January - February 2019 by Loss Prevention Magazine

JANUARY–FEBRUARY 2019 | V18.1 LOSSPREVENTIONMEDIA.COM

LOSS PREVENTION MAGAZINE THE AUTHORITY ON ALL THINGS ASSET PROTECTION

SHOPLIFTING RESPONSE, REACTION, AND RECOURSE WHAT’S A RETAILER TO DO?

THE EVOLUTION OF LP TO SUPPLY CHAIN OMNI-CHANNEL EXPERTS PROGRESS IN SUPPLY CHAIN SECURITY WILL BE TESTED MANAGING LOSSES ASSOCIATED WITH SELF-CHECKOUT TECHNOLOGIES

TABLE OF CONTENTS

6 EDITOR’S LETTER

Shoplifting Response, Reaction, and Recourse

Why Supply Chain? By Jack Trlica

10 RETAIL SPONSORS 12 INTERVIEWING

Evaluating Memory: I Remember It This Way, Part 2 By David E. Zulawski, CFI, CFE and Shane G. Sturman, CFI, CPP

What’s a retailer to do?

By Walter Palmer, CFI, CFE, EPIC Integrated Risk Solutions, and Jacque Brittain, LPC, LPM Editorial Director

24 SUPPLY CHAIN

37 CERTIFICATION

The End-to-End Logistics Provider By Glenn Master

Meet the Director of Operations for the LP Foundation

The Evolution of LP to Supply Chain Omni-channel Experts

Interview with Mat Schriner, LPC

48 EVIDENCE-BASED LP

Opportunity Makes the Crime By Read Hayes, PhD, CPP

50 LPM EXCELLENCE

LPM “Magpie” Award: Applauding Excellence

A Conversation with Maurizio Scrofani

Featuring Melissa Wacha, Walmart, and Tom Rittman, Appriss Retail

By James Lee, LPC, LPM Executive Editor

57 FUTURE OF LP

Security Theater: Feeling Safe at the Airport Does Not Make You Safe By Tom Meehan, CFI

58 STRATEGIES

Using Analytics to Maximize On-shelf Availability and Supply Chain Processes

Bumps in the Road

Interview with Guy Yehiav, Profitect

60 PERSPECTIVES

The Year Ahead in LP

Progress in supply chain security will be tested

Interview with Hedgie Bartol, Axis; Tom Batterbury, Auror; and Dan Reynolds, 3SI

By Garett Seivold, LPM Senior Writer

64 LPM DIGITAL

In the Minds of Offenders By Kelsey Seidler

65 PRODUCT SHOWCASE

68 CALENDAR

Unexpected Loss in the Bagging Area

70 PEOPLE ON THE MOVE 72 ADVERTISERS 72 SUBSCRIPTION FORM 73 VENDOR SPONSORS

Understanding and managing losses associated with self-checkout technologies

74 PARTING WORDS

I Got Spirit. How ’bout You? By Jim Lee, LPC

By Emeritus Professor Adrian Beck

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EDITOR’S LETTER

Why Supply Chain?

ince the magazine began publishing in 2001, we have included occasional articles on supply chain topics such as cargo theft and distribution center loss prevention programs. However, readers may have noticed that we have included more editorial on supply chain in the recent few years. Why? With the evolution of omni-channel retailing where customers can order online, pick up in store, or return items delivered to their homes at nearby stores, the supply chain and inventory control play a much more important role than a decade ago. And because asset protection organizations play a vital role in supply chain, we have focused more editorial on the subject.

Understanding Today’s Supply Chain In this issue we have several feature articles and columns dealing with different aspects of supply chain. The first is an interview with one of the better-known loss prevention executives in the supply chain security and risk management arena, Maurizio Scrofani, CCSP, LPC (see page 27). Scofani started in loss prevention as a store LP associate before moving into supply chain, so he has a broad perspective on both the loss prevention aspects of supply chain and the overall evolution of omni-channel retailing. In our interview he expresses his opinion of the importance that all LP professionals should have

a fundamental understanding of supply chain:

on-shelf availability and to support omni-channel retailing. For LP professionals looking to learn more about supply chain, there It’s the right time for brick-and-mortar are two upcoming events to consider. associates to start shoring up their The first is the Retail Industry Leaders glossaries because supply chain AP and Association (RILA) Retail Supply Chain store AP will all be talking the same Conference February 24–27 in Orlando language sooner or later. (see linkretailsupplychain.rila.org). The second is the International Supply In a second feature article on page Chain Protection Organization (ISCPO) 39, we look at some of the traditional annual conference March 6–7 in Dallas challenges of supply chain risks related (see iscpo.org/conference). to cargo theft in transit and inside our distribution centers. The statistics Shoplifting Response revealed in the article by LPM Senior and Self-Checkout Writer Garett Seivold show that despite improved programs and technology, Our two other feature articles should supply chain loss by theft is still an issue not be overlooked. The cover article for retailers: on page 15 discusses an extremely important topic that continues to While cargo-theft data overall seems be debated in our industry—how to suggest that shipments are growing should retailers respond to shoplifting safer, experts insist that loss prevention apprehension? Do we, or don’t we? practitioners need to stay consistently Walter Palmer, CFI, CFE, and Jacque engaged as obstacles and opportunities Brittain, LPC, offer their perspectives. cause cargo thieves to shift tactics. Professor Adrian Beck’s article on page 51 reports on his research into Two columns in this issue also self-checkout. His two-year study takes address other aspects of supply chain an in-depth look at losses associated management. In our ongoing Supply with fixed self-checkout stations Chain column on page 24, another and scan-and-go technologies used well-known supply chain executive by thirteen retailers in the US and Glenn Master discusses issues related Europe. His findings are both alarming to managing contracted third-party and insightful for LP organizations logistics providers who may handle any tasked with managing losses with number of services for moving product self-checkout programs. throughout the supply chain, including the “last mile” delivery to consumers. In our Strategies column on page 58, we interview Guy Yehiav, the CEO of Profitect, about how Jack Trlica analytics are helping retailers fine-tune Managing Editor their logistics and supply chain operations to maximize merchandise

JANUARY–FEBRUARY 2019

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EDITORIAL BOARD Charles Bernard Group Vice President, Asset Protection and Comprehensive Loss, Walgreens

John Matas, CFE, CFCI Vice President, Asset Protection, Investigations, Fraud, & ORC, Macy’s

Erik Buttlar Vice President, Asset Protection, Best Buy

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

Jim Carr, CFI, CCIP Senior Director, Global Asset Protection, Rent-A-Center

Randy Meadows Senior Vice President, Loss Prevention, Kohl’s

Ray Cloud Senior Vice President, Loss Prevention, Ross Stores

Melissa Mitchell, CFI Director, Asset Protection and Retail Supply Chain, LifeWay Christian Stores

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

Richard Peck Senior Vice President, Loss Prevention The TJX Companies

Charles Delgado, LPC Regional Vice President, Store Operations, Academy Sports Scott Draher, LPC Vice President, Loss Prevention, Safety, and Operations, Lowe’s Scott Glenn, JD, LPC Vice President, Asset Protection, The Home Depot Barry Grant Chief Operating Officer, Photos Unlimited Bill Heine Senior Director, Global Security, Brinker International Frank Johns, LPC Chairman, The Loss Prevention Foundation Paul Jones, LPC Director, Asset Protection and Risk Management, CKE Restaurants Holdings Mike Lamb, LPC Vice President, Asset Protection, The Kroger Co. David Lund, LPC Vice President, Loss Prevention, DICK’S Sporting Goods

EXECUTIVE EDITOR James Lee, LPC JimL@LPportal.com

Tina Sellers, LPC Director, Asset Protection, Retail Business Services LLC, an Ahold-Delhaize Company

MANAGING EDITOR, DIGITAL Kelsey Seidler KelseyS@LPportal.com

SENIOR WRITER Garett Seivold GarettS@LPportal.com CONTRIBUTING WRITERS Read Hayes, PhD, CPP Walter Palmer, CFI, CFE Maurizio P. Scrofani, CCSP, LPC Shane G. Sturman, CFI, CPP Bill Turner, LPC David E. Zulawski, CFI, CFE CHIEF OPERATING OFFICER Kevin McMenimen, LPC KevinM@LPportal.com

Hank Siemers, CFI Vice President, Global Retail Security, Tiffany & Co. Quinby Squire Vice President, Asset Analytics and Insights, CVS Health Mark Stinde, LPC Vice President, Asset Protection, 7-Eleven Paul Stone, CFE, LPC VP Security, Goodwill Industries of SE Wisconsin Pamela Velose Vice President, Asset Protection, Belk Keith White, LPC Senior Vice President, Loss Prevention and Corporate Administration, Gap Inc.

EDITORIAL DIRECTOR Jacque Brittain, LPC JacB@LPportal.com

RETAIL TECHNOLOGY EDITOR Tom Meehan, CFI TomM@LPportal.com

Joe Schrauder Vice President, Asset Protection, Walmart Stores

JANUARY–FEBRUARY 2019

700 Matthews Mint Hill Rd, Ste C Matthews, NC 28105 704-365-5226 office, 704-365-1026 fax MANAGING EDITOR Jack Trlica JackT@LPportal.com

Loss Prevention, LP Magazine, LP Magazine Europe, LPM, and LPM Online 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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DIRECTOR OF DIGITAL OPERATIONS John Selevitch JohnS@LPportal.com SPECIAL PROJECTS MANAGERS Justin Kemp, LPQ Karen Rondeau DESIGN & PRODUCTION SPARK Publications info@SPARKpublications.com CREATIVE DIRECTOR Larry Preslar ADVERTISING MANAGER Ben Skidmore 972-587-9064 office, 972-692-8138 fax BenS@LPportal.com SUBSCRIPTION SERVICES

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INTERVIEWING

Evaluating Memory: I Remember It This Way, Part Two

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

itnessing an event is an extremely complex process beginning with the acquisition of the observation, followed by the retention or storage phase, and finally the retrieval phase where the recollection is described verbally. The human memory has been studied for well over 100 years by researchers around the world. As far back as 1902 in Berlin a staged event in a classroom was studied for the accuracy of the witnesses’ retrieval of information. The students in the classroom were broken into groups and asked to write a report on their observations of a staged event—some immediately, some a day or a week later. The study revealed that the smallest number of mistakes was 26 percent erroneous statements, and the largest number of errors was 80 percent. The more emotional part of the fictitious event, where a gun was drawn and a shot fired, averaged 15 percent more errors than the first half. In addition, statements made by the participants were inaccurately attributed or simply made up. Plus, some of the major points of the staged event were completely eliminated by a number of witnesses. This study from 1902 has been replicated in a variety of different ways and fashions over the subsequent years, but each concluded that the human memory was far from accurate. The memories are described by most researchers as falling into three stages: 1) the acquisition stage, 2) the retention stage, and 3) the retrieval stage.

Acquisition Stage When a witness first observes an event, only some of the details are observed and stored as part of the subsequent memory. The witness has to determine based on their observations which details are worth remembering based on where their eyes were focused and which details might be important later in deciding what to do.

Retention Stage The retention stage is the time between the observation of the event and recalling the details observed. The retention period could be a matter of moments or a much longer period of time depending on the witness’s need to talk about the actions. The retention stage of the observation can be affected when the witness is privy to new information. This new information could be provided by other witnesses to the event, media reporting, the interviewer’s questioning the witness, or a variety of other sources.

Retrieval Stage This part of the memory can be one of the more difficult components since the memory is not stored in one particular location in the brain but rather spread throughout the brain and linked in many different ways using our senses. The accuracy of the witness’s information retrieval can be affected in all three of these areas. If the witness failed to observe a particular detail of the event, there is no memory of it, but questions posed may infer information that taints the retention. The other issue is the words used by the witness to describe the situation and the interviewer’s assumptions of what they mean.

One hundred forty-one witnesses to a staged classroom event viewed a distraught student attacking a professor.The event, which was videotaped for comparison to the witness accounts, showed that the attack lasted thirty-four seconds. When questioned about the duration of the attack, the witnesses’response averaged eighty-one seconds, almost three times longer than it took. 12

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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.

Time Let’s consider the development of a memory beginning with the acquisition phase and the things that can affect the retention and retrieval of details. First, the more amount of time the witness has to make the observation, the more information they will likely be able to retrieve accurately. In one study conducted in 1971 by K. R. Laughery, participants were asked to look at slides of a human face for either 2.5 seconds or eight seconds each. After eight minutes, the participants viewed 150 projected slides of human faces and were asked to score whether these were the four faces they had seen. The research supported the idea that a greater amount of continued on page 14 |

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response averaged eighty-one seconds, almost three times longer than it took (Buckhout 1977/1975). Other studies confirmed this bias toward a longer estimation. Participants watched a forty-two second film and on average estimated that the film was a minute and a half (Marshall 1966). When there is stress involved in the observation, the witnesses are even more likely to overestimate time frames. While witnesses can also make errors in descriptions including heights and weights, they are not always like the over estimations of time frames.

exposure time will lead to greater accuracy. Those viewing the slides for eight seconds achieved 58 percent accuracy, while for those viewing the slides for 2.5 seconds, the accuracy rate dropped to 47 percent. Most of the participants said that they focused on the general structure of the face, the eyes, and nose in making their decisions, while very few focused on the hair or ears in making their judgments.

Frequency

Stress

Many research studies have confirmed that something experienced many times is going to be recalled much better than something observed only once. Clearly, criminal events are very short in duration and often unexpected, so the accuracy of an observation is likely to diminish. However, seeing a person day after day entering a particular door, the witness would very likely have a much more accurate description of the individual.

Again, not surprisingly, adding stress to the observation of an event makes the ability to recall the situation much more difficult. For the interviewer, this means that the witness’s report should be treated cautiously because of the emotional situation observed. The level of stress may have increased the observer’s notice of the event, or it may have distracted them as they focused on escape or what they needed to do next. This is evident in the necessity of training in highly stressful situations so that the actions of a first responder are instinctual rather than having to be thought out. Reportedly during the battle of Gettysburg during the Civil War, some soldiers loaded the rifles repeatedly without ever firing a shot during the stress of battle.

Personal prejudices can also play a role in a witness’s observations. When a person holds certain beliefs or stereotypes a person or group, the tone of an encounter can change dramatically and is often untrue.

Expectations Witness observation can also be tainted because of their expectations surrounding an event. Knowing that your mail is delivered by a man each day may in fact taint your observation of a female letter carrier doing the job. In many situations, our memories may be deceived because we see and hear what we expect to hear in a common situation. Our expectations also may have a cultural basis that alters our observations to meet our particular biases. These expectations may also be based on our past experiences. For example, we might see two people walking but only have a clear view of one whom we recognize as a friend. These two friends are almost always together, so our expectation might be to assign the second person (whom we couldn’t view clearly) as the other friend. Personal prejudices can also play a role in a witness’s observations. When a person holds certain beliefs or stereotypes a person or group, the tone of an encounter can change dramatically and is often untrue. One has only to look at liberal or conservative reporting on a political event to see how the reporter can taint the event one way or the other. They might comment on how the conversation was portrayed, including tone of voice, delivery, or sequence, choosing clips that support their position. Certainly knowing an event is going to occur prepares the observer for the observation. Interestingly, research has found that people are better able to describe a face when asked to consider it in terms of personality, rather than simply visual observation of the hair, eyes, nose, or other facial features. In our next column we will consider the retention and retrieval stages of a witness’s memory. The important thing for the interviewer to remember is that the estimation of time is generally an overestimation while speed and distance are also difficult for a witness to accurately estimate. An observation made under stress can also lead to less detail from the witness.

Relevant Details In every observation that we make, we tend to focus on only the most relevant or memorable details of the situation. Most observers will focus their observation on the things that captured their attention. As we might expect, these would be the most unusual or interesting parts of the event that would be much like a TV show and capture our attention. The opposite side is also true that we would less likely remember things that are uninteresting or commonplace during an observation. The types of details that are important to be accurately retrieved in certain cases can be extremely problematic. For example, estimations of distance, time, and speed are especially difficult for witnesses to accurately estimate. In one of the earliest studies in this area (Marshall 1966/1969), participants were to estimate the speed of a vehicle. They knew in advance they would be asked to judge the speed, yet the estimates ranged from ten to fifty miles per hour, while the car was actually traveling at just twelve miles per hour. Estimates of time are also difficult, but people generally overestimate the amount of time an event took rather than underestimating it. One hundred forty-one witnesses to a staged classroom event viewed a distraught student attacking a professor. The event, which was videotaped for comparison to the witness accounts, showed that the attack lasted thirty-four seconds. When questioned about the duration of the attack, the witnesses’

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FEATURE

SHOPLIFTING RESPONSE, REACTION, AND RECOURSE WHAT’S A RETAILER TO DO?

By Walter Palmer, CFI, CFE, and Jacque Brittain, LPC

SHOPLIFTING RESPONSE, REACTION, AND RECOURSE

ince the earliest days of organized retail, there has been a recognition of the unique exposure that retailers have to crime and loss. We all know that larceny crimes—shoplifting, credit card fraud, refund abuse, and internal theft—cost the retail industry tens of billions of dollars each year and can devastate a retail business. But shoplifting and other forms of retail theft also impact the industry in ways beyond the monetary loss of stolen merchandise. From the retailer’s perspective there are the costs associated with processing the incident, court appearances, evidence management, and other related expenses such as the costs associated with surveillance and security equipment, merchandise protection tools, and technology resources. Looking deeper there are negative impacts due to lost sales, out-of-stocks, and merchandise replenishment. All of these can have substantial impact on the retailer’s bottom line—and the prices paid by the retail customer. Historically, society has provided retailers with tools to help control those losses. For example, each state has statutory provisions typically referred to as “merchant protection statutes” that provide retail organizations with extraordinary powers to detain possible shoplifters in a manner that’s not available to the typical citizen and also afford significant protection to the retailer against liability. The entire process of prosecuting a shoplifter can be very expensive from a community standpoint as well, ultimately costing thousands of dollars per incident. From the time of arrest, through the court system, and up to the point that a decision on guilt or innocence is determined, extensive financial and human resources are dedicated to ensure a fair and just process. If found guilty, the burden of public responsibility shifts to the management of the criminal sentence, up to and including incarceration for more serious criminal offenses.

So retail theft is costing all of us money—a lot of money. For anyone paying attention, that should really come as no surprise. The only true constant has been that the theft problem is not going away. The nature of retail theft may have evolved with the progressive nature of the retail culture and the needs, norms, and values of an evolving society. But the problem itself persists and will likely endure as long retailers open their doors for business.

