EBR) is. After all, it has been the industry standard for a few decades now. In their prime EBR programs were beneficial in helping to prevent future losses at the point-of-sale (POS), but even the best tools were difficult to use. They required a basic knowledge of structured query language (SQL). They would take weeks to return data, if you were lucky. And they did not generate actual reports, producing only spreadsheets of data that the user had to manually sort through.

Emerging Tools

Enter the 21st century and the emergence of business intelligence (BI) tools. BI programs allow users to examine the business as a whole by collecting data from all possible inputs, then reporting on that data. These advanced tools tend to be highly personalized and colorful. The former is vital because it allows the user to see exactly what they want on their own

terms, but the latter can be just as important. This is because color allows certain figures to pop off the screen, quickly drawing your attention to the items that need immediate attention.

While each of these tools serves its own purpose, the separation of the two can leave loss prevention professionals in the dark.

This is where Retail 20/20™ comes in—the next-generation reporting solution. Retail 20/20 blurs the line between EBR and BI by taking the best features from both and creating something that truly works for loss prevention professionals.

Below are a few key features that allow Retail 20/20 to stand out from the traditional exception-reporting tools.

Automated Compliance. ACT™, Retail 20/20’s automated compliance tool, enables retailers to create workflows that automatically triage and report on alert triggers that can be based

on individual events, summary data, or KPIs. ACT is also built to make chain-wide compliance simpler by allowing retailers to attach action plans and recommended resolutions to specific causes. The system then reports back to district managers and corporate-level users indicating which issues have been resolved, and if there are still open items that need to be addressed.

Chain-Wide Data Integration. Much like you, we know that losses can occur beyond the POS. This is why Retail 20/20 has the unique capability to collect data from almost any source, including loyalty programs, alarms and access control, inventory, human resource data, and much more. Collecting and reporting on all of this data simultaneously allows you to spot trends and track employee behavior more efficiently, helping you to stop fraud faster.

Reports That Actually Report. With all of this data coming in, you need reports that improve the process without adding to it. Retail 20/20’s reports run continually, eliminating the need for overnight jobs, and can be personalize using the drag-and-drop report builder—no knowledge of SQL required. The reports produced by Retail 20/20 use bright, colorful charts and graphs that allow outliers and trends to stand out. Click-to-drill-down then allows you to easily investigate issues all the way down to the item level.

Advanced Queries without SQL. Creating a query in traditional EBR tools can feel like solving a calculus problem.

If you do one thing wrong, you’ll never get the desired results. But Retail 20/20 is different. Creating queries has never been easier because you can use the language that your organization is familiar with. After just a few minutes with our query builder, you will be able to create queries delivering actionable insights that previously took you a full training session to nail down.

Future Ready

At Agilence we know that the technology being used today may not be the technology that is used tomorrow. To help you stay ahead of the curve we keep our ears to the ground and continually develop Retail 20/20 to be compatible with new technologies as they come across the horizon. Whether it is the next-generation EAS or RFID tag, a unique mobile POS system, or even wearable technology, rest assured that we are working to keep Retail 20/20 future ready.

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SOLUTIONS SHOWCASE ALPHA

Arming Retailers for the Battle

S

hoplifting is as old as shopping. Over the years this problem has escalated into a major battle that costs retailers more than $112 billion globally according to the Global Retail Theft Barometer.

Growing concerns keep loss prevention high on the agenda of retailers. “Companies are keen to invest in effective and proven loss prevention methods by collaborating with technology companies and specialists for loss management solutions to diminish these shrink problems,” states Euromonitor International.

For more than forty years, Alpha’s primary goal has been to partner with retailers and provide innovative solutions to help win the war against shrink. Here’s a look at Alpha’s newest weapons for the retailers’ arsenal.

VersaLok™. Versatility and Flexibility

The challenge—Create an effective security solution that will fit on boxes or other odd-shaped merchandise not easily secured by Keepers® or Spider Wraps.

The solution—VersaLok is a reusable alarming module that when used in tandem with a clear, disposable trace provides security options that are nearly limitless. The compact size of the module helps maximize merchandise sets and minimize storage space. VersaLok’s ease of application and removal cuts labor costs. Visually, it sends a clear “alarm secured” message. VersaLok is proving extremely successful in protecting ink toner, electronics, and other packaged merchandise in major office supply stores.

S3verify™. A Single Key; A Unique Store Code; Your Security Advantage

S3™ Attack and XL Spider Wraps®.

Both New and Improved

The challenge—Counterfeit, stolen, or unlawfully acquired detachers are being used to open and steal protected merchandise.

The solution—S3verify is a system utilizing new and advanced S3verify Keys and security devices that are programmed with a unique, store-specific code. Once programmed, attempts to open S3v devices with anything other than Alpha’s proprietary S3v Key will result in an alarm. S3verify is programmed to “erase” the store code if the S3v Keys are stolen or removed from the docking station. New S3v security devices include S3v-compatible versions of Alpha’s popular alarming series of CableLoks®, Spider Wraps, and Keepers.

S3verify is the “key” to a unique advantage against theft.

The challenge—Increase the ROI and best-in-class performance with ongoing improvements. Responding to one of the biggest shrink challenges faced by retailers, in 1996 Alpha created the Spider Wrap to protect six-sided boxes. The Spider Wrap pioneered a new era in security and is used by more than 500 retailers globally.

The solution—After engaging customers for candid feedback, Alpha’s newest generation, the 2 Alarm Attack Spider Wrap, allows for faster application and removal, features an even stronger locking mechanism, a smaller body for improved merchandising, and dual EAS technology. Storage is made more efficient with less exposed cables that won’t tangle.

The newest addition to the Spider family, the 2 Alarm XL Spider Wrap has a longer cable length of 132 inches to protect even the largest boxed merchandise. A push-button release makes it intuitive to use and allows for quicker application and removal. Alpha’s new and improved Spider Wraps lead the way in flexible, alarming security and provide retailers with a proven return on their investment.

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Innovation That Never Stops

Alpha is committed to solving challenges and providing the solutions required to arm retailers for this ongoing battle. Strategic thinking combined with our investment in innovation will continue to result in new solutions that target shrink and out-of-stocks while improving merchandise availability and profits.

For more information on these or any of our other solutions, please go to alphaworld.com or call 888-257-4272.

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SOLUTIONS SHOWCASE AXIS COMMUNICATIONS

Meeting the Challenges of Modern Retail

R

etailing today is no simple task and store owners face many challenges. The most obvious of these are theft and inventory shrinkage, which eat into your stores’ profits.

Retail surveillance using network video solutions, such as IP cameras, is an excellent tool in the efforts to protect your business. By deterring crime, it reduces loss and creates a safer environment for staff and customers.

With one of the broadest product portfolios on the market, Axis Communications offers a multitude of intelligent security solutions. From network cameras to encoders and physical access control, we think beyond surveillance and set the standard. With an open platform and collaboration with our partners, it allows us to create intelligent, proven solutions to deter loss and put money back to your bottom line.

For years the retail industry has been abuzz about the possibility of video analytics, and now it’s starting to

A Quick Glance at Video Analytics for LP

become a reality. Through these intelligent algorithms you can spot atypical customer behavior that when viewed by the LP department might suggest potential loss activity.

Historically, video analytics have been used for marketing and merchandising needs. But these analytics aren’t just tools for marketing and merchandising anymore. If you look at four of the most common video analytics used by retailers today—heat mapping, dwell time, people counting, and facial cataloguing—you’ll quickly see how intelligent video analytics can make the difference for loss prevention.

Increasing Value for Loss Prevention

Heat Mapping allows retailers to visualize customer traffic patterns through the store over time. The analytic uses color overlays to denote hot spots of activity and cold spots with little or no foot traffic. From an LP perspective, heat mapping is especially useful in static environments where the floor layout remains the same. You can establish a good baseline of activity, which makes it easier to judge spikes and anomalies.

Dwell Time lets retailers see which areas of the store catch a customer’s eye and keeps their attention. The analytic is designed to detect a person remaining stationary in a particular location beyond a set period of time, a parameter designated by the retailer. The application uses a graphic overlay on the video to pinpoint the location where the dwell threshold has been exceeded. For LP a dwell-time alert can be a red flag that someone might be looking for an opportunity to conceal a product or scoping out the location for an organized retail theft sweep.

People Counting helps retailers keep track of how many shoppers are entering the store or even a specific area of the store. The algorithm is designed traditionally to be one-directional so that it doesn’t count people leaving the premises. The information is generally presented in a graph broken down into units of time. When LP studies people-counting statistics, they’re looking to find a connection between customer density and returns. By familiarizing themselves with the baseline, they can spot inconsistencies that might indicate fraudulent rather than honest returns.

Facial Cataloguing is one of the newest analytics gaining attention and traction in retail. The algorithm is designed to gather the gender and approximate age of a shopper based on facial geometry. It can also predict general mood by analyzing facial expressions. The analytic helps LP identify repeat offenders or known retail crime members as they enter the premises by sending an alert to staff, who can then respond according to store policy and local laws.

Today, LP professionals are beginning to see the value of using these analytics. As algorithms integrate into standard operating procedures, their cross-functional value is becoming even more apparent. When LP applies this intelligence to its own surveillance toolbox, the ability to anticipate and avert loss increases significantly as does the retailer’s overall return on investment.

For more information, visit axis.com/retail or retail-surveillance.com.

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SOLUTIONS SHOWCASE INTELLIGENT LOSS PREVENTION

J-Plug’s Unique Audio Lock Secures Any Electronic Device with an Audio Jack

I

J-Plug offers the smallest-profile camera security on the market and a stylish loop security solution that can be used with handbags, headphones, home goods, and more. J-Plug’s cohesive line allows users to maintain a consistent aesthetic across all product categories.

In addition to physical security, the J-Plug Pro App can be used alongside or independently of the J-Plug line security range.

App features include siren from device, full system lockdown with geo fence technology, web-based dashboard, email notifications, content control, and uninstallation protection.

Intelligent Loss Prevention will be showcasing J-Plug at the NRF Loss Prevention Expo in Fort Lauderdale, Florida, from June 11–12. Demonstrations of the app will be available as well as the opportunity to view J-Plug securing mobile phones, tablets, speakers, headphones, cameras, and more.

While J-Plug is new to the U.S., it is no stranger to the European market. J-Plug is the creation of London-based Multplx whose customers include Microsoft, Jawbone, T-Mobile, Samsung, Dell, Griffin, Nokia, and HTC among others. Intelligent Loss Prevention is the exclusive U.S. distributor of Multplx’s J-Plug product line.

ntroducing J-Plug display security from Intelligent Loss Prevention (ILP). J-Plug is changing the way demo devices are displayed through unrivaled security, style, and simplicity. The differentiating factor is J-Plug’s use of the common feature of all consumer electronics—the 3.5mm audio jack. J-Plug features a unique pin that locks into an audio socket.

This audio lock provides universal and future-proof security for any electronic device with an audio socket, such as tablets, smartphones, speakers, PCs, laptops, MP3 players, and more.

In addition to the mechanical audio lock, J-Plug offers charging and alarming versions.

Clean, clutter-free design ensures that shoppers can fully interact with display products secured by J-Plug. This unique audio lock replaces the need for claw-style, adhesive, or bulky security devices that can detract visually or experientially.

Slim design and 360-degree rotation ensure unhindered product interaction.

About Intelligent Loss Prevention (ILP)

Intelligent Loss Prevention is the consultative security division of Southern Imperial, Inc.—a leading manufacturer of retail displays and fixtures for over fifty years. ILP helps brands and retailers safely merchandise high-theft products in shopper-friendly formats that drive sales. For more information about J-Plug or our other solutions, please call us at 800-747-4384 or visit intelligentlossprevention.com.

J-Plug solutions feature robust, aircraft-grade steel cables. Testing determined that retractable and coiled tethers deteriorate at a much higher rate than J-Plug’s wound steel cable.

Alarming J-Plug solutions contain a “tripwire” that is woven into the cable as an additional layer of defense.

J-Plug’s sleek and durable stand, which works in conjunction with the J-Plug alarm, positions display products with magnetic precision. In addition to the audio lock solutions,

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LPPORTAL.COM

SOLUTIONS SHOWCASE CORRECTIVE EDUCATION COMPANY

Leading the Change in Managing Petty Theft

T

o many, shoplifting is considered a victimless crime—not really hurting anyone. But in fact, shoplifting contributes to billions of dollars in losses for retailers each year and translates into higher prices for the average consumer. Other hidden costs can include overloading of the criminal justice system since low-level theft makes up a large percentage of these case loads. And for communities at large, neighborhood business may be forced to close due to lost profits, further inconveniencing the general public.