The Debate over Response How we respond to the problem of shoplifting has also shown considerable signs of change. Over the past fifteen to twenty years, there have been significant trends related to retail theft, shoplifting, police response, and the views of the criminal justice system that are causing significant disruption and confusion as to the manner in which shoplifting and related crimes are dealt with. These developments have often been contradictory to each other, influencing how they’re handled from jurisdiction to jurisdiction, how they’re viewed in the eyes of lawmakers, and even how they’re managed from retailer to retailer. As budgets are squeezed and resources stretched, conflicts over

of police resources. With criticisms emerging in large cities and small towns, the story is typically told by citing statistics on how many police responses are made to a particular retail outlet for issues ranging from shoplifting to various other crimes and complaints. In some instances, businesses have been threatened with fines or the intent to declare the retailer as a public nuisance due to the frequency of police calls made to deal with shoplifting and other criminal incidents. In other situations, police have asserted that they will not respond to theft incidents under a predetermined dollar amount. There are even those jurisdictions that have announced they simply won’t respond to shoplifting incidents at all, believing that police resources are better spent by focusing on “more serious crimes” other than those that cost retail companies tens of billions of dollars each and every year. For example, in March of 2018 Chief Erika Shields of the Atlanta Police Department announced that officers will no longer be responding to shoplifting calls at department stores. “You can only do so much,” said Chief Shields. “We are going to change how we handle shoplifting calls, and primarily, for the most part, we will

In some instances, businesses have been threatened with fines or the intent to declare the retailer as a public nuisance due to the frequency of police calls made to deal with shoplifting and other criminal incidents. the best way to handle this criminal behavior has only continued to escalate. In the past few years, there has been an increasing chorus of criticism of big box retail for what is being perceived as an “overuse”

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not be responding to them. Every time we make a shoplifting arrest, that officer is out of service for sixty to ninety minutes. It’s not acceptable.” While most departments work well with their retail partners, critics

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SHOPLIFTING RESPONSE, REACTION, AND RECOURSE assert that retail companies in question either don’t take crime seriously or don’t want to spend the money necessary to prevent it. Rather, they are Erika Shields relying on public services and the taxpayers’ dime to handle what could be prevented or mitigated. Further, there is a lack of understanding—or a lack of empathy—for the role that retail theft plays as a “gateway” crime to more

sentiment within the industry that a weakening of criminal sanctions has occurred and will, at least in theory, drive higher rates of offending and loss. These changes have largely been driven by budget concerns in the public sector and the sense that law enforcement agencies and the courts are beyond capacity, thus necessitating either increased funding or a reduction in the number of offenders being referred, prosecuted, and incarcerated. State Felony Threshold Changes. Since 2001, at least thirty-five states have raised their felony theft thresholds—the value of stolen money

In today’s dynamic and competitive environment where the wants and needs of the customer remains our greatest priority, there needs to be a balance between protecting merchandise and ensuring our products are available and accessible to the customer. serious offenses such as drug crimes and violent crimes, which only further impacts reaction and response.

Decriminalization and Reduction of Sanctions for Larceny When it comes to controlling crime, one of society’s aims is to deter bad behavior through the use of criminal sanctions. In fact, deterrence theory could be considered the bedrock of almost any criminal code. According to the National Institute of Justice—the research, development, and evaluation agency of the US Department of Justice—a primary means to deter crime is to increase the perception that criminals will be caught and punished. While the legislative branch and criminal justice system have long recognized the extreme exposure that retailers have to theft, there is strong

or goods above which prosecutors may charge theft offenses as felonies rather than misdemeanors. This comes at a time when the retail community is seeing a rise in organized retail crime (ORC) where the potential financial gain is significant compared with the reduced risk of meaningful criminal sanctions. “There are clearly people that should be in jail who are now free due to the new legislation,” said Loren Naiman, formerly with the Office of the Los Angeles County District Attorney. “Theft is now a consequence-free crime, resulting in an increase in property crimes in Los Angeles by almost 10 percent since these changes have taken effect.” Local Police Response Thresholds. On an informal basis, many law enforcement agencies have created a de facto reduction in LP MAGAZINE

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criminal sanctions for shoplifters by establishing dollar thresholds for when they will respond to a shoplifting case. While this does not necessarily prohibit Loren Naiman the retailer from pursuing criminal prosecution, it makes it much more cumbersome and also removes the immediate sanction and deterrence from the equation. Prop 47. Proposition 47, the ballot initiative passed by California voters in 2014, has become somewhat of a “rallying cry” in the retail loss prevention industry regarding the perceived softening on shoplifting, organized retail crime, and retail fraud. It reduces certain drug possession felonies to misdemeanors. It also requires misdemeanor sentencing for petty theft, receiving stolen property, and forging/writing bad checks when the amount involved is $950 or less, including any and all repeat offenses. “It’s basically decriminalized shoplifting and theft, making it a low-risk/high-reward proposition,” said Aaron Moreno, senior director of government relations for the California Grocers Association. “Thieves are more brazen, putting retail workers in danger.” “Ban the Box” Initiatives. Nationwide, over 150 cities and counties have adopted what is widely known as “ban the box” where employers are restricted in their consideration of criminal convictions in the hiring decision process. Ten states have also mandated the removal of conviction history questions from job applications. “The purpose of the ‘ban the box’ initiative is to allow people with a conviction history to go through the interview process and be considered based on their qualifications rather than their conviction history,” said Sandra Johnson with California-based Legal Services for Prisoners with Children and part of the campaign

SHOPLIFTING RESPONSE, REACTION, AND RECOURSE behind the “ban the box” initiative. “I felt held hostage by my past and wanted a fair chance to be considered without being judged based on my conviction, getting a job so that I could move forward.” While not directly related to the issue of retail theft, many retailers feel this trend also impacts the perception of decriminalization of a wide range Sandra Johnson of offenses and removes one more tool for retailers to control loss. Further, it represents an additional weakening of deterrence for offending.

Increased Violence and ORC Activity Over the last several years, every gathering of loss prevention practitioners has ended up with a significant focus on violence in the retail workplace. These concerns include traditional workplace violence issues, increases in armed robberies, and active-shooter incidents. But the major point of discussion involves increased levels of violence, threats of violence, intimidation, and use of weapons by shoplifters. “Different groups are now getting more involved in theft, including a number of gangs and other felons that have habitually been involved in more Bill Williams violent crimes,” added Bill Williams, formerly with the Los Angeles Police Department. “In California, following the passage of Proposition 47 they’ve turned to shoplifting because the penalties are so much less.” Whether involving ORC incidents or individual shoplifters, these issues seem to span the entire spectrum from big box to specialty retailers. This

trend continues despite attempts by retailers and loss prevention to reduce and mitigate violence by changes in policies and procedures.

The Drug Crisis and Its Impact on Retail There’s no denying that the US is facing an opioid abuse epidemic, and the impacts of that are being felt by retailers in many ways, but opioids are only one class of drug in play. For instance, the widespread use of methamphetamine (meth)

accept gift cards as payment in lieu of cash. While gift cards can be sold at physical locations, such as pawn shops and other outlets, online sales sites currently provide an easy way for thieves to convert the cards to cash at an 85 to 90 percent return. State Senator Richard Briggs of Tennessee reported a direct connection between gift cards and drug overdoses based on reports received in his home state. Retail theft is prevalent in Tennessee, with Knoxville reportedly ranking first in

While the legislative branch and criminal justice system have long recognized the extreme exposure that retailers have to theft, there is strong sentiment within the industry that a weakening of criminal sanctions has occurred and will, at least in theory, drive higher rates of offending and loss. has resulted in many states adopting stringent requirements for retailers regarding the handling of products that are components or precursors to meth, such as Sudafed and Advil Cold and Sinus even though they are officially over-the-counter medications. Some are now criticizing retailers because there is a sense that addicts are turning to retail theft to fund their habits. Many retailers would agree as they have long felt the impact of shoplifting due to drug dependency. But a Pennsylvania judge recently said that a major retailer was “part of the problem” because of its return policy and that retailers are not doing enough to combat the issue. There are now even reports of a link between gift card issues and the opioid epidemic, with addicts stating that drug dealers will often

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the nation per capita for card abuse and theft. In Knox County, he revealed that police linked sixteen of nineteen overdoses to the sale of gift cards during a one-month period in 2017. In the city of Knoxville, police also tracked eighty-three to ninety-eight overdoses to gift cards during a three-month period. “It would be no different than if there was a rock lying there, and if you lifted it up, and this horrible smell came out, and this monster came out,” said Richard Briggs Senator Briggs. “We had no idea that the organized retail theft was related so intimately with the opiate and drug trade in general in Appalachia.”

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SHOPLIFTING RESPONSE, REACTION, AND RECOURSE These criticisms add to the sense of frustration in the retail industry. It seems that some want retailers to solve a societal issue that is not of their own making without any regard to the competitive nature of their core businesses and the need to skew their policies to favor of their legitimate, honest customers who make up the vast majority of their businesses, while taking away many of the criminal sanctions or police response that would be expected historically.

The Search for Alternative Solutions Retail companies are in business to sell merchandise—not to catch shoplifters. Naturally, these businesses would much rather avoid theft in their stores and have taken many steps and allocated tremendous resources toward these efforts. In today’s dynamic and competitive environment where the wants and needs of the customer remains our greatest priority, there needs to be a balance between protecting merchandise and ensuring our products are available

response to shoplifters and other forms of retail crime. First and foremost, today’s retail companies have stressed deterrence as a primary response to theft, focusing on customer service, employee training and awareness, advanced prevention tools, cutting-edge technology, and similar measures to dissuade the theft problem. When shoplifting does occur, increased implementation of “no chase” and “no touch” policies and a willingness to let violent shoplifters go rather than attempt to physically detain them has become a common industry practice. Yet despite ongoing efforts to deter shoplifting, the problem persists. In fact, with the lack of police response and a reduction in the consequences for stealing, the doors have opened to a more persistent problem and the potential for a more volatile criminal element. This leaves retailers searching for new and better ways to respond to protect their products, their customers, their employees, and their businesses. In response to the reduction in criminal sanctions, the lack of police response, and the criticism that

As retailers face the many challenges of an evolving society, we must also continue to search for the best and most productive solutions to all the needs of the business. This requires an ongoing effort to challenge ourselves and our decisions to ensure that we provide the best possible outcomes. and accessible to the customer. Brand, image, price, quality, convenience, and service are hallmarks that drive the success of every company, and that can’t and won’t change if the company hopes to remain in business. Over the past several decades, retail has made significant changes in

retailers may be overutilizing public resources, retailers have sought out alternative programs to provide sanctions for shoplifting and control the huge financial impact on the retail industry. These include the use of civil demand programs, which have statutory endorsement in the majority LP MAGAZINE

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of states, and the recent introduction of “restorative justice” programs.

Civil Recovery Programs The use of civil recovery has been widely supported in the retail loss prevention industry for over thirty years, and all states have provided statutory provisions for these programs. Civil recovery laws make any person who unlawfully steals or tries to steal merchandise liable to the merchant. In simple language, this means that a shoplifter can be financially penalized by a merchant for stealing or attempting to steal from them—even if the merchandise is recovered. These laws do not in any way prohibit a merchant from taking additional legal action against the offender, such as turning them over to police or pursuing prosecution for the crime. They are designed to impose financial penalties on shoplifters to offset costs directly associated with the tools and personnel required to defend against shoplifting and related crime—a practice that would appear fair and reasonable. “Civil recovery is a tried and true process backed by statutes that are state-specific. These programs, when managed with an ethical and transparent focus, address recidivism while helping a company’s bottom line,” stated Stuart Levine, CEO of The Zellman Group. Maintaining a civil recovery program with processes that are uniform and fair from beginning to end is paramount. For example, high-dollar Stuart Levine demands and added fees are often at the root of legal inquiries. Retailers in partnership with their service providers should set consistent standards within established statutory guidelines—but not necessarily at the maximum penalty allowed by the state.

SHOPLIFTING RESPONSE, REACTION, AND RECOURSE

Further, the process, including civil demand notices, letters, calls, and all follow-up, should be inscrutable and fully defensible based on specific state statutes. There are also ancillary laws designed to protect consumers, which emphasizes the importance of ensuring compliance to the requirements of legislation such as the Telephone Consumer Protection Act (TCPA) or Fair Debt Collection Practices Act (FDCPA). Violation of these laws are an additional source of initial accusation and potential legal action, which ultimately negatively impact civil recovery for merchants. Nevertheless, criticisms routinely appear in mainstream media with accusations of unfairness even though these programs have a solid legal foundation, and many personal defense attorneys are prospecting this area for potential lawsuits. As a result, some retailers have pulled back on their use of civil recovery.

Restorative Justice Programs Restorative justice programs were intended to create a process where

first-time shoplifting offenders were offered an opportunity to avoid criminal prosecution. Rather than incurring the significant time and expense to all parties involved when a shoplifter is apprehended—including those the offender would incur when faced with penalties imposed by the criminal justice system—an alternative solution was offered with the idea that there were benefits for the offender, the company, and the community at-large. Taking a page from the criminal justice system’s traditional restorative justice diversion program, participants had to be first-time offenders and not involved in organized retail crime. If eligible, offenders were educated about the program and offered the choice to participate in and pay for the educational program or refuse the opportunity and opt instead to follow the traditional path of criminal prosecution and have their day in court. Those who signed up completed an online course intended to make them examine why they shoplifted, and why it’s a bad choice.

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They paid restitution for the thefts and footed the bill for the courses. The initial response to these programs was largely positive with both retailers and police agencies where implemented. Participating retailers cut their calls to police in half, saving significant resources for local communities. Repeat shoplifting offenses for those going through the programs were less than 5 percent. Intended to create a process where offenders can learn from victims and the community to make amends, restorative justice programs were meant to establish a cooperative rather than adversarial process—one intended to help make things right, show perpetrators the impact that their crimes can have, and take the steps to see that the behavior doesn’t happen again. However, while some prosecutors and police departments have applauded the implementation of restorative justice programs in the retail sector, others have taken great exception and umbrage. In 2015, a suit brought by the San Francisco City

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SHOPLIFTING RESPONSE, REACTION, AND RECOURSE Attorney asserted that the tactics used by Corrective Education Company (CEC), one of the companies that were administering restorative justice programs, were illegal, and the court issued a permanent injunction against CEC in California. “We should all be concerned about privatizing our justice system,” said City Attorney Dennis Herrera, adding that the company was “enriching itself on the backs of others, and many of the people they prey upon have limited means and are just barely getting by.” In Minnesota, the legislature is considering a bill that would make retail restorative justice programs illegal in the state. In Indiana, the State Attorney General’s office issued an opinion that the CEC program was “open to abuse” Dennis Herrera

and should be illegal. This has resulted in most retailers suspending their restorative justice platforms, ceasing to provide first-time shoplifters with the option of going through the program.

So What’s a Retailer to Do? If the penalties for shoplifting are reduced and the criminal justice system refuses to handle cases or complains about the volume, but at the same time don’t want retailers taking actions into their own hands through the use civil penalties, how are retailers supposed to control the issue especially in light of the current opioid crisis and the belief that shoplifting activity is feeding into the problem? If resources are so stretched that law enforcement doesn’t have the manpower to respond to legitimate crimes taking place in retail stores—to the point that the stores are being threatened with charges of being labeled a “public nuisance” based on

their response to those crimes—how are retailers expected to respond? Some critics claim that retail companies either don’t take crime seriously or don’t want to spend the money necessary to prevent it. Then other critics claim that businesses like retail are too tough on those previously convicted of criminal offenses and should make hiring decisions without regard for their criminal history. On top of all of this, throw in the perceived issue that violence and threats are on the rise in the retail sector, and it is fair to ask, “What is a retailer to do?” As the climate evolves, the concerns are mounting, leaving us with important questions that are lacking feasible and/or manageable answers.

Moving Forward As retailers face the many challenges of an evolving society, we must also continue to search for the best and most productive solutions to all the

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LP MAGAZINE

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SHOPLIFTING RESPONSE, REACTION, AND RECOURSE

needs of the business. This requires an ongoing effort to challenge ourselves and our decisions to ensure that we provide the best possible outcomes. When it comes to theft and related retail crimes, we must always look for internal solutions to the many concerns on our plates. We must also work with community leaders, legislators, and law enforcement, jointly communicating our thoughts and ideas while pursuing effective and reasonable answers to the many questions that we face. This is a shared responsibility requiring the cooperation and support of everyone involved. Communication is important, but so is perspective. We aren’t referring to a youngster stealing baseball cards and bubble gum. This is a multibillion-dollar problem that is only getting more serious—and more dangerous—as we move forward. Retailers are in business to sell their products and turn a profit. Serving the retail customer is our primary responsibility. We invite the public into our stores, present our products in a way that is attractive, desirable, and convenient to our customers, and persistently look for ways to best serve those customers, meet their needs, and keep them coming back. But among

the wave of valuable customers that enter our stores every day, we can neither avoid nor ignore those who are intent on malicious actions that threaten the retailer’s bottom-line—and even more importantly, threaten the safety of customers and front-line staff. It’s something that is an unavoidable aspect of the business and in many ways beyond our control. There remains a fine but clear line between protection and service. There is a responsibility to attempt to manage those guests with less-than-pure intentions and those making poor decisions. Our first desire is to control theft through prevention and deterrence, but hard-core, repeat, and violent offenders need to be dealt with appropriately. All of this must be accomplished while remaining respectful to the needs and perceptions of our customers and maintaining the public trust. Retail businesses serve and support our communities. They strengthen local economies by offering essential products, providing jobs, generating tax revenues, and championing community projects. The burden of dealing with all these concerns shouldn’t simply fall on the shoulders

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of our retail community. Retailers are not “the bad guy” in this equation. So what’s a retailer to do? Together we need to find the answers.

WALTER E. PALMER, CFI, CFE, is the practice leader for EPIC Integrated Risk Solutions where he leads their consulting, training, and research efforts for the LP industry. He has over 35 years of experience in retail LP and is a frequent speaker at industry conferences around the globe and regular contributor to LP Magazine. He serves on the advisory boards for the International Association of Interviewers and the National Association for Shoplifting Prevention. He can be reached at walter.palmer@epicbrokers.com. JACQUE BRITTAIN, LPC, is editorial director for LP Magazine. Prior to joining the magazine, he was director of learning design and certification for Learn It Solutions, where he helped coordinate and write the online coursework for the Loss Prevention Foundation’s LPC and LPQ certifications. Earlier in his career, Brittain was vice president of operations for one of the largest executive recruiting firms in the LP industry. He can be reached at JacB@LPportal.com.