According to numerous surveys from a variety of different organizations, most incidents are “opportunistic shoplifting,” which describes thefts that are not pre-planned and are committed by individuals stealing for personal use, not for profit or resale. It is believed that approximately 73 percent of shoplifters don’t plan to steal in advance.

Providing a structured approach through corrective education programs can help alleviate the burden this type of crime places on retailers, law enforcement, prosecutors, and society as a whole.

the restitution and justice they deserve; while offenders recognize their mistakes and are given the support and tools they need to correct their mistakes and change the course of their lives.”

By the Numbers

A study conducted by the Loss Prevention Research Council (LPRC) found retailers’ apprehension costs without CEC solutions ranged anywhere from $42 to $240. When using CEC, that cost dropped to the $11 to $18 range due to time savings for the LP associate. With thousands of potential apprehensions per year, significant savings can be realized in a short time period.

Beyond the cost savings behind apprehensions, recidivism studies on the impact of CEC’s education programs have found that recidivism rates without an education program can be as high as 80 percent. With some education, the rates dropped to 35 percent. Recidivism rates for individuals that experience CEC’s program are consistently below 5 percent.

Less administrative time shows a 34 percent gain in LP associate productivity. In an environment where retailers are constantly asked to do more with less, the gain in productivity alone can be a significant boost to the bottom line.

Finally, customer surveys show a 50 to 80 percent increase in financial restitution when deploying a CEC program.

Complete Suite of Solutions

Corrective Education Company (CEC) understands the challenges facing retailers, courts, prosecutors, and law enforcement agencies due to retail theft. The company works with all parties, as well as security firms, parents, and schools, to provide a successful, equitable, and more efficient alternative to judicial prosecution.

A pioneer in the industry, its approach to this societal problem has been to implement programs that balance the need for justice and restitution. Their team is comprised of seasoned professionals with years of experience in the areas of retail, education, and technology.

“By combining the latest in technology with media-rich educational programs, we deliver a holistic approach to restorative justice,” stated Darrell Huntsman, CEO and founder of Corrective Education Company. “Our education programs and proprietary incident intake and management system ensure that retailers receive

CEC provides retailers with a complete suite of tools with its CEC Connect™ solution: Mobile Case Management—Quickly launch a mobile app enabling clients to create, view, and edit incident reports on the go.

Increased Restitution—Users can now be more confident in the amount of restitution they receive for every case processed through CEC Connect.

Single Mobile Platform—No need to buy extra equipment because CEC Connect allows the swift launch of current service apps and programs at no cost using CEC’s device.

Predictive Analytics—Prevent theft before it happens with CEC’s out-of-the-box predictive analytics, exception reporting, and dash boarding tools.

Geo-Tracking—The CEC Timestamp™ feature allows the end-user to run real-time location and time card stats by date, stores, region, and employee.

Time Savings—Decrease the processing time for a petty theft shoplifting case to 25 minutes.

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Primary Benefits

about the diversion program. The offender is then offered the program under free will, and, if rejected, then the retailer follows its standard retail theft protocols.

Step 3. If the offender accepts the offer, CEC contacts the offender immediately with details about the diversion program, including program structure and costs. If the offender cannot or chooses not to pay, the retailer then follows its standard retail theft protocols.

Step 4. When the offender pays for and completes the program, his or her information is stored in the online database and monitored for repeat offenses. Retailers can track offenders’ program progress through CEC’s cloud-based analytics and reporting tools.

CEC’s solutions offer a number of benefits to users: educes Time and Costs—The technology reduces costs for R retailers to prosecute offenders and eliminates 90 percent of the time it takes to process an offender through the justice system.

Increases Financial Recovery—Because offenders are held responsible for damages, improved offender data improves civil demand recovery.

Completely Offender Funded—The offender pays for CEC’s program, and there is no cost to the retailer for the technology, online database, education program components, or implementation.

Components of the Program

Win-Win for Everyone

There are three primary components of the CEC program: obile Devices, including iPads and Fingerprint Scanners— M These technology solutions are deployed at every retail location to capture offender information.

Cloud-based Analytics and Reporting Tools—Information captured on the mobile devices are stored in a secure, cloud-based database. At any time retailers can access the analytics and create reports to better understand in-store loss prevention and CEC program effectiveness.

Online Education Program—CEC has developed a proprietary, proven online cognitive restructuring and life-skills course that takes offenders up to eight hours to complete. Retailers can track offender progress through the online database and reporting tools.

Shoplifting has been around since the beginning of retailing and will continue to exist as time goes on. Petty crime continues to present enormous challenges for retailers, the criminal justice system, law enforcement, and society. Unfortunately, the most common methods of dealing with these crimes are expensive for retailers, add additional pressures to the already overburdened criminal justice system, and can be life altering for individual offenders.

In the words of one senior vice president of loss prevention for a major retailer, “This is a program that is a win-win for everybody—the retailer, law enforcement, and the offender. I see no reason not to utilize CEC as part of any retailer’s LP program.”

Finding alternate ways to deal with offenders that is fair and equitable to all parties involved is the mission of Corrective Education Company. To learn more about the company and its solutions, visit correctiveeducation.com or call 877-318-0983.

Visit CEC at the NRF Loss Prevention Conference & Expo in booth 1023 and be sure to catch the session “Restorative Justice—The Impact on Retail Efficiency, Recidivism, and Shrink” on June 11 at 3:45 p.m. in room 315-316.

How the Program Works

Step 1. Once the offender is apprehended, he or she is qualified for the program. Qualification standards are established by the retailer and may include items such as age, repeat offense, value of merchandise, and other criteria. If the offender does not qualify for the program, the retailer follows its standard retail theft protocols.

Step 2. If the offender qualifies for the CEC program, an incident report is created and the offender is shown a video

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LPPORTAL.COM

SOLUTIONS SHOWCASE TYCO RETAIL SOLUTIONS

Mobility Empowers Retailers to Deliver an Enhanced Customer Experience

By Nancy Chisholm

I

n today’s mobile era shoppers are moving at a rapid speed and have little patience for cumbersome shopping experiences.

Retailers understand consumers’ need to quickly get in, find the products they want, and get back out the door. To keep their customers satisfied, many retailers are making it a priority to streamline their own operations, making shopping experiences quick, easy, and stress-free, while still keeping their valuable assets protected.