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SUPPLY CHAIN By Glenn Master

The End-to-End Logistics Provider

Master is a recognized industry expert with over twenty years of experience in loss prevention and security management. He has worked both domestically and internationally specializing in supply chain, transportation, and logistics. Master has held executive and management positions with companies such as Pitney Bowes, Newgistics, Office Depot, Henry Schein, and Motorola. He is cofounder and current board director of the International Supply Chain Protection Organization (ISCPO). He is also an adjunct professor at Texas Christian University teaching undergraduate courses in criminal justice, security, and LP management. He can be reached at Glenn.Master@pb.com.

f you’re like me, you’ve probably placed an order online in the last ninety days. Like most online experiences, it was likely seamless. You type a product in the search field, pull up comparable items, make a command decision, and place the order. When the experience concludes, you will have received an email confirmation of the order and the expected delivery date for your parcel. Most consumers who follow this process every day in the world don’t give a thought to what transportation providers will be handling their parcels. This responsibility falls on the retailer, who has been entrusted with the customer’s order. If the parcel shows up at the doorstep on time, life is good for all parties. If it doesn’t show up, life becomes bad, specifically for the retailer. According to several marketing surveys, by 2021 global

logistics summits to try and promote its own internal e-commerce growth for Chinese retailers, who drastically want to sell and ship directly to consumers in the United States. The Chinese believe that consumers having the ability to order and receive products at their homes not only is a convenience but also offers an emotional impact. This makes sense when you consider the emotional lift you sometimes get when arriving home from work and seeing a package at your front door.

According to several marketing surveys, by 2021 global e-commerce sales will reach a staggering $4.5 trillion. To put that into perspective, out of the 190 countries ranked by the International Monetary Fund based on their gross domestic product (GDP), this dollar amount would rank number four in GDP between the countries of Japan and Germany.

Parcels without Borders

What does this mean for individual merchants and retailers who are now experiencing the ability to sell beyond their borders? First, the experience has to be as seamless as an in-store shopping experience, which can be a daunting task if you are shipping to another country. Second, the package must be delivered quickly, and typically the consumer doesn’t want to pay for shipping. In the same breath, the consumer wants a hassle-free returns policy at no cost to them. This now leaves the retailer searching for options. One of the most-costly services in business is transportation. Therefore, most companies will look for the most cost-effective way to move that box from the warehouse to the client. This cost will vary greatly depending on several factors, which would include the time it takes to deliver the package, the distance the package has to travel, and the method of delivery. Typically, the more convenient the process is for the customer, the higher the transportation cost will be for the retailer or individual merchant. As a result, most companies will look for a balanced approach that will satisfy both the customer expectation and the costs associated with transporting the order. The result of this evolution in the supply chain is the development of the end-to-end service provider. These logistics companies support retailers as a hybrid solution, providing services that range from distribution, customs clearance, transportation, and final-mile delivery. It can include a mix of their own proprietary distribution centers and trucks mixed in with a vast network of contracted transportation providers, which can also incorporate national post offices in the final-mile delivery. If this sounds confusing, it’s because it sometimes is. However, if done correctly it is a very sound and cost-effective

e-commerce sales will reach a staggering $4.5 trillion. To put that into perspective, out of the 190 countries ranked by the International Monetary Fund based on their gross domestic product (GDP), this dollar amount would rank number four in GDP between the countries of Japan and Germany. China is expected to lead this blistering e-commerce pace, becoming the largest market on the planet for consumer goods purchased. As Americans, we are all too familiar with the term “made in China.” However, as e-commerce continues to accelerate, the new term in the market place is becoming “purchased in China.” In November 2018, Alibaba CEO Daniel Zhang announced that it intends to help global business sell $200 billion in goods to China through e-commerce channels in the next five years. The Chinese government has hosted several

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continued on page 26 |

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continued from page 24

If the retailer has a direct contract with the end-to-end solutions provider, then the loss prevention responsibly will fall on that solution provider. Remember that once the parcel is received, the solution provider essentially owns it.

method for the retailer to ship a customer order to someone who may be located on the other side of the planet. For example, picture a consumer in Seoul, South Korea, ordering a pair of shoes from a US-based retailer. The order will be picked, packed, and shipped out of the retailer’s distribution center in Atlanta, Georgia; however, the retailer is contracted with an end-to-end logistics provider. The parcel arrives at the provider’s US distribution center, is scanned in, and then placed with other retailers’ packages all destined for Seoul. The end-to-end provider then uses a large network of contracted partners that will handle that parcel as it moves from the US to Korea. The key to this type of solution is volume. The more volume the end-to-end provider can get from the retailer, the lower the cost is to the retailer.

Having a Proactive LP Plan

meets the road and where loss prevention must have a proactive plan in place that consist of the following elements: ■■ A comprehensive security protocol that the contracted carriers must adhere to. ■■ A robust auditing program that reviews compliance in the areas of security, scanning, and inventory control. As with most auditing, the basis is going to lie with the contractual verbiage that’s in place. ■■ Loss analytics that can identify trends by country, company, route, and final mile. The foundation of this reporting is looking for package exceptions where the scanning stops, or what is commonly known as “going dark.” This is very similar to what retail loss prevention uses when running exception reports, except you are looking for trends for all touch points in a global supply chain. Regardless of whether a package circulates the globe and touches five different companies, if a scan is put to the package, and you can review that through reporting, you will see where losses are occurring. ■■ Proactive communication with the carrier’s facility management, so they understand your expectations, loss trending analytics, and method of investigation. You will be surprised how receptive they will be to accept help and identify problems before they get out of hand. The one caveat is that unlike dealing with transportation companies in the US, there are specific government laws in each country that may limit the ability to conduct certain audits. This is more directed at specific actions, such as reviewing criminal background checks or drug screenings for employees verses operational processes. However, as a good rule of thumb, you should always check with your legal department and inquire about country-specific laws related to the transportation industry. As e-commerce continues to evolve, so will loss prevention. We have literally entered a new era in how the consumer shops, and retailers must continue to figure out ways to ship these orders. What was once a supply chain dominated by a few large, proprietary companies is now expanding into a multifaceted approach that involves a myriad of companies that must all work together to support this growth.

Based on this very complex network, one may ask how anything resembling loss prevention can be incorporated into this model. The answer is simple. As I mentioned earlier in this article, the shear growth of e-commerce is creating industries and subindustries that did not exist five years ago. With retailers worldwide continuing to look for cost-effective shipping solutions and customers demanding more flexibility, it was inevitable these type of hybrid solutions would be created. If the retailer has a direct contract with the end-to-end solutions provider, then the loss prevention responsibly will fall

The result of this evolution in the supply chain is the development of the end-to-end service provider. These logistics companies support retailers as a hybrid solution, providing services that range from distribution, customs clearance, transportation, and final-mile delivery. on that solution provider. Remember that once the parcel is received, the solution provider essentially owns it. With a high probability and depending on how the contract is worded, responsibilities may include labeling, customs clearance, tracking, security of the parcel, investigation of losses, and claim liability if the package is lost or stolen. Therefore, it is essential that a comprehensive loss prevention program is in place with the end-to-end solutions provider. However, it doesn’t stop there. What about all these contracted companies that are used? Here is where the rubber

JANUARY–FEBRUARY 2019

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INTERVIEW

THE EVOLUTION OF LP TO SUPPLY CHAIN OMNI-CHANNEL EXPERTS A CONVERSATION WITH MAURIZIO SCROFANI

By James Lee, LPC, LPM Executive Editor LP MAGAZINE

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THE EVOLUTION OF LP TO SUPPLY CHAIN OMNI-CHANNEL EXPERTS EDITOR’S NOTE: Maurizio P. Scrofani, CCSP, LPC, is a well-known supply chain asset protection professional with over twenty-five years of experience in retail and manufacturing, including leadership roles with Macy’s, Bloomingdale’s, Delonghi, and Toys“R”Us. He was cofounder and president of CargoNet, a supply chain theft prevention and recovery network solution of Verisk Analytics. Scrofani is a frequent speaker at industry conferences and a contributing writer for LP Magazine. EDITOR: As someone with a wide range of expertise in loss prevention in both stores and in the supply chain, let’s start by telling our readers how you got into LP. SCROFANI: I was an economics and finance major and went to college thinking I would end up on Wall Street. My first real summer job in high school, I worked at JCPenney’s in Garden State Plaza as a sales associate. It was there I first saw ladies and gentlemen walk mysteriously around the store talking into their jackets. I really didn’t know what they did, so I asked questions and found out they were security. They spent most of their time apprehending shoplifters and dishonest employees. I thought that was interesting even though I didn’t really comprehend there was a need for such a thing as I always assumed that most people were honest. Even though I was intrigued by security, in New Jersey you had to be eighteen years old to sign a complaint, so I was not eligible. Eventually, I turned eighteen as a freshman in college. There was an opening at Filene’s Basement for a store detective, which I was fortunate to get. That’s how it all started for me. EDITOR: When did you change your mind about Wall Street? SCROFANI: It was a gradual transition for me. The funny thing about finance is you live in the detail of the numbers. When you think about all your accounting classes,

It’s important to always acknowledge, “We’re really not subject-matter experts. We’re maniacally passionate students of the supply chain.” The more you take that approach, the quicker you’re going to learn because people will always share with you things that you thought you knew but didn’t.

you’re looking at your balance sheet and how things move to credit or debit and why. It technically was the same thing for me—you’re in the detail, and you’re following a very methodical path. JANUARY–FEBRUARY 2019

The more I got into LP, the more I learned about shrink, audit, inventory control, and shortage control. That really moved me into the paper part of the trade: how something can happen that’s not people-based. For example,

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THE EVOLUTION OF LP TO SUPPLY CHAIN OMNI-CHANNEL EXPERTS for me it was being in a store where business was slow. It made me think, how can you have a high shrink number? Someone must be really hurting you, but you barely have any employees working on specific days. So you start looking at the paper. Then you realize that it may be a problem with respect to how the inventory control department is manifesting deliveries to the store. That sort of illustrates how my interest in finance manifested itself into loss prevention. EDITOR: Did you then move more into shortage control? SCROFANI: Yes, over time. But specifically, when I joined Bloomingdale’s in 1995 as the LP manager of White Plains, there was quite a bit I needed to learn about shortage control. I was lucky enough to transfer over to corporate shortage control, and that’s where I was able to dive into it head first. At the time, Bloomingdale’s security department was headed by Bruce Williamson, the vice president, and shortage control was managed by Joe Medici whom I reported to. We really went after the whole audit piece first. We were able to break down the stores into traditional ABC classifications. We understood planogramming and its areas of opportunity. We understood the vendor view—which vendors do we have to pay more attention to than others and when. We worked with the security professionals and the merchants to reevaluate sales floor planogramming designs where we had buy-in, and multiple security technology tools were introduced to layer our shortage-reduction efforts. It was a great experience because that allowed me to really get my arms around the inventory control process and auditing compliance standards and practices. EDITOR: Eventually, you transitioned from the store side into supply chain, logistics, and risk management. How did you make that move?

SCROFANI: I’ve always been the type of person who tries to understand things that people say are impossible to do or fix. Or why people are critical of a specific department. When you’re in loss prevention and responsible for aspects of inventory control, you hear a lot of inventory management conversation about problems. In 1998, I moved to Babies“R”Us where I was lucky enough to work for seasoned LP professionals of the likes of Bob Serenson and Walter Palmer. At the time we were looking at all areas of opportunity. Bob was a pretty holistic thinker, which was refreshing for me. We were studying the merchant part of the business as well—how things moved and where they were going, essentially looking at the entire logistics side. That’s where I made my transition out of sheer curiosity, and I was lucky enough to have a supervisor that supported it and celebrated the transition. I said to myself, “Okay, apprehension and investigation, I get it. I need to move over to the other pieces that might be opportunities for us to study.” So I joined the merchandise flow team at Toys“R”Us into what the industry today calls “sales and operations planning.” We really learned to leverage how freight was moving, what should’ve happened, and what wasn’t happening when we needed to influence our partners in the buying side. For me, that was the continued galvanizing of, let’s just say, the asset protection supply chain sword. What that did for me was allow me to see things from a completely different point of view and honestly different language as well. Instead of hearing about the words that dominated most of the LP discussions like “apprehension and shortage,” now you’re talking about an all-out assault on “defect management.” What are the bits and pieces that you can absolutely touch and grasp that you can help manage and mitigate, expose, train teams, and fix? That’s where allocation and sales and operations planning became a big to-do for me. I was a kid LP MAGAZINE

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in a candy store and tried to absorb as much as they could throw my way. EDITOR: It sounds like that was a tremendous education for you. SCROFANI: No doubt. I learned quite a bit about SKU rationalization studies. How SKUs and categories were planned and forecasted. How purchase orders were written and how they were supposed to flow and from what origin to what destination and lead times. All the pain points that people scream and yell about were literally in front of me. And I could actually see the individual transactional problem in front of me and attack it. Then in a short window of time, I learned who to work with, and that allowed me to build smart strategic solutions and work with the people who were responsible for the systems and the processes. Sometimes it was the solution provider. Sometimes it was our wonderful databases and Excel spreadsheets [laughter]. Eventually, I moved over to logistics, and then I had all of the domestic inbound operations. I managed everything coming into the organization with a pretty substantial budget of a little over $120 million. That’s where I began to really understand things like lead times, in-transit risk, capacity planning, and how your vendors are moving product and building consumer packaged goods and sourcing for raw materials when they tell you something’s going to be made, and it’s not on time. It was a continued eye-opening experience. I think, however, it’s important to always acknowledge, “We’re really not subject-matter experts. We’re maniacally passionate students of the supply chain.” The more you take that approach, the quicker you’re going to learn because people will always share with you things that you thought you knew but didn’t. That’s the beauty of having an open mind and acknowledging that you’re nothing more than a student for a long period of time.

THE EVOLUTION OF LP TO SUPPLY CHAIN OMNI-CHANNEL EXPERTS EDITOR: Objectives on the store side are often pretty clear. It’s a theft problem, shrink problem, or operational discipline issue. What are the challenges on supply chain side in your experience? SCROFANI: I think there are four dominant challenges that have become strategic pillars that supply chain executives must continue to address—compliance, visibility, risk mitigation, and efficiency. First, you want to have compliance standards at all areas of your operation that will benefit you. So you’ll hear about Six Sigma standards, Kaizen projects, gray-space management, or another term that rallies the organization around success. So compliance is a pretty big deal. Visibility can cost millions of dollars. For example, you put your team together waiting for volume to arrive. You have this projected volume, and it doesn’t show up at the location. You have 2,000, 10,000, 20,000 cartons waiting to be unloaded, and you have people literally standing around getting paid, and your burn rate is through the roof but still waiting on the shipment to arrive. Visibility can become a rather large pain point for many areas of the company. Novelty items that are late, lost, stolen, damaged will create a feverish pitch of discomfort. Imagine a new-generation smartphone missing its launch date. Technology that breaks down in the middle of an event can be catastrophic. Lastly is efficiency. Can we get better, faster, and smarter at what we do? How do you take a company to a Six Sigma standard, where they are really firing off on all cylinders? Those four pillars are the biggest headaches that most logistics or supply chain executives have today. EDITOR: You have become a very hands-on, work-your-way-up supply chain expert in the business. How have things changed over the last several years?

SCROFANI: Obviously, technology has gotten better and faster. The ability to say omni-channel comfortably, and be right, has really proven to the consumer that they can buy anything they want at any time, anywhere, and have it delivered any place they want in an expeditious or extremely reasonable window of time. So I think that has changed dramatically. What omni-channel has forced though is that you are now tasked to make really good decisions quickly. Before you had some time on your side, and you had some manual intervention. For example, lead times for some origins and destinations were as high as nine or ten days. Where today your system is telling you, “Nope. The item is moving now.” You’ve got four days, two days, ten hours, four hours, which is a complete shift in paradigm. So I would say that time has compressed, and speed has increased and forced good decisions to be made at times immediately. Now, the reason I highlight “decisions” is because some of the time in wearing an LP hat, you have to make a decision on what you’re going to do when as it relates to detaining or prosecuting a suspect. In supply chain asset protection, the same applies. However, as you are now freight-centric as the focal point for taking care of the customer, you are challenged with some of the times making decisions about releasing or not releasing freight. Or the parcel package is somewhere in your pipeline that you may have to pull back, stop, or let go, and continue to build your criminal case around that shipment. So that is a very different way of attacking business today. And I don’t think it’s going to get any slower. In fact, I think it’ll get faster. But what I believe is going to be required is that the technology is going to have to be smarter and asset protection friendly. We are seeing machine learning, artificial intelligence, and blockchain strategies that can, over time, be applied to really smart maneuvering of not only how the data gets filtered and purified, so you can make a good decision, but also how the system can make a good decision for the supply chain AP professional. This will

JANUARY–FEBRUARY 2019

allow for the filtering of defects to draw out incidents that will ensure you’re really only going after criminality versus defect management. I think that’s where eventually over a long period of time, we could end up in a successful way. EDITOR: Give us a short description of what omni-channel is and what challenges it creates. SCROFANI: I’ll do my best because it’s still complicated to me. When most of us started out, we were accustomed to just logistics delivery, which was very linear—[distribution center] to store one and then to store two. Then we began to use multichannel—store or online. Now we’re in an omni-channel world where the transaction is at the center of your retail universe. The sale can happen anywhere, the delivery anywhere, and returns anywhere. Now try to put that combination on a white board with 300,000 SKUs, 500 stores, and forty warehouses while inventory is also in-transit in multiple modes of transportation, customers are dynamically buying and returning online and in stores with store locations in different states under different climates and economic conditions and lead times. I would say the transaction has really grown in complexity to where you have to be able to not only retain the customer through that one transaction but absolutely deliver to that customer’s expectation and at the same time a phenomenal experience. So if the customer wants to buy something now, you have to get it to them any way that you can, the fastest way that they want with no damage and at a reasonable cost. And if they don’t like it, you have to give them the easiest way to return it to have an experience that is unforgettable. At the same time, I am trying hard as a retailer to bring them into my store many times and not just once. So that experience that I allowed the customer to have on their smartphone, desktop, [point-of-service] stand, or on the salesfloor with somebody working a tablet, I have really amplified that to make them want to come back to this

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THE EVOLUTION OF LP TO SUPPLY CHAIN OMNI-CHANNEL EXPERTS

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

store because there’s no one that can do it better than we can. Omni-channel is not only a transactional technology experience but also an experience that is supposed to bring you into a real social event that allows you to fall in love with the store and amplify the customer’s desire for that store, regardless of the store being the vendor owner or the vendor distributor. Let me use Macy’s as an example. As a consumer, I love Macy’s. They have every brand that I love. And every time I buy, they never make a mistake. I get it earlier. I have great service. The people on the phone are great. The people at the store are great. Every store that I have shopped

in is the same as far as behavior. And I love the omni-channel experience. So they’ve created an outstanding experience that makes me want to continue my relationship with the Macy’s brand. EDITOR: Let’s talk about the people standpoint with supply chain. If you look back maybe twenty years ago, the professionalism of the people working in supply chain was not what it is today. How has that changed? SCROFANI: That’s a great observation. I’m going to be as transparent as possible because I think it LP MAGAZINE

JANUARY–FEBRUARY 2019

needs to be heard. When I first started in supply chain asset protection specifically, not just supply chain and logistics, I was told the people who went into the distribution centers were either close to leaving the business or they were ex-law enforcement. What that created was a very rudimentary way of looking at things. It was very physical-security focused. Are the doors locked? Is the gate locked? That has completely changed. I can only speak from my experience, but when I came out of college, I was told only 10 percent of your time was going to be spent on analytics. Today, a logistics professional, including supply chain AP, spends a good 50 percent of their time on analytics because they’re really studying how to get better, faster, smarter while managing their definition of defects. Today’s asset protection professional has to have those skill sets. Today we look for a logistician with an expertise

THE EVOLUTION OF LP TO SUPPLY CHAIN OMNI-CHANNEL EXPERTS in asset protection, not the other way around. We used to bring ladies and gentlemen from the store side, and they would really have a hard time. We knew that their shoring-up cycle was about eighteen months to two years. So we redesigned our onboarding and made sure we had the right sponsors, partners, and leadership oversight throughout their cross-pollination journey. Today’s supply chain AP professional needs to have the ability to attack the four pillars I covered earlier through the same systems that are available to the logistician or the supply chain professional, which can be at times like reading a book in a different language. So I would say that twenty years ago we were shaking doors, making sure everything was closed. Today we’re studying data, looking, literally, for the blank space. What can I not see that I need to manage? What do I not know that I need to know? That’s going to be the golden chalice that everyone’s going after, the “what I don’t know, that I don’t know.” EDITOR: If you are an LP professional with responsibilities for supply chain, where do you go to get smarter about how to do your job in this new world? SCROFANI: My humble opinion would be that it’s a layered approach. The Loss Prevention Foundation’s LPC program gives you a very strong, broad view. Within that broad view is a nice chunk of education that centers around supply chain. There’s also a great program put together by the American Trucking Association called the Certified Cargo Security Professional that gives you a lot of that logistic physical security view that also ties in carrier claims and some of the behind-the-scenes paper pain. I have also worked with some of the universities that have a supply chain certificate program. Whether at Penn State or Rutgers, whichever one is closest and convenient for you, they have fantastic programs both on-site and online.

Also, I was fortunate to reach out and work with folks that the industry and I considered subject-matter experts, like Bill Turner, John Tabor from NRS, and Mike Combs at Home Depot. There are others that I am unintentionally leaving out that would be willing to help people coming into our field as mentors and sponsors as well. Also, there is the piece on “how things work,” the actual processes, great events put together by trade associations like RILA (Retail Industry Leaders

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Association). Lisa LaBruno and her team do a very good job in bringing in the latest technologies, and the solution providers are always eager to share their new, innovative products. The Council for Supply Chain Management Professionals (CSCMP) puts together a pretty amazing conference. They also have great panelists speaking about the latest things happening in the industry. There are great logistics trade magazines, like Logistics Management, DC Velocity, CCJ, and the Journal of

LOSSPREVENTIONMEDIA.COM

After A Robbery It Can Be Business As Usual ...

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

Commerce, which is my favorite as I read just about anything that Peter Tirschwell shares. Let’s not forget the columns in LP Magazine on supply chain security. On the technology front, you need to know your systems. Sit down with the system owner. Don’t stop at the person who’s using the system. Get yourself in front of the IT person who has to really explain how the system can crash and what data fields are used and which ones are not, because sometimes those golden nuggets are the ones that you do not have visibility to, but they’re somewhere in this giant system database that you can get your arms around. Study those three things, commit to your academic foundation, and then really invest. Definitely don’t sit and wait for it to come to you in training classes. You’ve got to go from department to department and carve out your own career path. Ensure you touch base with the planning and allocation teams. Really get to know your buyers. Get into the loading and unloading department in your warehouses. Go to the picking-and-packing department of your 3PL. Sit down with the IT people who built the system that handles all of the hardware and software in your network. Spend time with transportation to understand how the contracts are written and what the exposure is on the parcel side when something is delivered and a person says they never got it. You are possibly getting ten cents on the pound while you just tried to deliver a $600 bracelet that weighs ounces. These are the little things that you’ve got to do to build a comprehensive plan. It may take you three to five years if you are aggressive. I am twenty-plus years in and am still learning and studying. EDITOR: Your expertise is not just as a practitioner but also as a solution provider. What’s that like experiencing both sides of the table? SCROFANI: I’ll speak to the solution provider first because I believe it is bit unique. As a solution provider, you’re able to inhale, gorge let’s say, all the problems that the community is feeling. You’re able to catalog all the problems that are consistently identified. Then, if you have a plan and process built to deliver product to the industry, you can create a solution for the industry. Of course, that takes a lot of collaboration, a lot of brain trust, and really that’s where my other side of the business was a blessing.

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continued on page 34 LP MAGAZINE

JANUARY–FEBRUARY 2019

THE EVOLUTION OF LP TO SUPPLY CHAIN OMNI-CHANNEL EXPERTS becomes a fantastic journey for not just you but also the industry as they have been waiting.

It’s the right time for brick-and-mortar associates to start shoring up their glossaries because supply chain AP and store AP will all be talking the same language sooner or later. continued from page 33

Working for a retailer or a manufacturer, let’s call them shippers, you realize what you don’t have but wish you had while putting out fires. Eventually, you get to a place in the shipper community where you know something bad is coming, and you can get ahead of it, but it’s expensive, and teams are competing for capital dollars, and your expenses are budgeted with minimal flexibility. Also, as a retailer, you’re trying to bring in your vendor community partners to solve for these problems you are facing. The solution providers have their niche and are unique to one another, and they don’t typically work together. You try to connect the vendors to create one holistic solution. Fortunately, I was able to bring vendors in, walk them through the problem, educate them in detail of the problem, and start having them work with one another on select initiatives at their

discretion. They weren’t competing but were complementary to one another, and that was why it worked. The solution providers knew they were creating something where one plus one is four. But it’s never easy. There are internal politics, financial demands and constraints, and multifaceted ways of looking at things that do not always align. On the vendor side, you are sort of a creative maverick, but you have to be with a company that is accepting of that profile. You have to say, “I’m from the retailer’s side. These are the twelve things that I know have been broken for the last fifteen, twenty years. Here’s how we tried to fix them. We were probably 40 percent, 60 percent of the way there. However, this is the total solution. And if we build it, then we can present it to the marketplace, and we will begin to gain momentum. But it’ll be like everything else. It’ll take a little while.” If the solution provider is all in, then it JANUARY–FEBRUARY 2019

EDITOR: How do you see the asset protection world changing over the next few years? SCROFANI: This was a question asked of me about five years ago from someone in risk. Nothing has changed in my mind from five years ago to today. We have all seen security go to LP, LP go to AP, and now AP has become supply chain as stores become shipping environments. They’re basically mini warehouses because now everyone’s shipping out of a store. So AP will become a supply chain AP department. Then that will take one more step where you’ll become a supply chain risk management department. At that point, you need to figure out where it all flows. It’s going to go from the operations to finance and then audit. Risk at the end of the day is under finance. So I wouldn’t be surprised if the evolution is probably from traditional security to true supply chain risk management finally feeding and reporting under the financial pyramid. EDITOR: In the past, we have predominantly seen store-line professionals move into the VP or senior level positions in asset protection. Do you see a day where the supply chain expert will become just as credible and may in fact move into those positions as well? SCROFANI: Absolutely. Omni-channel is forcing that to happen. There’s now a global demand for a holistic view and understanding of how to manage people, process, things, and data under one’s care and custody. I remember a big-box retailer some time back when their supply chain leader took on the senior role as a CEO. I absolutely can see it happening on the AP side because forty facilities and 600 stores equal 640 facilities that are shipping and receiving product. There is a human management piece in the

LOSSPREVENTIONMEDIA.COM

forty facilities where you have rules that cover coming into work only and not shop. In the 600 stores, they’re also coming in to shop. So you have to definitely have someone who has had store expertise. But as the world of retail continues to evolve to a truly omni-channel way of thinking, you’re going to see supply chain professionals take a leadership role. I wouldn’t be surprised if someone from supply chain AP actually moves over and has a solid number two that is managing the brick-and-mortar sales floor part of the business. EDITOR: Did you gain all your expertise on your own, or did you have people who helped you and mentored you along the way? SCROFANI: Both. I was pretty ambitious and driven, and I knew the only way to make sure I can solve something that was really big was to study it. And then I had phenomenal mentors. At Toys“R”Us between Bob Serenson and Randy Underwood, those guys were game changers for me. Joe Young as well, who taught me everything about planning allocation and sales and operations planning. John Matters, who was a phenomenal logistics executive, and Michael Jacobs, who was our senior VP of logistics and was supportive of cross-pollination recruitment, training, and development. At Macy’s I had Joe Medici, Ralph Betancourt, and I was able to watch one of the most remarkable strategic logisticians, Tom Cole, who built that entire program over his iconic tenure before retiring as the [chief administrative officer], really get things done. I was blessed to have always been around great business mentors. Outside of my mom and dad, those were the people that really helped in my professional development. EDITOR: You mentioned your mom and dad. Tell us about your family. Are you a first-generation Italian-American, and what traditions are important to you? SCROFANI: Yes, I am a first-generation immigrant. I came here in 1976. My family is traditional Roman Catholic Italian, so we celebrate all the religious holidays that are near and dear to us in a big way. Funny story about a non-religious holiday: when I first came to this country at age seven, it was two days before Thanksgiving. When we went to my uncle’s home for Thanksgiving, and they put the turkey on the table, I asked my mother, “Why the large chicken?” Everyone laughed at me, and I later figured out why. Our traditions are very rooted into our family. From family dinners where we sit at the dinner table nightly with my wife and sons, when I am not traveling. We also spend weekends with the extended family as well. So we’ll see mom, dad, my two brothers, and aunt. Birthdays are a big deal for us, and as I also have quite a few nephews, nieces, and godchildren, there can be quite a few get-togethers monthly. My boys have phenomenal uncles and aunts. It’s a very close-knit type of a community. The culinary arts are pretty deep rooted in our family.

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THE EVOLUTION OF LP TO SUPPLY CHAIN OMNI-CHANNEL EXPERTS continued from page 35

EDITOR: I’ve always thought of you as one of the most articulate persons I’ve ever known, and yet English is your second language, correct? How did you make that transition? There’s not even a hint of another language in your speech. SCROFANI: Yes, English is my second language. When I came to this country forty-plus years ago, we did what most Italians do. We came to a part of New Jersey, Paterson, that was filled with Italians. I started first grade at a Catholic school in Paterson called St. Anthony’s. Anyone that spoke Italian was put in a corner with Italian-American kids who spoke Italian. That’s how you assimilated. I had two challenges. First, I spoke proper Italian, but the kids I sat with spoke a dialect. It was difficult to communicate. I would go home and ask my mom and dad, “They said this word. I have no idea what it means.” They would say, “That’s from this part of Italy, and this is what it means.” Second, I did not like when I was poked fun of. So I forced myself to really learn English as fast as I could. It took me six months to be comfortably conversational. The one thing that saved me was math. Math is universal and the same in every language; one plus one is two. And I was really good at math. So I quickly learned to speak English well, so I wouldn’t ever have to deal with language as an obstacle. EDITOR: You wrote an article for us a few years ago on your vision of the mall of the future. I’m guessing that your vision has probably evolved at this point. Talk about what you see, not just LP or supply chain, but how you see the retail world evolving in the near future. SCROFANI: We’re seeing it happen right now. You walk in some of the big retail department stores, and there are multiple vendors that have leased departments in the store, which technically means that their stores are inside your store. Now you’re seeing layers of restaurants being added. You’re starting to see that they’re

bringing in people to talk about health and wellness. So it’s really beginning to happen. What is going into the malls today that is nontraditional? They are putting in more financial institutions. Some kind of e-learning classes or schools. All that’s happening. So malls are becoming somewhere that you go to be in an environment that has everything in it. It’s got your urgent care. It’s got virtual universities, so you can take classes. Your gym is in there. And everything inside the mall becomes like a small community. And think about if you have a dog or a child—you drop the dog off at a pet park with a veterinary clinic next door. And you drop the baby off at the daycare center. Malls can slowly evolve to safe-haven communities. EDITOR: How will this effect asset protection? SCROFANI: It will force AP to really think about how to manage human capital within this giant community, almost like they do at very large theme parks. So people that come to visit this mall would receive an RFID wristband. Now you know the family unit includes the parent, the child, and the dog. They’re all inside. You’ve got full, smart technology, so the mall security understands how many people are in there, where they are, what’s going on, what the relationship is to what ID badge. That’s the easy part. Then comes the store associates. Now that social media is everywhere you are, how do you make sure that every person in the AP world is well-versed in how to engage an individual? You’ve got a lot of different types of identifications out there as far as how people want to be identified. How do you engage that individual without putting the brand of the company at risk by referring to them by something they don’t want to be called? That kind of soft-skill demand is coming really fast because it’s not just about the person making a mistake. It rolls up quickly to the CEO of the company. And before you know it, your brand is tarnished. I think that’s starting to happen in individual stores at the transaction level, but when this

JANUARY–FEBRUARY 2019

new evolution becomes real, it’ll be a big to-do. EDITOR: One more question. You are on the board of ISCPO (International Supply Chain Protection Organization). For those who don’t know, give us a short description of what that organization is all about and what we could expect from the upcoming conference in March. SCROFANI: The board is made up of a great group of people. The best part of what we do is, we’re not tied into a specific segment of the industry. On our board there’s someone from the insurance industry, someone from retail, manufacturing, third-party logistics, and law enforcement. We try to address what the problems are that we continue to face in the marketplace that we can educate the industry. We have certification programs where we allow specific trucking companies to certify themselves with our work. We make sure that their standards are above board, and we help them build strong, solid, transportation security and distribution programs. We do a lot of training, education, and information sharing. You can expect this year’s conference March 6–7 in Dallas will be a solid event. We’re going to deliver the right message to the right audience at the right time. We fully understand that omni-channel is going to take over much of the conversation. Once you walk into the ISCPO door, it’s ginormous. You have to kind of pick your avenue, go down the hall, because we’re going to be able to walk you through a lot of what we’ve talked about today with a lot more detail, a lot more resources, and a ton of passion and vigor. It’s an exciting time to be connected to ISCPO, and I truly look forward to a lot of our good industry friends making their way this time. It’s not just for supply chain professionals. It’s the right time for brick-and-mortar associates to start shoring up their glossaries because supply chain AP and store AP will all be talking the same language sooner or later.

LOSSPREVENTIONMEDIA.COM

CERTIFICATION

Meet the Director of Operations for the LP Foundation

Interview with Mat Schriner, LPC Schriner joined the Loss Prevention Foundation nine months ago as director of operations. Initially pursuing a law enforcement career, he quickly identified a passion for loss prevention and changed his focus. He now has over twenty years of loss prevention, safety, and operations support experience in a wide variety of roles at Kmart, L.S. Ayers (The May Company), Kohl’s, and Lowe’s. Schriner can be reached at Mat.Schriner@LossPreventionFoundation.org.

Why did you decide to pursue your LPC certification? I pursued my LPC certification for several reasons. First and foremost, I wanted and needed to develop and grow as an LP professional. Second, I knew having a well-rounded perspective would assist me in making better decisions and help me in assisting stakeholders understand the benefit of having loss prevention involved in strategic planning. Third, I saw how my leadership held the LPC in such high regard and wanted to count myself as a true loss prevention professional.

The most eye-opening part of the curriculum was that as a twenty-year LP practitioner, I was not as fluent in integration and influence due to my lack of knowledge in key business verticals as I had once thought.

Was the coursework what you expected?

What benefits have you seen from taking the course?

I knew this certification was going to be a challenge based on the feedback from several of my peers and colleagues who obtained their LPC certifications. The coursework proved to be what I expected and more. The depth of information in areas both familiar and distant to me challenged the very foundation of my LP experience. The course material expanded my vision in every aspect of what we are capable of doing and shined a light on areas where I needed to improve. There were several areas of the business I had not been previously exposed to like logistics and pharmacy.

The biggest benefit I have seen in taking the LPC course is the need to be involved in the overall business. What I mean is, in every section of the curriculum I pulled pieces out on partnership, stakeholders, collaboration, and how together with our business partners, we can make better business decisions to benefit the entire organization. As true LP professionals, we need to think and partner better, educate and work with all stakeholders to deliver a differentiated loss prevention program focused on the business and not just one vertical.

Now that you have been with the Loss Prevention Foundation (LPF) for nine months, what can you tell us about the value of the LPC certification?

If you could offer one takeaway to someone considering getting certified, what would it be?

The value of the certification inherently comes from the individual. What you put into the LPC or LPQ is what you will get out of it. If you approach it looking for opportunities for yourself to grow, you will get significant value out of the rich content. If you approach the certification from a check-the-box mindset, you will likely struggle to apply the material and truly advance your knowledge of our ever-changing industry. It is truly amazing to see and talk to so many loss prevention and asset protection leaders and our solution provider partners about the content and how they continue to contribute and enhance our materials.

As an LPC who works for the foundation, what tips and suggestions can you give to someone pursuing their LPC? It doesn’t matter if you purchased the course yourself or were graciously awarded a scholarship to become LPC. Take advantage of the opportunity to grow and advance your career opportunities. The LPC is rich with content in every aspect of a business and can enhance your knowledge in how to successfully collaborate the various verticals within your environment. It doesn’t matter if it is in an individual store, a market or region, or the corporate office. By being able to talk about the business holistically, you set yourself apart as a business partner and a true professional. LP MAGAZINE

What was the most eye-opening information that was part of the curriculum?

Get it, take it, apply yourself, and grow. It has influenced me both personally and professionally and can help you to establish credibility amongst your organization, your partners, and leadership and identify areas for personal and professional growth.

How has certification changed your expectations of loss prevention as a career, for yourself and for others? The LPC certification has enriched the expectations of loss prevention as a career for me as I feel I have more depth to the business acumen and strategy I can offer to any organization. Having a foundation in the various aspects of an organization is the only way you can evolve and maintain the nimbleness needed to keep up with the ever-changing environment.