When it comes to a positive in-store experience, a fast and easy checkout plays a big part. If shoppers are stuck in the checkout line for a long period of time, they can become irritated and impatient. This dissatisfaction can then translate into a substantial loss in retailers’ sales—impacting their top-line growth and customer retention rate.

And while some things that create an Nancy Chisholm unpleasant checkout situation cannot Vice President & be avoided, there are certainly many General Manager Tyco Retail Solutions that can.

accurately scan and deactivate acousto-magnetic (AM) electronic article surveillance (EAS) labels in one sweep for a quicker—and safer—checkout experience. This rapid one-step scan and label deactivation also reduces nuisance and false alarms that are responsible for causing unnecessary customer inconvenience.

This handheld’s lightweight yet durable design ensures reliable operation in spite of everyday usage and exposure to dust and liquids. Together with a compatible scanner, it becomes an all-in-one portable device retailers can use to free up valuable counter space and avoid having to install the deactivation system in or under the checkout counter. This new mobile, in-aisle checkout gives store associates the flexibility to scan and deactivate

Rapidly Changing Landscape

The retail landscape is constantly evolving, and so are the technologies needed to help retailers succeed. RIS News 2014 annual “Store Systems Study” cites mobile technology for associates among the top store systems priorities for retailers, causing them to completely rethink the way associates interact with customers. Research indicates the growth of mobile devices for store associates confirms how mobility has become part of retailing’s DNA. Just as shoppers are utilizing mobile technology to be more productive and efficient in their everyday lives, retailers are doing the same in their stores. A number of research studies offer compelling insights on how equipping associates with mobile devices positively impacts productivity, profits, and customer service. In fact, according to RSR Research’s recent benchmark report “Mobile in Retail,” retailers recognize associates are unable to spend enough time assisting customers even though customers want assistance, making assisted selling the number one use of mobile devices for employees among the majority of retailers.

First-to-Market Solution

Leveraging emerging technology, we designed a solution to help associates checkout customers faster, more accurately, and more efficiently—while keeping assets secure and employees safe. First to market, Tyco Retail Solutions’ mobile handheld integrated deactivation solution enables associates to easily and

Tyco’s mobile deactivator enables retail associates to easily and accurately scan and deactivate in one sweep.

all items in the shopping cart, including merchandise too heavy or bulky to lift onto the counter—a “must have” for reducing lifting-related injuries due to store associates taking heavy, bulky items out of the shopping cart and on to the checkout belt.

Additionally, since labels can only be deactivated after associates scan them for purchase, this device helps retailers tackle theft. By having this level of deactivation intelligence, retailers are helping prevent internal theft, scan avoidance or “sweethearting,” and merchandise switching.

Our handheld integrated device allows general merchandise, Do-It-Yourself (DIY), or other retailers that typically sell large, bulky products to improve employee productivity, reduce shrink, and enhance overall customer satisfaction. Now armed with Tyco’s breakthrough technology, our retail customers can seamlessly advance their mobile strategies, creating a satisfying and more profitable customer experience.

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SOLUTIONS SHOWCASE PALMER, REIFLER & ASSOCIATES

Civil Recovery—The Original Restorative Justice Program

By Natt Reifler

S

tate legislatures in all fifty states have already decided how to address employee theft, shoplifting, and other forms of retail theft. Alabama is a great example.

Codified into its civil recovery statutes, Alabama provides clear legislative intent: from in-house counsel whether members of the shoplifting or employee theft community will truly understand the distinction between the education program offered to them as an alternative to criminal prosecution and future requests for statutory civil damages (civil recovery or civil demand).

Consideration should also be given to whether the people who fail to pay for the education program, or even those who do, will be more or less likely to sue retailers and/or their agents under state unfair/deceptive trade practices acts by arguing they didn’t understand the “pay for theft education instead of being prosecuted” agreement. Pioneering creative ways to tackle society’s theft epidemic is both noble and admirable, but may come with unacceptable risks inherent in relatively untested legal concepts.

As retailers explore new frontiers, it may be helpful to remember the long road to today’s civil recovery landscape.

It didn’t happen overnight and without numerous legal challenges. The approved practice of civil recovery law by lawyers has been court tested and forged by landmark court decisions, amended by state legislatures, reviewed by Attorneys General, and proven effective for over twenty-five years. This process produced the important precedent that because the underlying claim to a civil theft demand is a tort and not a consensual consumer debt, attempts to collect civil demands are not considered attempts to collect debts and do not fall under the scope of various consumer protection legislation as well as other protections for retailers.

Today, in addition to pursuing a socially responsible policy, retailers are confident that a properly implemented civil recovery program is also a sound risk management decision.

Section 6-5-270: Legislative findings.

The Legislature finds that shoplifting and employee theft have reached near epidemic proportions and that efforts to control these criminal offenses through traditional methods have proven unsuccessful and costly to both the general public and to business.

The existing criminal justice system is overcrowded and burdened thereby causing unreasonable delay. Continual use of the criminal justice system for shoplifting and employee theft offenses creates a further strain on an already overcrowded criminal docket, thereby requiring more tax revenue to pay for a continual expansion of the criminal justice system.

The continuous growth of shoplifting and employee theft cases in the face of traditional efforts to control these offenses represent added cost to retailers which, in turn, is passed on to the consumer in higher prices. Additionally, the merchandise lost to theft is not converted to profit in the form of sales for the retailer which results in millions of dollars in tax revenues lost.

Therefore, the Legislature deems that the utilization of an alternative form of deterrence to eliminate shoplifting and employee theft which avoids the stigma of a criminal record is more desirable than the present system.

(Acts 1993, No. 93-676, §1.)

Clearly in matters of shoplifting and employee theft, Alabama considers civil recovery as the ideal civil method to settling claims with a desirable outcome, benefitting all parties involved. Alabama is not alone, although in most states, civil recovery is a supplemental civil remedy that can be pursued in addition to criminal prosecution as a parallel process. Civil recovery is, after all, the product of careful deliberation by fifty state legislative bodies attempting to balance the property rights of retailers and interests of consumers and society at large, with the need to punish and deter individuals from committing acts of retail theft.

Retailers experimenting with new restorative justice programs should be mindful that, in our litigious society, all too often it seems no good deed goes unpunished. In light of recent legal challenges to private-sector, for-profit alternatives to criminal prosecution, retailers are wise to pilot new programs carefully. Particular attention should be paid to the implementation details, not only verifying the support of the local prosecuting authorities while deciding along with advice

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NATT REIFLER, Esq. is a partner at Palmer, Reifler & Associates.