Would you recommend certification to others? Absolutely. I feel that this certification brings legitimacy to our profession. It establishes a new level of LP professional we should all be seeking out. Someone with the LPC certification has a diverse perspective and can contribute in areas many organizations have not tapped into yet. This is where the future of our industry is, and this is where the future of your value can be.

JANUARY–FEBRUARY 2019

continued on page 38

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Our Success Starts with Our Partners

Newly Certified

Following are individuals who recently earned their certifications.

Recent LPC Recipients

Brandy Albano, LPC, MetroPCS Guy Antolick, LPC, Amazon Bradley Byers, LPC, Lowe’s Colton Cantrell, LPC, Walmart Stores Jackie Chapman, LPC, Walmart Stores Tyler Choat, LPC, Amazon Dennis Dixon, LPC, Amazon Paul Dollinger, LPC, Amazon Albert Flores, LPC, Lowe’s Lakeisha Gilyard, LPC, Fleetpride Laurel Harrington, LPC, Lowe’s Jonathan Kobayashi, LPC, Amazon Kris Kubasta, LPC, Office Depot Faiz Malik, LPC, Amazon Jeremiah Martin, LPC, Custer County Ag Society Rodney Maynard, LPC, Lowe’s Samuel Miller, LPC, Lowe’s Trevor Mohs, LPC, Amazon Zackary Mongosa, LPC, Amazon Paul Moore, LPC, Lowe’s David Mosser, LPC, Amazon William O’Malley, LPC, Amazon Shelley Orf, LPC, Sears Holdings Nicholas Pappas, LPC, Lowe’s Patrick Patton, LPC, Lowe’s Michelle Reis, LPC, Walmart Stores Micah Sheffield, LPC, Loss Prevention Brian Tolbert, LPC, Sears Holdings Desi Touchet, LPC, Walmart Stores James Vandermer, LPC, Big 5 Sporting Goods Spencer Von Behren, LPC, Amazon Kenneth Watson, LPC, DICK’S Sporting Goods Jennifer Zervas, LPC, At Home

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FEATURE

BUMPS IN THE ROAD

PROGRESS IN SUPPLY CHAIN SECURITY WILL BE TESTED By Garett Seivold, LPM Senior Writer LP MAGAZINE

JANUARY–FEBRUARY 2019

BUMPS IN THE ROAD

videnced by the most recent statistics, progress has been made against cargo thieves in the US. The value of stolen cargo is down. The number of retailers that report being victims has dropped. Busts have disrupted the activities of major theft rings. But in today’s retail world—where the ability to ship anything from anywhere and to anywhere within a short time frame is increasingly paramount—that progress will surely be tested. As retailers’ products travel more miles to find their way into customer hands—residing less often under the controlled confines of store walls and well-established LP programs—losses in the supply chain are amplified. Developments in the supply chain, which previously may have not raised an eyebrow, can become, quite suddenly, materially important to the retail loss prevention mission. Transportation networks, for example, are becoming more fragmented as each entity throughout the supply chain seeks to minimize its own costs and liability. So a typical shipment of retail goods has more hands touching it than in years past, and more hands increases the exposure of retail goods to loss, noted Glenn Master, loss prevention Glenn Master director for commerce services at Pitney Bowes and former regional loss prevention manager for Office Depot. “A retailer might have a contract with company X, but they in turn will use an extensive transportation network to manage that process all the way to a customer’s doorstep,” explained Master. “From a [distribution center] to a consumer, multiple companies will be touching that product, and every time there is a touchpoint, there is a risk for it to be lost or stolen.” Moreover, as shipments get closer to the customer endpoint, it’s likely that the carrier transporting that product will be smaller and less sophisticated, thus reducing the visibility of in-transit orders.

Truth be told, cargo theft has never mattered all that much to retailers and LP executives, say some industry leaders. With contracts that make them whole again in the event of loss, diversion in the supply chain has always been more nuisance than priority. “But now, if you have thousands of customer parcels stolen from a truck in Burbank, by a driver five companies deep in the supply chain network, the cost to retailers is substantial,” explained Master. In addition to the resources required to manage claims from all those disappointed consumers, there is the real risk that you’ve lost them forever as customers. The e-commerce transformation isn’t yet complete, according to the director of loss prevention for a home furnishings retailer. Retailers continue to focus on removing customer obstacles, to facilitate purchases no matter when, where, and how shoppers want to make them. “It’s about the customer experience and how you can get the product to them at their convenience—and we haven’t seen the end of that evolution,” he said. He added that it’s important for loss prevention to be part of planning as retailers innovate, whether it is ship-from-store, order online and pick-up in store, or “into scenarios with autonomous delivery, Uber-like services, and other last-mile issues.” Case in point: Kroger said in December that it has started delivering groceries via an autonomous vehicle with no driver

from its Fry’s Food Stores to homes in the Scottsdale, Arizona, area. Such developments completely transform cargo security models. Retailers are currently grappling with the new consequences from supply chain loss, according to Byron Smith, CFI, LPC, corporate asset protection manager for 7-Eleven. “It has become top of mind for retailers as sales change,” he said. “It’s being looked at as an issue of maintaining consumer confidence in that brand, whether customers are buying products in store or they’re being delivered to them by a third party.” If a product isn’t in the store when shoppers Byron Smith go to buy it or it doesn’t arrive when it’s supposed to, that confidence can be easily shaken. That can have severe consequences for the retail business, suggested Smith, who is chairman of the International Supply Chain Protection Organization (ISCPO). The task is also growing more complicated alongside the increase in the number of direct international shipments that bypass traditional US carriers. “You can pretty quickly experience brand erosion from losses and delays from shipping partners,” Smith warned, adding that loss prevention and asset protection leaders need to involve themselves in the supply chain process to align with its growing significance. As e-commerce takes on a greater share of traditional retailers’ revenue

The e-commerce transformation isn’t yet complete, according to the director of loss prevention for a home furnishings retailer. Retailers continue to focus on removing customer obstacles, to facilitate purchases no matter when, where, and how shoppers want to make them.

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BUMPS IN THE ROAD

It’s not enough to have the right tools and protocols in place. It takes ongoing investigation, assessments, and audits to ensure vigilance against ever-present adversaries. For example, access-control systems generate a wealth of data, but it can only point to a driver’s suspicious after-hour visits to a distribution facility if it’s scrutinized.

streams, shipment delivery and retailer reputations become intertwined. The consequence of crime disrupting supply chains isn’t only about insurance claims and loss of revenue; it’s about brand protection, customer loyalty, and future sales. So it’s not only gains in supply chain security that will be tested but also perhaps the value of LP professionals themselves.

In the Yard

The risk of theft in retailers’ distribution centers (DCs) is much as it has always been—and the best strategy to prevent it is too, according to one director of loss prevention. “There is no silver bullet. It’s just a matter of having a strong overall security program, where you’ve got good people, and layer in technology, and work to deter crime with the same approach that you have in stores,” he said. Just as stores are more likely to be hit when they are in disorder, distribution centers need to appear “buttoned up” to dissuade crime, he said. That means walking your fences, checking your lighting, implementing robust video surveillance, instituting tracking systems for both trucks and product, and having well-defined access-control programs. As a blueprint, some LP leaders noted that it helps to follow the physical security attributes identified by the

Customs-Trade Partnership Against Terrorism (C-TPAT), the voluntary supply chain security program led by US Customs and Border Protection, which was created to improve the security of private companies’ supply chains with respect to terrorism. Still, it’s not enough to have the right tools and protocols in place. It takes ongoing investigation, assessments, and audits to ensure vigilance against ever-present adversaries. For example, access-control systems generate a wealth of data, but it can only point to a driver’s suspicious after-hour visits to a distribution facility if it’s scrutinized. “If you’re not looking at what your tools are telling you,” an LP director warned, “then they’re not doing you any good.” Overall, retail LP teams do a good job of preventing theft at distribution facilities from causing material harm to their businesses, according to security consultants and supply chain LP professionals we interviewed. “We all have our cases now and then—people will go into cartons and take onesies and twosies—but it’s not enough to really move the shrink needle for a company,” said one. “If your DCs are secure, and your yards are secure, then the opportunity for theft to cause significant damage is pretty minimal.” The bigger risk for theft today comes as a package leaves the control of a retailer and is placed LP MAGAZINE

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in the hands of third-party logistics providers (3PLs), say experts. While subcontractors and small carriers may pose more risk, experts say that even the big carriers like UPS and FedEx have issues inside their buildings and operations that result in loss. Problems are likely to worsen under today’s labor shortage, particularly the acute issue of too few drivers for too many packages. “I think the 3PLs are suffering like everyone else under the labor shortage,” said one LP supply chain professional. “They’re having to take what they can get to move boxes.” America is short about 50,000 truck drivers, according to the American Trucking Association. If the current trajectory continues, that number could exceed 174,000 by 2026, says the group. Fewer drivers can cause trailers to be staged loaded for long periods of time, putting shipments at added risk. It also puts shipments in the hands of drivers that may not have passed a rigorous background screening a few years ago. Realistically, retailers will likely have to come to terms with paying more to transport shipments and that drivers they probably wouldn’t want will be in control of their packages, experts believe.

On the Road

Data on cargo theft is, generally, trending positive. Both CargoNet and SensiGuard’s Supply Chain Intelligence Center have tracked year-over-year declines in the number of cargo thefts for the three years leading into 2018. The FBI reported an increase in the number of thefts in 2017, but that likely reflects an increase in the number of law enforcement agencies reporting cargo theft data. (In 2017, a total of thirty-three states and the Bureau of Indian Affairs participated in the submission of cargo-theft data.) A new study by the National Retail Federation (NRF) reports a major drop in the percentage of retailers that say they were victims of cargo theft in 2018. And everyone’s data seems to point to a conclusion that the total value of

BUMPS IN THE ROAD

Cargo Theft by Location, 2015–2017 2017

207

211 209

50 0

Warehouse/DC

Secured Yard

Other

Parking Lot

Truck Stop

Unsecured Yard

Side of Road

33 23

50 34

110

117 91 89

100

99 103

125

131 92

150

149

200 149

Reported Cargo Theft Incidents

250

2016

227

2015

Port

Source: CargoNet, a Verisk business

property stolen in cargo thefts has been falling or holding steady. What’s behind the better numbers? Experts suggested a number of factors have put cargo thieves on their back feet. These include:

Retail Victims of Cargo Theft 2015–2018 44.1% 40.0%

37.9%

28.8%

2015

2016

2017

Source National Retail Federation 2018 Organized Retail Crime Survey

2018

Successful law enforcement investigations and the formation of cargo-theft task forces; ■■ Increased use of GPS tracking devices to monitor shipments; ■■ Better locks on trailers; ■■ Fleets and drivers adopting team driving; and ■■ Better cameras and recorded footage of thefts and identification of suspects and vehicles. “The technology piece is interesting,” according to Tony Pelli, a supply chain risk consultant at BSI. “Tracking devices are becoming a lot cheaper. Tony Pelli And instead of tissue box-size or even larger devices, we’ve moved to much smaller devices, and even throw away ones where reverse logistics is not necessary and you don’t have to worry about getting them back.” He added that—because everything is Internet-connected these days—there really is no excuse to not have visibility into cargo shipments. “Increasingly, everything in a truck is connected to the Internet: the driver’s cell phone, the truck’s engine, and so on. You’ve already got things on board that you can track.” While that does add a new layer of responsibility—to make ■■

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sure devices that are tracking and reporting locations of shipments aren’t vulnerable to being hacked—it’s helping to alter the cost analysis on which cargo shipments are worth tracking. “It’s becoming possible to track cheaper shipments like food and beverage and other products on which, in the past, it might not have been worth it to do tracking,” advised Pelli. With Sensiguard reporting that food and drinks were the third-most stolen type of cargo in the third quarter of 2018, that’s good news. Using technology to monitor shipments seems to yield value, according to recent research, including tests conducted by researchers in a paper for Technical Transactions, “The Cost of Risk Evaluation in Intermodal Transport,” Dec. 2017. In the study, researchers compared intermodal shipments (a) without location monitoring, (b) with location monitoring, and (c) with location monitoring plus cargo parameters, such as notification if container doors are opened, temperatures exceed a certain limit, and other deviations from standard events. The conclusion: “Conducted tests made it possible to confirm the benefits of implementing a system for positioning and monitoring cargo parameters, especially for high-value

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BUMPS IN THE ROAD 2% 2%1%

US Cargo Theft by Product Type, Q3 2018 20% ■ Electronics ■ Home & Garden 15% 13% ■ Food & Drinks ■ Miscellaneous 11% 9% ■ Metals ■ Building & Industrial 9% 8% ■ Alcohol ■ Clothing & Shoes 5% 5% ■ Personal Care 2% ■ Tobacco 2% ■ Auto & Parts ■ Pharmaceuticals 1%

20%

5% 8%

15%

9% 13%

11%

Source: Sensiguard Supply Chain Intelligence Center, Nov 2018

goods.” Devices for monitoring both location and cargo parameter resulted in lowering costs by an average of 53 percent. Using a system to monitor location only cut costs up to 31 percent. “These results showed that using those systems could bring great benefits,” the study concluded. Overall, Pelli says that trends in cargo theft remain fairly consistent. With a few fluctuations, thieves are primarily hitting the same products and in the same states as in recent years. “These are certain areas around major transportation nodes where you have very active cargo-theft gangs,” explained Pelli. Southern California is one such hotbed, where retail consumer goods arrive from Asia through the Port of Long Beach and then move into Riverside County. “So you’ll see gangs operating there, targeting trucks in those areas and hitting warehouses.” Occasionally there will be a crack down in a specific geographic area that disrupts cargo-theft operations. “So crime may decline for a time in that area, but then after a while, it comes back.” The Chicago area recently rode that wave, according to Steve Covey, special agent at the National Insurance Crime Bureau and former head of the Midwest Cargo Theft Unit for the Illinois State Police. After a several months lull at the

end of 2017, cargo thieves became very active in early 2018, with more than a dozen thefts, all more than $100,000. “Cargo theft is still pretty rampant,” warned Covey. And while cargo-theft data overall seems to suggest that shipments are growing safer, experts insist that loss prevention practitioners need to stay consistently engaged as obstacles and opportunities cause cargo thieves to shift tactics. Cargo thieves are opportunists, explained Sergeant Peter Lee, in the California Highway Patrol Southern Division’s Cargo Theft Interdiction Program. “[They] will scout possible locations for easy opportunities, whether unsecured load on docks to distribution facilities with limited to no

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security. Other thefts may involve use of fictitious documents to steal cargo from facilities with untrained security.” SensiGuard’s yearly report similarly noted that the decline in reported cargo theft doesn’t mean thieves are backing off—just that they’re refining operations and honing in on soft spots in the supply chain and on shipments they know can be easily fenced. That is one reason for the rise in mixed-retail-load thefts—shipments that are typically a mix of product destined for a brick-and-mortar store. “Diligent and organized thieves can still utilize their criminal network to identify the contents of these loads, which if they contain desired products, typically have less security measures in place than a dedicated trailer of one high-value/targeted product,” warned Sensiguard analysts. This trend is also evident in the rise of large pilferage events, according to Sensiguard. “Thieves have learned that valuable intelligence can be gathered while obtaining high-value merchandise by penetrating a trailer, stealing some of the product, and then drawing back to see what—if any—response occurs.” Pelli has also noticed cargo thieves becoming more strategic, including using information found online to create false identification and set up bogus trucking companies, or to steal the identity of a legitimate trucking company and book loads and shipments under the company’s name. To an unwitting distribution center, the pick-up seems completely legitimate.

BUMPS IN THE ROAD “Like in all areas of security, risk is increasingly at the intersection of cyber security and physical security,” Pelli said. Some trends, which can seem to have little relationship to cargo theft, are also impacting risk. The nation’s clogged roadways are one example. “With traffic increasing around major cities, more retail deliveries are being made to stores in the middle of night so that drivers don’t have to contend with traffic,” explained John Albrecht, vice president at Transport Security, which has provided locks and other cargo security solutions to retailers for forty years. “And it’s tough for retailers to protect at that point. You can’t put a fence around it.” To secure shipments as they sit unprotected, he suggested that retailers should consider upgrading to tougher locks that have been developed in recent years and are able to withstand the determined efforts of ORC gangs. Another smart solution is to place a tracking unit inside a trailer after it arrives at the store and until it’s unloaded, so store staff can receive an alert if it’s moved, he said. Shrinking law enforcement resources also pose potential risk. Successful police investigations have been touted as a cause for declining cargo theft rates, but some jurisdictions are now scaling back cargo theft interdiction units. “It depends on the jurisdiction, but in my state, for example, the cargo theft unit

is now manned by a single person,” said Special Agent Covey.

The Bigger Picture

The supply chain is infinitely intricate. So risks are, naturally, far more extensive than those inherent in warehousing or transporting cargo within the US. And this Bryan Strawser broader picture of risk is growing darker, according to Bryan Strawser, principal and CEO at Bryghtpath, a strategic advisory firm specializing in global risk, business continuity, and crisis management. He thinks supply chain risk is growing, a result of a combination of two factors: (a) the increasing complexity of the global supply chain and (b) a substantial shift and growth in geopolitical unrest. “I think LP practitioners need to adopt a very broad view of supply chain risk because executives’ concerns transcend the issue of cargo theft,” he advised. Strawser, who served Target for nineteen years as senior director for global crisis management, business continuity, and intelligence, sees geopolitical uncertainty impacting today’s retail supply chains. “It’s everything from the collapse in Venezuela and the nationalizing of assets to the more general instability as it relates to the current state of

The growing importance of cyber security in cargo transport is perhaps most obvious in the rise of autonomous long-haul trucking. Outfitted with sensors and guided by self-driving software, several companies have already announced successful test runs of 18-wheelers across the country. 44

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diplomacy and rise in tariffs—and the risk that these actions lead to more aggressive behavior.” The Risk Advisory Group released its Strategic Outlook 2019 in December, and it offers a similar warning. “Across nearly every region, we forecast that authoritarian, right-wing, and nationalist governments and movements will grow in strength and influence,” according to the group. For example, it predicts that extreme right-wing groups are likely to grow in strength and influence in Europe during 2019, negatively affecting security, and that authoritarian governments across the Asia Pacific region will pose a risk to stability in 2019 and beyond. Increasing geopolitical competition will make it more difficult to jointly tackle challenges like climate change, environmental degradation, and water scarcity, serving to perpetuate insecurity and instability, limit development, and drive migration. “This feeds a cycle of complex risks that will become even harder to resolve,” the group warned.