His responsibilities include the overall supervision of the legal department and the team of dedicated collectors. Reifler also consults on compliance issues, serves as a legal liaison to clients, and advises on the firm’s day-to-day activities.

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LPPORTAL.COM

SOLUTIONS SHOWCASE PROTOS SECURITY

Isn’t It Time for the Guard Industry to Receive an Upgrade?

By Tim Shipman, LPC

T

hose of us in the loss prevention industry at times find ourselves in need of a security guard service for either a temporary or permanent assignment.

Finding the right partner or provider can be a challenge. There have been times when some of us have thought this to be a four-letter word—something that we would just as soon not have to deal with.

Managing a security vendor can be overwhelming from the perspective of tracking their attendance, monitoring if the guard reports on time or leaves early, as well as the quality of the guard provided. Most security guard companies come in with the best intentions of providing quality guards who will report on time and follow the post orders provided by the client. At the end of the day, though, many of the companies give the lowest bid possible—hoping to create additional volume for their company so as to increase their revenue while cutting costs—but do not have the infrastructure in place to properly monitor and manage the service on a quality, time, attendance, and professional basis.

You also may have seen what I have experienced, where a guard company is billing you for hours that were not worked or covered. When confronted they say, “It was just an honest mistake.” If you have been in the industry as long as I have, you have seen many guard companies come and go because they over-commit and over-extend themselves and could not produce the professional services promised.

A Paradigm Shift in Guard Service

Last year, before deciding to leave a company I had been with for twenty-three years and start my own consulting company, I was called on by Patrick Henderson, vice president with Protos Security. He shared their approach with respect to security services. When Henderson initially told me that they were a security company but did not have security guards working for them, I was a little confused to say the least. He went on to tell me that they actually had developed comprehensive software that provides their clients with many layers of efficiencies that result in reducing the overall costs of any security guard program.

They have also developed a network of more than 2,000 security providers throughout the U.S., Canada, and Puerto Rico that have been put through a rigorous vetting process related to the quality of guards, service, and professionalism

they provide. Once the vetting process is complete, Protos utilizes these companies to provide the needed services for their clients. Protos completely manages that process using the technology they’ve developed—creating one-stop, one-point of contact for service and billing.

At this point I am sure you are thinking the same thing I was thinking: “No way. This is too good to be true.” I decided to make a trip to Protos Security’s office and operations center in Roanoke, Virginia, to conduct onsite interviews. There I was met by their management team, consisting of Chris Copenhaver, president; Sally McGuffin, director of operations; and Jerry Scott, national accounts manager; in addition to Henderson.

It was obvious from the very beginning of the meeting that they were all very passionate about their business and the security industry as a whole. Copenhaver and Henderson actually started the company focusing on the technology side of the house because they both recognized the need to elevate the security guard industry while providing clients with a clear and accurate view of their overall security program.

In companies that utilize security guard services, many find this to be the largest single line item within their budgets; yet they do not have the labor or technology in place to properly manage billing, time, attendance, tracking, real-time incident reports, tardy alerts and notifications, quality assurance, and risk mitigation. Protos’s creative and fresh approach could and should take the security guard industry (reported to be a

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$21 billion-a-year business) to a whole new and professional level—adding much-needed accountability for both the solution provider and the client.

“Protos gives us a single point of contact for requesting security guard coverage in all of our stores, as well as the ability to communicate with the on-site officer. They have truly found a way to add value to an age-old solution.”

Creating a Partnership, Not Just Another Vendor to Manage

It became very apparent that Protos not only wanted our business, but also had a very strong desire to become a true partner with us. After careful consideration, I made the decision to proceed, giving Protos an opportunity to provide the services they had described.

I checked back with Terry Hoal, loss prevention manager of distribution for Delhaize America, who manages the security guard services for both distribution and retail at Delhaize America. Following is what he had to say.

“Protos Security is the only guard company I have worked and partnered with where I am constantly receiving compliments on the level of service they provide. Their response time to temporary or permanent assignments is unmatched compared to other companies I’ve used. The technology they bring to the table is also outstanding as it relates to reports and time and attendance. We have experienced a 5 percent savings in our budget because of the accuracy of time worked being properly billed and reported,” said Hoal.

Obviously, using the management software Protos provides imposes accountability on the solution provider. At the same time, the client is paying only for the actual time worked instead of the scheduled time.

Andrew Barborak, CFI, Gander Mountain anyone in need of a very professional and caring guard company.”

Andrew Barborak, CFI, senior manager of LP at Gander Mountain, stated, “Protos gives us a single point of contact for requesting security guard coverage in all of our stores, as well as the ability to communicate with the onsite officer. We can also follow up using various reporting tools, which greatly enhances our ability to manage and be informed of our guard activity. They have truly found a way to add value to an age-old solution.”

“At Advance Auto we have been doing business with Protos Security for eight years,” said Jeff Carr, asset protection solutions engineer for the auto parts retailer. “I have found Protos to be quick to respond to last-minute needs and always there to respond to our needs in the moment. The management tools they have developed provide us with real-time reporting and accurate billing, which is a cost and labor savings for our company. Protos Security is unlike any other security company I have ever done business with.”

I could find no one who had anything but positive things to say about Protos Security. Protos is quickly establishing itself as the one-stop, choice destination for contract security guard and management solutions. They are constantly looking for ways to raise the bar for their clients and are in the process of scheduling a security guard management summit of current and potential clients to solicit what additional visions, desires, and needs retailers may have related to contract security guard management tools.

I encourage you to contact Patrick Henderson at Protos Security at patrickh@protossecurity.com or 866-403-9630 ext. 105 to learn more about the solutions they provide or to participate in their upcoming summit.

“Protos Security is the only guard company I have worked and partnered with where I am constantly receiving compliments on the level of service they provide. We have experienced a 5 percent savings in our budget because of the accuracy of time worked being properly billed and reported.”

Terry Hoal, Delhaize America

TIM SHIPMAN, LPC is president of The Shipman Group, LLC, a loss prevention, emergency management/ disaster recovery, and risk management consulting firm based in Raleigh, North Carolina. He can be reached at 919-756-8033.

During the research for this article, I talked with several of Protos’s current clients, who provided the following statements.

“Protos Security is great to work with,” stated Sara Moccardine, NAS customer support manager for Protection 1.

“They have always delivered what they say they will deliver.

When we call for a last-minute situation where we need service, they constantly communicate with us until the request is filled. Compared to our previous provider, they are great communicators. I have and would highly recommend them to

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LPPORTAL.COM

SOLUTIONS SHOWCASE THE RETAIL EQUATION

Big Data—Turning the Tide on Fraud and Shrink

T

he phrase “big data” turns up frequently in the trade press. This ill-defined term loosely describes the ocean of bits and bytes pouring into IT systems daily, as well as the complex analysis being applied to the sea of information. The data can be marshalled into neat rows and columns or can be completely unstructured.

Retailers want to use it to understand customers better or otherwise benefit corporate executives and marketing departments, but loss prevention doesn’t need to take a back seat. Recent studies by The Retail Equation (TRE) show the big impact of big data on fraud and shrink.

Volume and Speed

Retailers collect data from many sources, including store sales transactions, store video, traffic counters, alarms, merchandise movement, loyalty programs, e-commerce click paths, and much more. A large retailer collects millions of transactions and hundreds of millions of line items per day.

To that they add 30 to 60 gigabytes of video per store per day. For a 1,000-store retailer, this could total 22 petabytes per year (the equivalent of 23,068,672 gigabytes).

Conventional systems like exception-based reporting and data-mining systems uncover direct relationships that occurred in the past. Big data analytical tools take analysis to a new level by, for example, detecting the connections among seemingly unrelated events to reveal underlying forces. This happens as the Verify-3® return authorization solution from The Retail Equation snaps into action to prevent fraud and abuse in real-time during the return process, not the day after. This type of response is not possible with conventional systems because they simply cannot pose the complex queries and deliver accurate answers fast enough to decline a transaction in process.

Many companies and solution providers have approached the data size or analytics problems by investing in bigger, faster hardware. This works up to a point. However, the massive amounts of data building up in the system and the complex analytical methods required to unearth the information is more resource-intensive than most companies can devote to loss prevention.

TRE achieves its big data high-processing speeds by using the Hadoop platform to split data into thousands of chunks and distribute the load. Additionally, TRE has custom software to operate in this environment to tackle very tough analytical challenges. Further, TRE utilizes several IBM PureData (formerly Neteeza) data warehouse appliances for added throughput. This architecture decreases processing time by sometimes more than 90 percent versus more traditional hardware/software deployments. A query that may take five

Fraudsters depend on system delays and lapses in judgment by the cashiers and associates on the front lines. However, when big data analytics replace subjective decisions, fraud and shrink diminish substantially.

Verify-3 reduces return rates by an average of 8.2 percent and shrink by 12.95 percent. hours to process using SAS on a conventional system takes only minutes on a Hadoop or PureData architecture. In the field, a return authorization completes in milliseconds.

Knowing Precisely What to Look For

Verify-3’s predictive algorithms and statistical models rely on big data tools to quickly improve the shopping experience and reduce return fraud and shrink simultaneously. TRE processes the data from all the transactions in the chain and identifies suspicious behavior indicative of any form of return fraud/abuse, including renting/wardrobing, returning stolen merchandise, receipt fraud, price arbitrage, price switching, double dipping, organized retail crime (ORC), check fraud, and tender fraud.

When an individual attempts to make a return, the system performs calculations, and, in less than a second, predicts the likelihood that the return is fraudulent. While the vast majority of consumers (about 99 percent) are approved, those whose actions are highly suspicious are warned or denied. This is an important point to notice—the system allows and supports generous return policies so that profitable consumers enjoy a fast and pleasant return process, including those who make many, many returns. In fact, the most valuable consumers tend to have a very high number of returns, which is why Verify-3 does not rely solely on simple return-velocity calculations, but rather uses big data to identify fraudulent patterns of behavior in real-time.

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Hidden Connections Indicating Fraud

99.31% Return Rate

Fraudsters depend on system delays and lapses in judgment by the cashiers and associates on the front lines. However, when big data analytics replace subjective decisions, fraud and shrink diminish substantially. Verify-3 reduces return rates by an average of 8.2 percent and shrink by 12.95 percent.

A $2 billion retailer would see about $15 million in savings per year, and retailers will see a steep decline in return rates beginning immediately after the system is live.

Verify-3 uses complex queries to identify ORC rings and fraudulent returners by linking seemingly independent events.

The diagram above shows a cluster of suspicious purchase and return events.

At the center of each dandelion-like cluster is one person (or one ID). The thin lines connecting the clusters show a “hidden” connection, such as a gift card being passed among conspirators. On their own the clusters may appear to be legitimate (high-volume buyers often return many items), but the value of the returns is very close to the value of purchases, and the connections indicate probable fraud by a group or an individual using multiple identities. Verify-3 halts the group’s returns immediately, and special reports can provide investigators with the information necessary to pursue a case. The big data tools allow TRE to maintain and update the linked identities on more than a billion linkages each day.

The amount of return-related fraud is staggering—$9 to $16 billion problem according to the 2013 Consumer Returns in the Retail Industry report released in January 2014 by the National Retail Federation and TRE. Many of these losses are preventable using the technology available today.

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About The Retail Equation

The Retail Equation, headquartered in Irvine, California, optimizes retailers’ revenue and margin by shaping behavior in every customer transaction. The company’s solutions use predictive analytics to turn each individual shopper visit into a more profitable experience. This yields immediate financial payback, increasing store comps by as much as 2 percent, with significant return on investment. The software-as-a-service applications operate in more than 27,000 stores in North America, supporting a diverse retail base of specialty apparel, footwear, hard goods, department, big box, auto parts, and more. For more information, visit theretailequation.com.

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LPPORTAL.COM

ACCESS CONTROL

ACCESS CONTROL

ALARM MONITORING/RESPONSE

WATCHING OVER YOU SINCE 1873 • Underwriters Laboratories Listed

Outdoor Area System

Ideal for garden centers, lumberyards, patios.

Where gates and doors are exposed to weather or moisture, panic hardware has to stand up to rain or snow. Detex offers a system with various weatherized applications.

• Detex Weatherized Delayed Egress Hardware prevents shoppers from slipping out with merchandise. Secure, two-point locking has 15-second delay and 100dB alarm.

• Access Control Devices allow entry from outside courtyard with keypad or card reader.

• Door Prop Alarms add to your system with an audible warning of doors being propped or held open. Battery powered or wired.

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This Detex system deters customers from entering stockrooms, but during an emergency provides a life safety path through the stockroom.