A Call to Action

Although fewer retailers report falling victim to cargo theft, respondents to the NRF’s 2018 Organized Retail Crime Survey said that inattention to risks to goods in transit is one reason that ORC continues to increase. “Retailers say they often are unable to counteract the problems due to staff shortages, a ‘do-nothing’ policy, and lowered supply chain security,” according to the new report. For some LP departments, assuming a more proactive role in managing supply chain loss will be an easy transition. “I think some organizations have done a good job of LP getting involved, especially those that have developed organized crime task forces,” said Smith. For others, it may mean starting from scratch. LP has a history of either not being consulted on matters of

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BUMPS IN THE ROAD

While cargo-theft data overall seems to suggest that shipments are growing safer, experts insist that loss prevention practitioners need to stay consistently engaged as obstacles and opportunities cause cargo thieves to shift tactics.

supply chain loss, or not infrequently, it has willingly turned a blind eye to the risk. “We’ll sometimes have to educate LP on their own [supply chain] processes because they’ve been excluded from a seat at the table by their own camps,” said Master. “And it blows me away that, even at the VP LP level, I’ll find myself having conversations with executives that show they don’t know their own processes

because they are so exclusively focused on brick-and-mortar.” Master’s advice is simple. “Get engaged,” he said. “Honestly, engagement is everything.” On that front, he’s observed some encouraging signals. Over the last two years, as e-commerce has continued to grow, he says LP executives have become more involved in conversations around loss and risk in the supply chain, and some

retailers have started to allocate more manpower to address the challenge. The nature of engagement will naturally depend on where the supply chain hits a retailer’s business. For one retailer without an e-commerce component, focus has been on ensuring that the 3PLs it does business with are up to the challenge. “Our goal is to have good, strong agreements in place with third parties,” explained the retailer’s top supply chain LP executive. “We devised a document that spells out our company’s transportation security requirements that you have to meet to do business with us.” On a monthly basis, they conduct an audit of providers to assess compliance and hold them strictly accountable. “We’re giving the 3PLs the security answers. There is zero reason they should fail these audits,” he explained. Auditing also plays an important role for 7-Eleven, to ensure the quality and integrity of deliveries by 3PLs

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BUMPS IN THE ROAD to stores and to ensure that “they are delivering exactly what the store ordered, no more and no less,” said Smith. Providers are required to hit certain plateaus on key performance indicators, “so if 99 percent gets to the store, we can drive that change to get 100 percent.” More than fraud, human error can pose a challenge for carriers trying to make convenience store deliveries quickly. 7-Eleven stores help to cut down on the risk of errors by making it a priority to review orders, having internal resources that make it possible, and by doing the scanning necessary to validate that all product is received. Monitoring theft trends will also continue to be important. The risk of

study of cargo theft, which analyzed the previous five years of cargo theft, data showed theft occurred significantly less often on Wednesday and Thursday, at just a fraction of the rate on weekends and substantially less frequently than on Friday and Monday. Cargo remains at its most vulnerable on the weekends, according to the latest data, but Wednesday has emerged as a higher-risk time, with thefts now occurring at a rate on par with Friday and Monday. As cargo moves more frequently, to more places, it’s starting to look like no day will offer refuge to shipments in transit. Tracking enhancements in theft prevention should also be a persistent priority for LP, suggests Ron Heil, CPP, CSC, CHS, senior security

US Cargo Theft by Day of the Week, 2017 Sunday Monday Tuesday Wednesday Thursday Friday Saturday 0%

10%

15%

20%

25%

Source: SensiGuard Supply Chain Intelligence Center. “Cargo Theft Annual Report United States and Canada. 2017”

criminal activity associated with cargo in transit has always been strongly linked to specific goods, days, locations, and routes, making planning and routing of transportation an important consideration in mitigating risk to cargo. And some experts suggest that the rise of e-commerce could alter the risk landscape. For example, pool distribution models or the use of smaller distribution centers to speed consumer deliveries may change where and when cargo is stolen. Some changes may already be showing up in the data. In a 2011

advisor with Business Protection Specialists, a security consulting firm. In addition to GPS and other tracking technologies, “old” solutions are getting an Ron Heil upgrade. “Seal technology is changing quite a bit,” Heil said. “It’s not as easy to counterfeit or remove and put seals back on.” On the horizon are perhaps transformative technological solutions. Brigid McDermott, vice president of blockchain development for IBM, says

JANUARY–FEBRUARY 2019

that blockchain technology, by making it easier to verify legitimate carriers and the loading and unloading of shipments, can help to deter and practically eliminate some forms of cargo theft. Pelli’s advice is for retail companies to expand their view of risk. He says retailers are currently more concerned about the potential of physical vulnerabilities in their shipping partners, but that they need to start paying greater attention to whether the cyber security of those companies is also up to the task. The fallout of cyber vulnerabilities in the supply chain was underscored in 2017 when Maersk, which handles about one out of seven containers shipped globally, was crippled by a ransomware attack, causing weeks-long supply delays and disruption. Cyber attacks become more viable as more nodes in the logistics chain are connected, even as that very connectivity may help to minimize cargo theft. In “Contribution of physical internet containers to Mitigate the Risk of Cargo Theft” (an article published in 15th IMHRC Proceedings in 2018), researchers from Georgia Southern University observed that using easy-to-interlock smart containers in an open, interconnected logistic system has the potential to reduce cargo theft. They concluded: “Results suggest that through the modularity and standardization, the application of physical internet containers will significantly improve the logistics performance and reduce cargo theft risks.” However, it is only possible to extract security gains from greater supply chain connectivity if cyber vulnerabilities are included in the risk management equation. The growing importance of cyber security in cargo transport is perhaps most obvious in the rise of autonomous long-haul trucking. Outfitted with sensors and guided by self-driving software, several companies have already announced successful test runs of 18-wheelers across the country. A truly driverless truck would change the nature of trucking—and protecting cargo. To many analysts—and to the International Transport Workers’ Federation worried

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BUMPS IN THE ROAD about the elimination of millions of trucking jobs—the expectation is that self-driving trucks will be crisscrossing the US in a decade’s time. For LP professionals broadly, Smith thinks executives will need to continue the trend of involving themselves in supply chain issues and to work more closely with their operations team on identifying how LP can better support their companies as they navigate the e-commerce revolution. That very issue is a focus of the upcoming ISCPO annual conference in Irving, Texas, March 6–7, 2019. For retail companies, it’s important to bring more internal members to the table, “so we can look for ways to improve our processes year after year and to take advantage of LP’s particular expertise,” Smith said. LP’s external relationships also play a key role in meeting retail’s evolving supply chain challenges, according to experts. For example, Glenn Master and Byron Smith both noted the importance of using analytics to monitor loss trends and sharing data with logistics providers, such as an escalating number of consumer complaints in a select zip code. The more transparent the relationship, the more readily a provider can remedy emerging loss issues that pose a risk to a retailer’s business. Another LP executive said it’s important to have good investigative partners you can call upon and suggested engagement with regional cargo-security councils to stay informed on risks and solutions. “It’s important to be able to learn from one another, to see how thieves are slipping seals and otherwise creatively compromising shipments these days, and to have people you trust that you can call if you see something you need more information about,” he said. Agent Steve Covey noted that communication with law enforcement has room to improve, suggesting that retail organizations need to combine robust physical security with enhanced outreach to law enforcement units that work on cargo theft. “Cargo thieves and ORC gangs have fencing operations in common,” he said. “So that’s something retailers can get with law enforcement about.” Sergeant Peter Lee also sees communication with law enforcement as an important theft-prevention tool. “Direct communication with cargo-theft investigators result in quicker investigative response,” he said. The importance of supply chain integrity is reflected widely. It can be seen in surveys that show consumer purchase decisions are increasingly swayed by issues such as seamless shipping, delivery, and returns. International Data Corporation predicts that more than 50 percent of consumers will name fulfillment execution as the top reason for loyalty by 2020. It’s clear, too, in the emergence of fulfillment as the top area of investment among retailers, which now allocates 29 percent of capital expenditures on transportation and logistics, delivery options, order management, and inventory visibility and returns, according to the Walker Sands’ Future of Retail Report. And it’s starting to be visible in the LP domain, as retailers and their LP leaders look to bring the success they’ve achieved in their upstream logistics downstream to consumers. LP MAGAZINE

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EVIDENCE-BASED LP by Read Hayes, PhD, CPP

Opportunity Makes the Crime “

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. © 2018 Loss Prevention Research Council

ocation, location, location” has been used at least since the 1920s to make the key point about property-value differences. The same goes for sales success and, in our case, crime risk. I’ve mentioned before I’m an environmental criminologist, and in the criminology/sociology field “environmental crime” is relatively rare. Most social scientists study criminality, in other words, why some humans are deviant, some worse than others, and why some offend through adulthood rather than aging out of crime like most. We know multiple factors lead to crime, and our environmental criminological focus concerns actual crime, how and why crime events occur. We think more about why people commit an actual offense than why they might become a criminal. We want to better understand why and how people go from thinking about doing something wrong to initiating their attempt and why some even progress their attempts despite multiple obstacles.

We believe situational opportunities are the center of gravity. No matter how motivated an offender might be, they can’t commit a crime without the opportunity to do so. And further, we really can’t shape the initial variables, but we can do something to affect crime opportunity. Multiple interacting factors explain criminality and real crime events including varying genomics, socialization, life circumstances, and finally, perceived crime opportunities. All help predict not only criminality but also actual crime attempts. And it’s the last factor—crime opportunity—that environmental criminologists work on. We believe situational opportunities are the center of gravity. No matter how motivated an offender might be, they can’t commit a crime without the opportunity to do so. And further, we really can’t shape the initial variables, but we can do something to affect crime opportunity.

Opportunity

Opportunity is perceived differently by different people, but most offenders tend to gravitate toward very attractive and vulnerable targets rather than the opposite. So our protective efforts concentrate

JANUARY–FEBRUARY 2019

on identifying the most attractive physical and digital assets (those most desirable, exposed to threats, and vulnerable) and then making those assets or places tougher to steal or attack. We then increase guardianship, so would-be offenders perceive they’ll most likely be caught if they initiate an attempt. Or we clearly let criminals know their theft or attack will not be worth it; they will be denied any benefit from their attempt. This process is called situational crime prevention (SCP), and SCP is how environmental criminology improves crime reduction. And all University of Florida (UF) and Loss Prevention Research Council (LPRC) crime and loss control innovation and research is grounded in SCP principles.

Science2Practice

UF and LPRC researchers have now compiled more than 300 loss prevention and asset protection (LP) research projects for their over seventy retail chain members, with a lot of learnings. But the problem for LPRC now, like most entities, is getting the flow of evidence-based tactics to the practitioners, corporate planners, and field personnel—in short, usable action guides that enable them to practically use research findings to make a real difference. We must transfer learnings to action. In most science fields, this is called “science2practice,” or S2P. S2P is a major 2019 focus for the LPRC and is overseen by the LPRC Board of Advisors S2P Committee headed by Paul Jaeckle, vice president of asset protection at Meijer. It plays out in these channels: ■■ LPRC Knowledge Center (KC). Soon to be an amazing app, the keyword searchable KC contains over 300 reports briefs, fifty-plus webinars, twenty podcasts, working group call recap notes, hundreds of offender interview video clips, and more. ■■ Webinars and CrimeScience Podcasts. The LPRC generates monthly webinars and biweekly podcasts on emerging topics and research results. ■■ Big Six Events. LPRC starts with Kick-Off in New York City following the NRF Big Show, then holds the LPRC Board of Advisors IGNITE planning meeting in March, then conducts an antitheft summit, a supply chain protection summit, and a violent-crime summit. The LPRC community then wraps up with the annual Impact Conference in October. ■■ Weekly LPRC Connect eNewsletter. This weekly news brief highlights new research and upcoming working groups calls, introduces new LPRC members and their working group engagement plans, and describes coming events. ■■ Working Groups. All seven LPRC working groups bring together multiple retail chains, solution partners, and scientists monthly to address specific problems, propose solution research, and share experiences and project results. LOSSPREVENTIONMEDIA.COM

Winning with People Speaking of S2P, by mid-2019 LPRC will stand up a new working group termed the Workplace Performance Working Group to facilitate better employee on-the-job performance for members. Dishonest and unsafe behavior will be key action-research targets, but our vision is to help our members create a competitive advantage for their businesses through people. They can use research evidence to foster company spaces where everyone’s best work is encouraged, enabled, expected, and recognized. More to come on this new working group.

Featured Research

Retail product theft, and fear of theft, frequently results in sales-suppression via defensive merchandising (in other words, removing live products from the shelf or impeding self-selection) and is still a chronic, critical issue with numerous popular retail product categories. Retailers want to maintain sales and customer satisfaction by sustained on-shelf availability. And a large part of that mission is cost-effectively maximizing theft deterrence without running shoppers to online or physical competitors.

Priming Convincing a motivated thief not to steal a coveted item is difficult at best and often requires cotreatments or multiple measures to consistently work. Think about multimeasure advertising that combines radio, TV, online, and in-store ads. Same with medicine where radiation might make a lesion more susceptible to chemical agents, some of which kill the tumor, while others activate the natural immune system. Further, mood, exercise, and diet can make the system more effective and recoverable. Same thing in our stores, distribution centers, and offices. One piece of an effort rarely works, or at least for long. We need to get our deterrent or disruptive message to the ideating offender, right to the action part of their brain. So we prime the pump—we prep them to perceive, understand, and favorably respond to our countermeasures. It’s for this reason you might note an emphasis on online messaging, layered and changing signage, and other priming measures.

The Project A carefully designed survey was conducted to assess whether three in-store sign versions indicating a person is in an active surveillance area would be effective at deterring theft while not disrupting a customer’s shopping experience. The signs presented in this exploratory research can be seen below.

Active Surveillance Area Sign Options

All data was collected in Gainesville, Florida, from an LPRC StoreLab, an operating retail store used for systematic testing. To further understand signage deterrent “dosing” characteristics (meaning how the sign should look, where it should be placed, how many should be deployed, and how to keep the message fresh) and LP MAGAZINE

store visitor perceptions and responses, the LPRC gathered offender and customer feedback about signage in the purposefully selected StoreLab location. First, thirteen active or former offenders were shown each of the three signs and asked what message each sign sent to them, if any version sent a stronger message than the others, and if any sign component was offensive. Offenders were then asked how they would react to the sign if it were placed near an item they often intended to steal.

Customers and offenders both found the sign that excluded “thieves” to be the most noticeable. Many commented the largeness of the word “beware” on the signs was the best way to grab their attention. In the second phase of this study, twenty-three customers were intercepted at the entrance and were shown all three notifications. Customers were asked the same series of questions. A primary interest for this study is if the presence of the sign would change shoppers’ store perceptions or shopping behavior. Both offenders and customers were also asked if they had any suggestions to make the signs more noticeable, understandable, and a more credible threat to a would-be shoplifter.

Results Summary Customers and offenders both found the sign that excluded “thieves” to be the most noticeable. Many commented the largeness of the word “beware” on the signs was the best way to grab their attention. Over 50 percent of shoplifters indicated they would either go to another store or not steal anything if those signs were present in an area where they were trying to steal. They also noted that most shoplifters don’t consider themselves “thieves,” which lessens the impact of signs with that word. The presence of these signs was welcomed by most shoppers interviewed. Over 85 percent of respondents indicated they had no issue with any of the signs. Over 80 percent of customers surveyed thought posting signage would be an effective way of reducing theft. And 70 percent of customers surveyed also felt more secure by having these signs posted in-store. Many customers noted unsolicited the link between increased theft and increased prices, so many customers supported signage as an antitheft measure. One surveyed customer indicated the presence of these signs might adversely affect their shopping behavior, and two more said the sign did generate some concerns but wouldn’t affect their shopping, but none could offer an explanation as to why. Our UF and LPRC teams continue to work online, outdoor, and indoor priming signage-dosing options including symbology, colors, size, unit placement, numbers per store, constant slight changes to maintain freshness, and aural and visual priming cues to boost the treatment’s noticeability and credibility.

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LPM EXCELLENCE

LPM “Magpie” Awards: Applauding Excellence

The LPM “Magpie” Awards offer a means to celebrate industry accomplishments on an ongoing basis, recognizing the loss prevention professionals, teams, solution providers, law enforcement partners, and others that demonstrate a stellar contribution to the profession. The ability to influence change is a product of drive, creativity, and determination, but

it also requires a unique ability to create a shared vision that others will understand, respect, support, and pursue. Each of the following recipients reflects that standard of excellence, representing the quality and spirit of leadership that makes a difference in our lives, our people, and our programs. Please join us in celebrating the accomplishments of our latest honorees.

Excellence in Leadership

Excellence in Partnerships

“To be a true leader in the industry, you can’t be afraid of change or learning new things,” said Wacha. “I find it admirable when people in leadership roles aren’t afraid to ask questions, get hands-on with their teams to work on new innovation, or step out of their comfort zones to see how new technology or automation can impact the business in a digital world. I think these are qualities great leaders must have to stay relevant.” Through her own experiences, Wacha understands firsthand the importance of working hard, taking risks, and accepting new and different responsibilities. But when asked about her greatest accomplishment, she took the conversation in a different direction. “I’m proud to see someone I’ve led or mentored excel in their role and along their career path. It’s what keeps me going every single day. Whether it’s seeing them get a promotion, watching them get a high five after an amazing presentation with a VP, or revolutionizing a process to make associates’ lives better. It’s people that make a difference; and helping to develop those people to make us fit for the future will always be what I’m most proud of.” Taking a page or two from her own playbook, Wacha also offered some advice for young leaders working their way up the career ladder. “You need to be your own advocate,” she said. “Don’t wait for others to give you a seat at the table—find your place and sit down. Actively seek out leaders in your area and those in other spaces as well. Work hard, work smart, and get the job done, but don’t be afraid to pursue your own development. Ask for feedback, learn where else your skills can be relevant, and set goals for the future. Lastly, find a mentor that’s able help you reach those goals and isn’t afraid to give you honest feedback to help your reach your full potential.”

“I’ve been involved in retail store systems, both point-of-sale and exception reporting, for twenty years,” said Rittman. “I began by performing marketing communications and research, moved to meeting with clients and running user conferences, and now managing marketing, technical sales, and business development. But through it all, it’s the prospects of what comes next that drives me. I especially enjoy probing into the future—helping clients look past tomorrow to find new and better ways to use artificial intelligence and solving problems we haven’t even encountered yet.” While the doors of innovation are opened through progressive thinking, Rittman also believes that the key remains in the hands of strong relationships. “Partnerships are best when you create solutions without limitations,” he said. “We should always try to go above and beyond. In return, our partners help make us better by providing insights and sharing ideas as we look to develop next-generation solutions. None of this would be possible without the mutual respect we have for each other.” Rittman also offered some advice to young leaders looking to build successful careers: ■■ The best opportunities often come packaged as problems. Help solve a problem, and you’ve created a new opportunity. ■■ Do more than is expected. Try to step beyond the plan and deliver something more. This goes a long way in creating goodwill. ■■ Ask for more responsibility. Growth comes from pushing boundaries. ■■ Meet people. Accept travel responsibilities. Experience how others live their days. The only way to offer solutions is to learn what’s outside your comfort zone. ■■ Who is the audience, what’s the objective, and what’s the message? If you can’t answer these questions, back up and start from there. “This advice has served me well and made me look much smarter than I am.”

Melissa Wacha, Director of Asset Protection Operations Support, Walmart

Tom Rittman, Vice President of Marketing, Appriss Retail

Nominate Your Peers at Excellence@LPportal.com We want this to be your program. Those of you working as LP practitioners witness these exceptional performances on a regular and ongoing basis, and we strongly encourage you to provide us with nominees for each of the award categories. We encourage creative nominations and want the program to cast a positive light on the many tremendous contributions of the loss prevention community. Nominations can be submitted via email to excellence@LPportal.com. 50

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FEATURE

UNEXPECTED LOSS IN THE BAGGING AREA UNDERSTANDING AND MANAGING LOSSES ASSOCIATED WITH SELF-CHECKOUT TECHNOLOGIES By Emeritus Professor Adrian Beck

UNEXPECTED LOSS IN THE BAGGING AREA

he use of self-scan and checkout (SCO) technologies has grown considerably in the past fifteen years, predominately but not exclusively in the grocery sector, where customer and product volumes and space-utilization issues make them a particularly appealing proposition. For many retailers it has provided a significant opportunity to reduce their core costs at a time of increasing competition, and as new iterations of the technology have evolved, there would seem to be a growing appetite amongst certain groups of users to prefer this mode of shopping. However, a fundamental component of the SCO proposition is the transfer of responsibility from the retailer’s staff to the consumer for the accurate scanning of products and ensuring correct payment is made. For many of those tasked with ensuring that retailers sell more products than they lose, this growing use of SCO systems has been viewed as a concern, not least in the difficulty in imposing strong enough controls over the way in which it may be used and abused. A new report from the ECR Community Shrinkage and On-shelf Availability Group and an accompanying book provide new insights into this issue, charting the scale and extent of the losses retailers are experiencing from a range of SCO technologies. The research also provides a detailed review of the ways in which these losses might be best be controlled. The two-year study focused on quantifying the risks associated with three forms of SCO systems: ■■ Fixed—The consumer scans at a designated machine/robot, ■■ Scan and go—The consumer is provided with a scan gun by the retailer, and

Understanding the Drivers of Lost Profits from SCO

LOST PROFITS FROM SCO Lost Stock

Lost Sales

Lost Margin

Out-of-Stocks Stock Inaccuracy

Nonscanning

Walkaways

Promo & Multi Variety Errors

Doublescanning

Mobile scan and go—The consumer users their own mobile device to scan items. The research is based on data collected from thirteen retail companies operating in the US and Europe and two SCO technology providers. Interviews were carried out with seventy-three key stakeholders from these companies, and eleven store visits were conducted to review the technologies in use. In addition, a range of data points were collected from participating retailers, including 140 million scan-and-go transactions, 17 million transaction audits, 486,000 items found not to have been scanned, video analytics of €72 billion ($83 billion USD) of fixed SCO transactions, and comparative shrinkage data from thousands of retail stores. The study does not take into account the likely productivity savings retailers can accrue from using this technology nor any possible reductions in loss as a consequence of employing fewer staff for instance. This needs to be kept in mind when reviewing the data below. It is also worth noting the significant challenges the research faced in trying to collect, collate, and analyze data from retailers on the losses associated with SCO systems—the absence of quality data on this issue was profound and concerning. It certainly shone a spotlight on the ■■

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Mis-scanning & Switchng

Barcode Switching

Coupon Frauds

current lack of prioritization in retailing to better understand the potentially negative consequences of their use. It would seem that, to date, retailers have been keen to feast upon the positives of SCO but less keen to understand the possible downsides in terms of an increase in retail losses.

Impact on Retail Losses: Fixed Self-Checkout Systems

Data comparing stores with and without fixed SCO found that levels of loss were higher in the former than the latter, with some grocery case studies recording losses in the region of 33 to 147 percent higher. One case study that focused on the difference between stores using SCO with and without a weight-checking system found that losses where there was no weight system were 147 percent higher than stores not using any SCO technology. Utilization data (the value of transactions processed through SCO) showed that stores with higher rates had higher levels of shrinkage. Stores where 55 to 60 percent of transactions went through fixed SCO can expect their shrinkage losses to be 31 percent higher. Similarly, data looking at rates of loss and the number of SCO machines in use found that stores with higher numbers of machines also had higher rates of loss. Stores with the

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UNEXPECTED LOSS IN THE BAGGING AREA average number of SCO machines (for the case-study retailer) could also expect to see shrinkage losses 31 percent higher than an estimated industry average, while those utilizing an above-average number of machines could expect the rate of loss to be at least 60 percent higher or more. Technology monitoring and video analysis data looking at €72 billion ($83 billion USD) of transactions found that nonscanning at fixed SCO machines accounted for 0.44 percent of SCO sales, amounting to 9.5 percent of all store-recorded shrinkage. The data suggested that nonscanning behaviors alone (not including misscanning, walk-aways, and so forth) are likely to add 0.45 basis points of loss per 1 percent of fixed SCO utilization. Together, the various data sets strongly indicate that previous assumptions that fixed SCO does not generate additional losses for retailers are incorrect—the losses are real and, in some cases, significant. Based on the available evidence, it is estimated that for each 1 percent of fixed SCO utilization, a retail store should expect their shrinkage losses to increase by at least one basis point. This estimate does not consider other forms of loss that SCO systems are likely to be generating, such as lost margin and lost profits due to out-of-stocks

caused by increased errors in stock-inventory records. Given this, for a store with 25 percent of the value of transactions being processed through fixed SCO, it can probably expect its shrinkage losses to be about one-third higher than the average rate found in grocery retailing.

Impact on Retail Losses: Scan-and-Go Systems

Analysis of 140 million transactions found that the average utilization rate of this technology was still relatively low in the companies that agreed to share data—2.82 percent of the value of all transactions. Of this total, 12 percent or 17 million were subject to a partial rescan audit (only a small proportion of items are checked). Of those, 2.88 percent were found to contain at least one error, generating an overall inventory error rate of 0.52 percent of scan-and-go sales. When overscans (the consumers scans the same item more than once) were taken into account, the net loss was calculated as 0.31 percent of scan-and-go SCO sales, equivalent to a 0.7 basis point increase in losses for every 1 percent of utilization. However, analysis of 20,000 random full rescan audits (every item is checked) provided by one case-study company paints a very different picture.

Relationship Between Number of Fixed SCO Machines and Rates of Loss

Shrinkage Rate Index

142

150 140 130

158

153

160

121

120 110 100 90 80 70

Non SCO Stores 1-3

Non SCO Stores 4-6

Non SCO Stores 7-10

Non SCO Stores 11+

Number of Fixed SCO Machines LP MAGAZINE

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It showed an overall error rate of 43.4 percent—1,407 percent higher than the partial rescan audit data. When this error rate is used to calculate net losses, it shows that the rate is as much as 4.68 percent of all scan-and-go SCO sales, generating a loss-to-utilization ratio of 10.4 basis points per 1 percent. Taken together, stores using this technology (at the utilization rate found in this study) could see significantly higher losses, perhaps as much as 40 percent higher. Further analysis of full rescan audit data, using probability statistics, showed that as the size of shoppers’ baskets increased, then the likelihood of an error occurring also increased. When a shopper has fifty items in their basket, then there is a 60 percent chance they will make at least one error, while for those with 100 items there is almost a nine in ten chance they will make an error. One retailer shared data comparing stores with and without scan-and-go SCO, which showed that those with the technology

UNEXPECTED LOSS IN THE BAGGING AREA Probability of Error by Basket Size

had a rate of shrinkage 18 percent higher than those that did not.

100

Controlling Self-Checkout Systems: Keeping Shoppers Honest and Accurate

Controlling Fixed Self-Checkout

Guardianship. This was considered to be the most important factor by respondents to the research but also difficult to ensure compliance at store level. The key was ensuring suitable, properly trained, and motivated supervisors were used and that they were operating in an environment that facilitated rather than hindered their duties. Overall, respondents to this research thought the optimal supervisor-to-SCO machine ratio was 5:6, although this could flex depending upon the SCO environment in place. Technology. Scan-verification technologies were most prevalent—weight-based checking and video analysis of customer scanning behaviors. The former was the most established, although opinions varied on its applicability with some deciding to turn it off because of its impact on the customer experience. Others had taken the decision to adapt and refine it to better fit their retail context and achieve an acceptable balance between risk amplification and minimizing customer friction. Given the challenges of controlling fixed SCO systems, the latter approach would seem a good option to adopt. Product-verification technologies were not used at all in the case-study companies, although some were beginning to trial them. Designed to help mitigate misscanning errors and help speed up the checkout process, these technologies could make a real contribution to managing SCO

Error Rate (%)

The research looked in detail at how these various types of SCO technologies might best be controlled in the short to medium term, focusing particularly on the amplification of risk, how to enhance capacity to detect errant behavior, and minimizing product-driven errors.

40 30

20 10 0

100

Number of Items losses and improving the customer experience, but as yet further work is required to make them a viable prospect. Design. Developing effective ways to amplify risk and enhance detection in the SCO environment—creating zones of control—was found to be important. Key was the location of the SCO area within the store, how customers were channeled through this space, the location and sight lines of the SCO supervisor, and the use of risk amplifiers such as CCTV and signage.

Controlling Scan-and-Go and Mobile Self-Checkout Systems

In comparison with fixed SCO systems, scan-and-go and mobile SCO currently offer far fewer opportunities to amplify risk and enhance detection.

The majority of current controls are focused on six process-based factors. Robust User Identification. Ensuring that retailers had a clear, verifiable way of understanding who was registering to use their systems. Establishing User Expectations. Retailers should only be offering this facility to those who clearly understood the “rules of the game”—that it is a privilege and not a right to access this way of shopping and that it comes with clearly defined expectations on the part of the retailer, including that a shopper will be audited on the first use. Delivering Credible Audits. Delivering deterrence and detection of errant users through the use of consumer behavior-driven algorithms and utilizing capable guardians. The latter need to be supported with

Controlling the SCO Environment

AMPLIFY RISK & ENHANCE DETECTION COMPLIANCE Guardianship

Technology

Process

Design

CONTROLLING THE SCO ENVIRONMENT

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MINIMIZE PRODUCT-DRIVEN ERRORS |

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UNEXPECTED LOSS IN THE BAGGING AREA data-driven tools to ensure they are equipped to identify items most likely not to have been scanned. Utilizing Fixed Payment Points. While current mobile scan-and-go SCO systems require the user to go to a fixed point to confirm payment, concerns were raised that developing iterations of mobile scan-and-go SCO will allow the user to pay on their mobile device at any location. This was considered extremely risky as it removes a key control point within the SCO shopping journey. Communicating with Users. A number of respondents described ways in which they were considering the communication of risk-related messages to users, particularly with mobile scan-and-go SCO through the associated app. Exit Control Strategies. Some retail companies already use or are thinking about introducing designated exit areas where mobile scan-and-go SCO users must go to leave the store. These often

Analysis of 20,000 random full rescan audits (every item is checked) provided by one case-study company paints a very different picture. It showed an overall error rate of 43.4 percent—1,407 percent highear than the partial rescan audit data.

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require the user to scan a code generated upon payment that opens the exit gate.

Minimizing Product-Driven Errors

Packaging and Barcode Issues. Respondents flagged up a range of issues relating to barcodes on some products that made them difficult to scan. Others were concerned about the use of multiple barcodes on the same product. Retailers should consider meeting with suppliers to review product design issues that may be contributing to SCO-related problems. Set-Up Issues. A number of case-study companies recognized that errors within their own organizations were creating problems, particularly relating to the regular updating of product-inventory systems, especially when items were sourced locally. Product-Protection Issues. Ensuring not only that tagged items were consistently detagged but also that scan-and-go and mobile SCO users were

UNEXPECTED LOSS IN THE BAGGING AREA

The key was ensuring suitable, properly trained, and motivated supervisors were used and that they were operating in an environment that facilitated rather than hindered their duties. Overall, respondents to this research thought the optimal supervisor-to-SCO machine ratio was 5:6, although this could flex depending upon the SCO environment in place.

reliably informed about which items needed to be detagged was considered a real concern by respondents.

Controlling the SCO Environment Dynamically

Just as risk differs across the retail landscape, the use of strategies to manage SCO systems should also be tailored to the circumstances in which they are being used. Different operating environments may well require not only a different palette of interventions but also variable tolerance settings depending on the circumstances.

Compliance Is Key

Store teams need to be clearly guided on why agreed practices and policies relating to the control of SCO systems need to be rigorously and consistently enforced, such as the maximum number of fixed SCO units per supervisor. The provision of unambiguous data on the impact

SCO-related losses are having on the business will be a key first step in achieving this goal.

Developing a Framework to Manage SCO in Retailing

The extent of the losses presented in this new research suggest that retail businesses, and their partners, need to rebalance their assessments of the benefits that can accrue from investing in SCO-related technologies. The ROI calculation needs to fully take account of what the negative impacts might be. Using a variant of an existing loss prevention model, the research developed a framework for how retail businesses can go about developing an organization-wide approach to managing the risk associated with use of SCO systems, focusing on eleven key themes: ■■ Ensuring there is senior management commitment focused on understanding all the outcomes of investing in SCO. ■■ Developing cross-functional organizational ownership and embedded responsibility for the control of SCO. ■■ Establishing a clear set of data management protocols to fully understand the impact of various types of SCO technologies on the business. ■■ Prioritizing operational excellence in how SCO is developed and managed. ■■ Committing to a program of innovation and experimentation to improve control. ■■ Forging better collaboration between different retail functions and with SCO technology providers not only to understand the risk side of the SCO equation but also to develop and evaluate interventions that may help mitigate the identified risks. ■■ Recognizing and prioritizing the role people can play in actively managing and controlling SCO systems. ■■ Striving to develop SCO leadership that can articulate all aspects of its use within retailing, including not

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only the possible benefits but also the possible risks. ■■ Ensuring that there is communication with all parts of the business on all aspects of SCO. ■■ Delivering store management responsibility by providing them with data to understand the challenges, training, resources, and technological tools to create an environment that minimizes risk and incentivization to ensure that they remain compliant. Taken together, the research concluded that these factors offer an approach to begin to develop a more coherent and coordinated strategy to better manage the risks associated with SCO systems in retailing, one that continues to recognize the benefits but also takes more account of the growing challenges that they now seem to be presenting. Certainly for those employed in loss prevention, this research will hopefully enable a much more joined-up and realistic assessment to take place in retail companies, one where their concerns are better heard and all the consequences of “choices” retail businesses make are properly taken into account. For a free copy of the report, visit the ECR Shrinkage and On-shelf Availability website at ecr-shrink-group.com. For a copy of Professor Beck’s book on this research, search “Adrian Beck” on Amazon.com. Emeritus Professor ADRIAN BECK spent his academic career in the criminology department at the University of Leicester in the UK where he focused on retail crime and shrinkage issues. He currently is an academic advisor and researcher for organizations like the ECR Community’s Shrinkage and On-shelf Availability Group and the Retail Industry Leaders Association. Beck is a frequent speaker at conferences worldwide and a contributor to both LP Magazine’s US and Europe publications. He can be reached at bna@le.ac.uk.

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ACADEMIC VIEWPOINT

Security Theater: Feeling Safe at the Airport Does Not Make You Safe

eeling safe and secure is a sentiment we all desire to obtain. We often reflect on investing in security systems and software for our personal settings. As for the nation and the world at large, security theater is an imperative option. However, it cannot be your whole program. Security theater has a lower cost than elaborate security methods. Nonetheless, it may divert parts of a budget for actually effective security measures. In this article, I will focus on security theater in airport settings.

So What is Security Theater?

Security theater offers precise security measures to make people feel more confident about their security. “Security theater is the practice of investing in countermeasures intended to provide the feeling of improved security while doing little or nothing to actually achieve it,” according to “Security Theater and Learning Theater,” an article for Wired.com. As terrorism continues to

With all the measures related to security theater, its real purpose should be to infuse itself with actual security. People need to feel safer so that orderliness will be maintained, and they feel confident in whatever they do and wherever they go. occur, fear and devastating traumas arise in airports. The truth is that it can happen anywhere at any time. People should consider security theater, so they can feel safer without exerting a lot of effort. ID cards, for example, are to be checked by the guards even if there isn’t a legitimate explanation to request verification. A similar route was taken after the 9/11 incident occurred. The National Guard had soldiers stationed at US airports holding guns with no bullets. Instead, the guardsmen carried loaded magazines on their belts, according to the Associated Press. In addition, metal detectors were placed in numerous places of business, shopping centers, and lodging centers after the terrorist attacks in Mumbai. The metal detectors served as a deterrent without any plan of LP MAGAZINE

FUTURE OF LP By Tom Meehan, CFI Meehan is retail technology editor for LP Magazine as well as chief strategy officer and chief information security officer for CONTROLTEK. Previously he was director of technology and investigations with Bloomingdale’s, where he was responsible for physical security, investigations, systems, and data analytics. He currently serves as the chair of the Loss Prevention Research Council’s innovations working group. Meehan can be reached at TomM@LPportal.com.

how to respond to an activation in some areas. Security theater offers some level of deterrence, yet no actual additional safety in these examples. The practice of randomly searching bags through different systems, which is backed by huge funds, is also another example of security theater. In regard to airport security measures, programs such as Secure Flight, CAPPS (Computerized Assisted Passenger Prescreening System), TSA Precheck, and Clear are implemented and use screening profiles from airport passengers in the past. If a search is random, it offers a potential deterrent but nothing more. Security theater will not keep people safe; it makes people feel safe. Due to the fear created by nonstop global terrorist attacks, this type of security practice has expanded outside the TSA (Transportation Security Agency). The TSA has shown to be 95 percent ineffective. It has failed to detect a threat in sixty-seven out of seventy tests conducted by the Homeland Security Office of Inspector General. A second round of tests showed little improvement. The inclination for security theater originated from the interplay of both leaders and the public. When people develop a fear about their security status, leaders must do something to make the public feel safe, even though it will not necessarily make them safe. Thus, many police departments have been using a show of force to imply that they are everywhere. The show of force happens when a heavily armed unit is placed in a specific area of a city, mall, or event, and rotated. While this is security theater, these units are fully equipped and ready to respond. The main difference is a show of force by the New York City Police Department Hercules unit has a real deterrent value because the unit is armed and mobile. The TSA on the other hand is not.