It includes access control for employees, and an optional alarm if the door is left open.

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• Alarmed Panic Devices can be wired or can operate with a ninevolt battery.

• Access Control Keypads and Card Readers have flexible programming capability and options such as anti-tamper switches.

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• Door Prop Alarms, battery powered or wired, alert staff with a 100dB alarm when a door stands open.

Door-open times can be field-set.

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MAY - JUNE 2014

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LPPORTAL.COM

a3tag

The new mantra in retail security The new patented intelligent a3tag combined with the new Smart Detacher provides retailers the tools to control not just external theft but internal shrinkage too. glen@retailersadvantage.com Call 647-781-1500 www.rfidadvantage.com

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STORE DETECTIVES

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Over 160 Offices Nationwide Including Canada, Mexico and Puerto Rico LP MAGAZINE | MAY - JUNE 2014

77

EAS

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NEW YORK

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Client says people know right away once they see them.

Claims their prices are the lowest, so few words are needed.

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PEOPLE ON THE MOVE

Brian Wedoff is now a Regional LP

Dusko Tadic, CFI is now a Regional

Joel Contreras was named LP

LeeRoy Hegwood, CFE, CFI was

Damond Windham was named

Dennis Douress was made Regional

Manager for American Girl.

Manager at Banana Republic.

Regional LP Manager for Bath & Body Works.

David Branum, LPC is now

Regional LP Manager at Bealls/Burkes Outlet.

Jason Steffen is now Regional AP

Manager East for Cabela’s.

Gary Moncur, CFI was named LP Director at Compass Group North America.

Edmundo Velazquez is now

LP Manager with Old Navy.

named Manager of LP at Outerwall.

LP Manager for Payless ShoeSource.

James Rodriguez was appointed

Director of Investigations at Stage Stores.

Lucy Jenkins; Ron Taylor, CFI; Steve Herring; and Brian Keefer were named Regional AP Managers, and Jay Hawkins, CFI

was made Regional LP Specialist with Regis Corp.

John Paul Mulhern, LPC is now

Regional Manager of AP for REI.

a Regional LP Manager with Destination Maternity.

John Peyton was named District

Bobby Oliveaux was named District LP Manager for DICK’S Sporting Goods.

Joe Young is now a District LP Manager for Sephora.

Melissa Bostick, CPP is now

Jenny Ley was appointed Director of Corporate Security by Target.

Corporate LP Manager at Eddie Bauer.

Manager at Ross Stores.

Brian McGee was made Regional

Amanda Belding is now a Regional LP Manager for TJX Companies.

Andy Stofanik is now Senior

Cherlynn Harris and Cheryl Demski, CFI were appointed

LP Manager for Finish Line.

Director of Safety and AP at Floor & Décor.

Regional LP Managers by Victoria’s Secret.

Brian Keenan was named District

LP Manager with HomeGoods.

Britt Davidson is now LP Analyst

for Kum and Go.

Wolf Ahonen was named Regional

Security Manager West at Levi Strauss & Co.

Margie Manto, CFI was named Zone

LP Director for Limited Brands.

Dave Shaffer, CFI, LPC, MBA was

appointed District LP Manager at National Stores.

Don Burkett is now Senior Director of LP Technology, Investigative Systems, and Safety for Office Depot.

To stay up-to-date on the latest career moves as they happen, sign up for LP Insider, the magazine’s weekly e-newsletter, or visit the People on the Move page on the magazine’s website, LPportal.com.

Information for People on the Move is provided by the Loss Prevention Foundation, Loss Prevention Recruiters, Jennings Executive Recruiting, and readers like you. To inform us of a promotion or new hire, email us at peopleonthemove@LPportal.com.

LP MAGAZINE | MAY - JUNE 2014

CALENDAR

June 5, 2014 DC Metro Cyber Security Summit The Sheraton Premier Tysons Corner, VA cybersummitusa.com June 11 – 13, 2014 National Retail Federation Loss Prevention Conference & EXPO Greater Fort Lauderdale (FL) Broward County Convention Center lp14.nrf.com June 15 – 20, 2014 Association of Certified Fraud Examiners 25th Annual Global Fraud Conference Henry B. Gonzalez Convention Center San Antonio, TX fraudconference.com June 17 – 18, 2014 International Quality & Productivity Center Retail Loss Prevention 2014 Novotel Sydney Central Sydney, Australia retail-lossprevention.com.au August 3 – 6, 2014 Restaurant Loss Prevention & Security Association 2014 Annual Conference Caribe Royale Hotel, Orlando, FL rlpsa.com September 8 – 10, 2014 Consumer Returns Westin Galleria, Dallas, TX consumerreturnsusa.com September 10 – 11, 2014 Retail Council of Canada Retail Loss Prevention Conference Toronto (ON) Congress Centre retailcouncil.org September 18, 2014 Retailers Association of Massachusetts New England ORC Symposium and Tradeshow DCU Center, Worchester, MA retailersma.org September 18, 2014 NYC Cyber Security Summit New York Hilton Midtown cybersummitusa.com September 29 – October 2, 2014 ASIS International 60th Annual Seminar and Exhibits Georgia World Congress Center Atlanta, GA asisonline.org October 10 – 13, 2014 Coalition of Law Enforcement and Retail (CLEAR) 5th Annual Training Conference San Diego (CA) Marriott Mission Valley clearusa.org

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ADVERTISERS AFA............................................................. 76, 77, 78 afap.com Agilence................................................................ 23 agilenceinc.com/retail-2020-solution Alpha...................................................................... 18 alphaworld.com American Military University............................. 35 amuonline.com/lpf Axis Communications.......................................... 49 axis.com/retail Bass Security....................................................... 61 bass-security.com CALTAG.................................................................. 78 caltag.net Checkpoint............................................................ 19 checkpointsystems.com ClickIt Inc.............................................................. 25 clickitinc.com Contact, Inc........................................................... 32 contactinc.com Corrective Education Company......................... 37 correctiveeducation.com Detex.................................................................. 9, 76 detex.com Diebold Security................................................... 31 diebold.com/lpmagazine FireKing Security Group...................................... 22 fireking.com InstaKey................................................................. 53 instakey.com Intelligent Loss Prevention................................. 60 intelligentlossprevention.com International Assoc. of Interviewers................ 75 certifiedinterviewer.com Kenwood............................................................... 62 kenwoodusa.com/protalkinfo LockUp by Digilock.............................................. 59 lockup.com Loss Prevention Foundation............................... 51 losspreventionfoundation.org LNL Systems ........................................................ 34 lnlsystemsinc.com LP Software.......................................................... 77 lpguys.com Milestone.............................................................. 36 milestonehusky.com NuTech National.................................................... 2 nutechnational.com Palmer, Reifler & Associates............................. 47 palmerreifler.com Protection1 Security Solutions.......................... 45 protection1.com Protos Security....................................................... 3 protossecurity.com The Retail Equation................................................ 5 theretailequation.com/success Retailers Advantage............................................ 76 rfidadvantage.com Salient Systems.................................................... 43 salientsys.com Secureitech.......................................................... 33 securitech.com/simplythebest Security Resources............................................. 83 securityresources.net Se-Kure Controls.................................................. 78 se-kure.com Sysrepublic........................................................... 13 getyourprofitsback.com Turning Point Retail............................................. 21 turningpointjustice.com Tyco Integrated Security.................................... 84 tycois.com/lp U.S. Security Associates.................................... 77 ussecurityassociates.com Verisk Retail............................................................ 7 veriskretail.com

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VENDOR SPONSORS

NATIONWIDE GUARD MANAGEMENT

VENDOR ADVISORY BOARD Agilence Pedro Ramos Vice President, Strategic Accounts

ClickIt Inc. Jim Paul Director of Sales

Intelligent Loss Prevention Jay Leedy Business Development Manager

Security Resources, Inc. Kris Vece Business Development

Alpha Diane Wise Global Marketing Manager

FireKing Security Group Ed McGunn President/CEO

Milestone Systems Trenton Thoms Retail Sales Manager

Sysrepublic Christopher D'Amore Owner/Partner, Global Sales

Axis Communication Hedgie Bartol Business Development Manager, Retail

Corrective Education Company Darrell Huntsman CEO

Palmer, Reifler & Associates Jeff Welch Executive Director

Tyco Integrated Security Kevin E. Lynch, LPC Executive Director

Detex Ken Kuehler National Account Manager

Protos Security Patrick Henderson Vice President

Digilock Marcy Ream Vice President of Marketing

The Retail Equation Tom Rittman Vice President, Marketing

Universal Surveillance Systems Anthony Oliver Chief Marketing Officer Chief Technology Officer

InstaKey Security Systems Cita Doyle, LPQ Director of Sales & Marketing

Salient Systems Mary Wilbur Director of Marketing

Bass Security Paul Fisher Vice President, Sales & Marketing Checkpoint Carlos Perez Senior Director, Global Marketing

LP MAGAZINE | MAY - JUNE 2014

Verisk Retail David Duhaime President Verisk Crime Analytics

81

PARTING WORDS

Show Me the Way H

Jim Lee, LPC Executive Editor

the tables on Fogg by asking him questions. Libby Rabun, vice president of LP for AutoZone passionately spoke of the value of advanced education through school, certifications, and conferences. Mark Stinde, vice president of asset protection at 7-Eleven, drove home the education piece with the personal example of how we all can find the time if we desire to go back to school. While Mark leads the AP effort at 7-eleven, he also finds time to work on his MBA. An undergraduate student session featured presentations on “Millennial Customers’ Perception of AP Strategies.” With a title like that you have to pay attention. Under the mentorship of LP professionals representing companies across the U.S., each student conducted research, performed community surveys, and prepared presentations. The results of the studies were presented, and the students fielded questions from the audience. Industry leaders then offered their insight to the students’ work. The session was a learning opportunity for the student, but also underscored the patience and mentorship that is a strength of today’s LP leaders.

A leadership session featuring Debbie Maples, Melissa Donaldson, and Hanan Darwish focused on creating a workplace culture that fosters inclusiveness, promotes diversity, and embraces team member’s unique skills and qualities and affords them the opportunity to fully participate in creating business success. Each speaker challenged participants to become ambassadors of change—reflecting on their teams, their programs, and themselves.

There were several other sessions that I attended and always seemed to find a leadership thread within them.

Good that this industry is on a high note with quality leaders willing to show others the way. And good that it happened so close to my hometown. I am pretty proud of being called a “Hoosier.”

ow many of you live and work in the same town as you were raised? Not very many I would guess. How many of you stay in touch with friends you went to school with?

How many of you get back to your hometown on a regular basis?

I am fortunate that I can say “Yes” to a couple of these questions.

Just recently the good people at RILA completed their annual asset protection conference in my home state not far from my hometown. So, guess where I made a visit before the show started.

Over the years when someone would ask me where I grew up, I always said a small town about sixty miles from Indianapolis. It is still small, still sixty miles away from “Naptown,” and I still have school friends who live there. I drove around town, visited with relatives, and had lunch with a couple of friends I went to school there from the third grade through high school. Is it just me or do you think when you see friends from school, they always look older than you? Anyway, it was fun to recount the good old days and excellent therapy to remember where you came from. I recommend it.

“A life is not important except in the impact it has on other lives.” Number 42, Jackie Robinson.

I also recommend the RILA conference. It seemed like every session I attended focused on leadership—being a good leader or showing others the way. An executive panel was a perfect example of dynamic leaders showing others the way. Jay Fogg, senior vice president of operations at Bloomingdale’s, was an exceptional moderator with a relaxed, confident, probing style. Fogg grew up in the LP side of the business and was himself an A-plus leader before other parts of the business needed him more. Bob Oberosler, group vice president of LP for Rite Aid, who spends a great deal of his time trying to create new and different solutions for our business was superb in his spot-on responses and even turned

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Managing loss prevention. Tracking millions of pieces of inventory – from the manufacturer to the shopping bag. And doing it all in one of the fastest-changing environments in global commerce. That’s why we like to think of people like you as Chief Visibility Officers – with an eye on every aspect of the industry, and the goal of improving customer experience through effective security practices backed by genuine Sensormatic® EAS technology. At Tyco Integrated Security, we get how important that is – and it’s why we work with 80 percent of the world’s Top 100 retailers on smarter ways to advance their business security. We’re more than a security company. We’re your Tyco Team.

Visit us at NRF Booth 801 To download our latest White Paper, visit TycoIS.com/LP 1.800.2.TYCO.IS / Safer. Smarter. Tyco.™ ©2014 Tyco. All rights reserved. Tyco and the product names listed above are marks and/or registered marks. Unauthorized use is strictly prohibited.