Infuse the Show with the Reality

To be clear, I believe everyone should use security theater to help mold the public perception and make people feel safe while offering a deterrence to deviance. The TSA uses real security measures that have an impact; however, my point is to remind all of us the importance of a balanced approach to security programs. Furthermore, the TSA has a mismanagement issue and leans more toward security theater because of its ease of implementation. With all the measures related to security theater, its real purpose should be to infuse itself with actual security. People need to feel safer so that orderliness will be maintained, and they feel confident in whatever they do and wherever they go.

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STRATEGIES ACADEMIC VIEWPOINT Interview with Guy Yehiav

Using Analytics to Maximize On-Shelf Availability and Supply Chain Processes

ata analytics has been one of the major technology applications driving the evolution of retailing. While many of the analytics platforms are focused on in-store operations, the same techniques can help retailers fine-tune their logistics and supply chain operations to maximize merchandise on-shelf availability and support omni-channel retailing.

Did they follow through and execute the task(s)? What is the value of doing a given task compared to others? Prescriptive analytics has turned this upside down. It provides those who receive the reports with clear, actionable directives in plain text that anyone can understand and follow through on. By tracking both the opportunity and the response to it, prescriptive analytics provides a level of comprehension and visibility that predictive analytics and exception-based reporting can’t match. Combine that with a user-feedback loop, and you have a systematic process with built-in continuous improvement. The solution cuts through any biases that may arise during the interpretation of the reports.

■■ ■■

LPM: In layman’s terms, what is predictive versus prescriptive analytics? YEHIAV: Predictive and prescriptive analytics differ in their end purposes and user types. Predictive analytics uses many techniques from machine learning, pragmatic artificial intelligence (AI), modeling, and more to process data, find trends within it, and use those trends to make predictions about future business performance and generate reports to be interpreted by data analysts. Prescriptive analytics does the same, except that it uses those trends to tell the right person the right action to take for an optimal outcome. A prescriptive analytics solution might have thousands of users versus just a few with a predictive analytics solution.

So in a nutshell, predictive analytics makes predictions, while prescriptive analytics makes predictions and tells you what to do about them to drive optimal ROI, revenue, and margin improvements.

LPM: How is analytics used differently in supply chain versus store operations? YEHIAV: Supply chain is using analytics to maximize on-shelf availability and optimize their processes through just-in-time delivery, full truckloads, on-time shipment complete, forecast accuracy, efficiency at the distribution centers (DCs), and other factors. So in a nutshell, predictive analytics makes predictions, while prescriptive analytics makes predictions and tells you what to do about them to drive optimal ROI, revenue, and margin improvements. Store operations is using analytics to maximize customer satisfaction, optimize P&L, optimize labor, minimize shrink, execute promotions, optimize merchandise displays and promotions, and other examples. As both areas are leveraging a significant amount of data, the common solution has been predictive analytics and/or exception-based reports. However, these methods are not ideal, with the following six common points of failure: ■■ Did anyone open the email or report? ■■ Do they understand the reports, fields, and columns? ■■ Do they see the insights? Do they understand them? ■■ Do they know what is expected of them in responding to this insight?

JANUARY–FEBRUARY 2019

Yehiav is CEO of Profitect, a well-known data-analytics solution provider in the retail loss prevention industry. LPM asked the 25-plus-year retail supply chain industry veteran to explain how advanced analytics is contributing to positive changes in omni-channel retailing.

LPM: What is the “Amazon model,” and how is it different from the normal retail model? YEHIAV: Amazon’s flexible technology stack allows it to offer consumers a broader product assortment (endless aisles, the long tail of merchandising), greater convenience, highly competitive pricing, and other services like movie streaming and cloud management through Amazon Web Services—all of which make Amazon a formidable competitor for traditional multichannel retailers. But when compared to the normal retail model, retailers have something that Amazon doesn’t—actual stores (although it seems to be on their radar, given recent deals with brick-and-mortar stores like acquiring Whole Foods, partnering with Kohl’s, and leveraging the physical supply chain with companies like Best Buy to sell its own, private-label merchandise like TVs). Despite Amazon’s convenience, consumers have proven that they still enjoy a fully immersive shopping experience—like at Apple. According to the latest US Census data released in August 2017, nearly 90 percent of all retail purchases in |

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America were made in brick-and-mortar locations during the last quarter. Stores offer immediate gratification—something Amazon has attempted to do with one-hour delivery options for Prime Now combined with free returns. LPM: Beyond these, how are specific retailers improving e-commerce as well as brick-and-mortar operations with prescriptive analytics? YEHIAV: When it comes to prescriptive analytics, there are many examples from retail and e-commerce. Here are a few success stories from leveraging a prescriptive analytics solution. A large retailer with a popular loyalty-card program used prescriptive analytics to uncover an issue they weren’t even aware was a problem. Leveraging prescriptive analytics, they were able to discover a trend that involved shoppers cheating their reward points for free rewards. The retailer’s previous system did not integrate points accumulation until the end of each day, so if a customer brought their receipt to multiple stores in a single day, it was easy to receive many times more reward points than were due, then convert it to real money, just like a free ATM machine. The retailer’s prescriptive analytics solution caught the recurrence and saved millions within the first week of use. Prescriptive analytics identified and broke up an organized retail crime (ORC) ring that turned out to consist of student employees at the call center of a fashion retailer. The ORC group would legitimately buy a product online and, after receiving it, would call the center to complain they never got the product. Thus, they would receive a second product plus a $20 gift card as a customer-appeasement gesture. Prescriptive analytics

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Prescriptive analytics identified and broke up an organized retail crime (ORC) ring that turned out to consist of student employees at the call center of a fashion retailer. stopped the ring, saving the retailer an average of $50,000 a month. Another fashion retailer used prescriptive analytics to identify a glitch in their transaction process. This glitch purged transaction records from the retailer’s point-of-sale (POS) system after seven minutes of idle time. Cashiers who knew about this glitch found a way to exploit it. When the cashiers loaded a live gift card, they waited the required idle time, generating cash out of thin air. Leveraging prescriptive analytics, the data revealed that the cashiers were loading money onto gift cards but not ringing up the amount. Instead they waited, and seven minutes later, the glitch kicked in, leaving active funds on the gift card but no evidence of a completed transaction. From there the cashiers could return the gift card for cash or spend the funds on merchandise without issue. Thanks to prescriptive analytics flagging this, the company was made aware the glitch even existed, took corrective action on the cashiers, and fixed the issue. The savings and future losses avoided were significant.

JANUARY–FEBRUARY 2019

PERSPECTIVES By Jacque Brittain, LPC

Brittain is editorial director for LP Magazine. Prior to joining the magazine, he was director of learning design and certification for Learn It Solutions, where he helped coordinate and write the online coursework for the Loss Prevention Foundation’s LPC and LPQ certifications. Earlier in his career, Brittain was vice president of operations for one of the largest executive recruiting firms in the LP industry. He can be reached at JacB@LPportal.com.

The Year Ahead in LP Supporting the Evolution of Retailing

visionary that has always been as concerned about sales as they have been about shrink will be able to leverage solutions to drive sales, operations, and the customer experience. After all, who owns more devices in a store than LP? BATTERBURY: The growth in technology solutions that retailers have seen this past year will continue to drive the 2019 LP agenda. New enhancements in video analytics, artificial intelligence, machine learning, biometrics, RFID, and the growth of IoT-connected devices are leading us to a truly connected store. Retailers will have more smart-connected devices in their stores, and these devices will be learning more about our customers while providing new data points unlike anything seen before in the brick-and-mortar environment. The key for LP professionals in 2019 will be learning how to harness this data in a way that it will generate actionable intelligence to initiate new theft identification and resolution. The next steps beyond 2019 will be how retailers are leveraging artificial intelligence and machine learning to analyze all of this data, so retailers can start to get predictive in terms of addressing shortage. REYNOLDS: One way to understand these trends is to look at the buzzwords we’re hearing—and one that heard constantly is “omni-channel.” I think omni-channel is affecting LP in two ways. First, the delivery method of retail continues to evolve. While the “death” of brick-and-mortar stores is likely an exaggeration, it’s certain that online sales are growing; and for traditional stores to survive, they need to adapt to consumer trends. That means that LP professionals must adjust their solutions as well. In addition to protecting stores against shoplifting, burglary, and robbery, LP now faces the additional challenge of protecting the supply chain at multiple stages. Whether inventory is shipping to a warehouse where items will be sent directly to customers or organized and sent to physical stores, there are many vulnerabilities along that path that criminals seek to exploit. To combat losses, it’s incumbent on protecting inventory at each and every stage. Further, like retail sales, retail LP should take a multilevel approach. There’s no one-size-fits-all security solution. The solution that protects against robbery in the store probably won’t work to protect inventory being shipped cross-country or stop the growing menace of porch pirates stealing packages. Becoming familiar with as many security solutions as possible is the best way to protect the most inventory.

his is truly a transformative time in retail. With mounting expectations on product availability and escalating demands on service and convenience, the way people shop is changing—and with it the strategies necessary to attract and retain customers. Innovation has become a requisite to retail survival, with new technology offering both our greatest opportunities and our greatest challenges. But the changes that we face are more than just a few new and different widgets that will push the envelope. This is all part of an evolving retail culture that is changing the way that we do business. What does this mean for loss prevention? What are the primary challenges the industry may face this coming year, and how might we rise to meet them? For perspective and input into where 2019 may take loss prevention, we turned to executive leadership from three leading retail solution providers to help identify some common themes.

Hedgie Bartol, LPQ Retail Business Development Manager North America, Axis Communications

Tom Batterbury Co-Founder and Co-CEO, Auror

Dan Reynolds Vice President of Retail Sales, 3SI Security Systems

What key trend or development that took place over the past year do you think will drive the loss prevention agenda in 2019? What do you think will have the greatest influence on the way LP will evolve in the year ahead?

BARTOL: Perhaps the most prominent trend was the permeation of IoT into the LP space and the realization that integrated systems and solutions may allow the LP professional to finally start achieving the directive to “do more with less.” As e-commerce continues to affect brick-and-mortar, retailers will be looking for ways to evolve and adapt to the changing landscape. By leveraging IoT and integrated systems, the LP

JANUARY–FEBRUARY 2019

As you look over the risk landscape in 2019 and consider the many challenges currently facing LP, |

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which of these do you think the industry is least prepared for or perhaps not giving enough attention? In other words, are there any areas where you think LP might need to step up its game?

BATTERBURY: “Frictionless” is the new retail buzz word, and retailers are striving to create a frictionless shopping experience for every customer. We’re seeing the expansion of self-checkout, or the removal of checkouts altogether in some circumstances. Every day we see new methods for allowing customers to shop without any interaction with retail employees. For the loss prevention side of the business a certain amount of friction provides more opportunity to reduce risk. One of our greatest risks moving forward is failing to adapt our people, processes, and technology to this frictionless environment. LP leaders will need to challenge their teams to think differently, being strategic and creative when it comes to addressing the shortage risks in a frictionless environment. REYNOLDS: Criminals are always evolving their methods and LP must continually evolve its approach as well. That’s not to say that traditional methods aren’t worthwhile, but by themselves they’re no longer enough. While it can be challenging to stay on top of the latest technology, it’s incumbent on all of us to do just that. I like the concept of using a “layered” approach to security, where multiple technologies work together to increase the likelihood of predicting and deterring criminal activity and apprehending violent criminals.

LP MAGAZINE

The key for LP professionals in 2019 will be learning how to harness this data in a way that it will generate actionable intelligence to initiate new theft identification and resolution. The increase in retail crime also impacts law enforcement, and retailers who are perceived as doing their best to stem this growth will strengthen their relationships with police. Interrupting the crime cycle helps both police and the community as a whole. Less crime and fewer criminals on the street will help create a safer world for everyone. This definitely sends a positive message for retailers and a way to connect with potential customers and employees. BARTOL: I believe the biggest threat is in the realm of cyber security. It’s fair to say that most retailers are well aware of the issue and taking the necessary steps to mitigate risk. However, when one considers the number of tools that all business units in retail have that are on the network, it can be a daunting task. By engaging more with IT on strategy and approach, as well as self-education on the basics of technology and cyber security, an LP professional will be better equipped to work in conjunction with their IT counterparts.

JANUARY–FEBRUARY 2019

when sharing this intelligence with other retailers and law enforcement. Technology is helping brick-and-mortar retailers bridge this gap and move faster. Retailers have more behavioral data on their customers than ever before due to all the new connected devices. This new data will change how we identify theft behaviors and how much intelligence we have regarding those causing the issues. Loss prevention leaders will need to reshape their data platforms to handle the influx of new data, analyze that data faster, and generate easy-to-follow action items for those in the field. The next step will be for retailers and law enforcement to reshape how they share and act collaboratively on this intelligence. This intelligence is beneficial to each individual retailer, but it becomes even more powerful when used in a collaborative way with other retailers and law enforcement.

I overheard a discussion between an LP professional and an IT professional where the LP pro asked why the IT pro didn’t hire more resources. The IT pro responded, “Why don’t you hire an IT guy?” Might be a good strategy.

The retail culture is changing at a fast and furious pace, and in many different ways. As you look at the year ahead, how do you see these changes reshaping retail or loss prevention?

REYNOLDS: It really will be all about the technology. Smart retailers are using intelligence-enabled platforms to deliver more-personalized customer experiences every day. Those that don’t embrace customization will find themselves on the losing side of the sales equation. Just as with the retail sales function, there are benefits to leveraging technology in the physical security space as well. Facial recognition and AI have become hot topics in loss prevention.

Looking at the industry as a whole, what do you feel is the most important lesson that loss prevention professionals should take away from the past year and apply to their career development as they move forward?

Where there used to be great risk associated with adopting something that didn’t work well, there is now greater risk of not being up-to-date with the latest and most effective solutions on the market, which will change again very soon.

BARTOL: Loss prevention will need to realign resources more toward protecting product visibility and inventory management. Having a transparent inventory knowledge bank that is accessible to any consumer could result in future threats, shrink, and inventory shortages in brick-and-mortar, further driving consumers toward omni-channel solutions. As loss prevention puts more emphasis on protecting the entire supply chain, better controls for omni-channel accessibility, diversified sales platforms, and transparency will continue to meet the ever-growing demand. I also believe that ongoing cultural changes, collaborative communities, and experiential visitations will also help to regain brick-and-mortar presence, delivering quality of experience or quantity of availability. BATTERBURY: We are currently working on an AI concierge feature to add our autonomous security robots allowing for a two-way dialogue between the machine and a human. What if the loss prevention team could provide a unique and engaging shopping experience while simultaneously securing the facility? There’s nothing like the return on investment we experience from a safe and happy customer. REYNOLDS: Let’s start with the touchless checkout that’s been implemented by many retailers, which eliminates the need to go through an associate-staffed point-of-sale. Depending on company policies, there are different methods for assessing and minimizing risk, but a standard method has not yet been established. Former methods for lowering risk associated with certain high-priced items are being challenged, so retailers can provide a more engaging experience, requiring that different prevention factors are implemented that utilize new technology. The good news is that these emerging technologies can be applied to a wider and more effective set of retail situations and ultimately lower the total loss factor at retail. This will be exciting for the loss prevention leaders of tomorrow.

Traditional security methods have become smarter: cameras and alarm systems now have the intelligence to decipher what they sense and see. Covert GPS solutions have become more proactive and provide real-time results. Alarm systems have evolved in sophistication to improve their performance as well. But I don’t believe there is a “cure all” approach for anything, and even with this tech-injection, we will continue to see the best payback coming from a layered approach to safety, albeit with more tech-driven layers. BARTOL: First of all, thank you for saying that retail is changing. I grow weary of the folks saying that retail is “dying.” It is changing, and retailers must begin to adapt to the way folks shop today. I think that because of the rapid pace of evolving technology, retailers will be forced to adopt new technologies quicker than ever before. Where there used to be great risk associated with adopting something that didn’t work well, there is now greater risk of not being up-to-date with the latest and most effective solutions on the market, which will change again very soon. By keeping your thumb on the pulse of technology and always having the mindset of asking, “How can I use MY tools to enhance sales and operations?” we can better serve the LP industry. BATTERBURY: Organized retail crime is getting more and more organized, which is playing a major role in how the loss prevention industry is changing. Retailers need to work faster to identify behaviors that lead to shortage and even faster

JANUARY–FEBRUARY 2019

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LPM DIGITAL Kelsey Seidler Seidler is managing editor, digital. She manages the magazine’s digital channels that includes multiple daily e-newsletters featuring original content and breaking news as well as pushing content to various social media platforms. Seidler recently earned her master’s degree in technology and communications through the University of North Carolina’s School of Media and Journalism. She can be reached at KelseyS@LPportal.com.

In the Minds of Offenders F

ollowing are a few article summaries that can provide you with a small taste of the original content available to you every day through our daily digital offerings, which are offered free through LossPreventionMedia.com. In addition to our daily newsletter, a comprehensive library of original content is available to our digital subscribers at no cost. Visit our website to gain access to all of our content. You can also follow us on Facebook (search LP Voices), Twitter (@LPMag), and LinkedIn.

allows you to easily download it” by simply pasting the link into the tool. In the weeks ahead, we will be highlighting more tools that Honey and other expert presenters said they use in their online investigations. To get started, however, here are tools that Honey says can provide social media investigators with a solid foundation to their work. What’s out there? There is more to the social media universe than the big names like Twitter and Facebook—lots more. “You need to get smart about the many platforms people use,” said Honey. She suggested checking out a list of the top 200 social networks worldwide at Social Media List, which is regularly updated. Where should you start? “If I’m investigating a forty-year-old female, my first stop isn’t Twitter,” said Honey. What should it be? You can see by examining data from the Pew Research Center on use of different online platforms by demographic groups. “I find I am always checking this data to target my searches,” she said. How do you get where you want to go? The OSINT framework provides a flow chart to help focus the gathering of information from free tools or resources. “It’s a fantastic resource,” said Honey. What do leading experts recommend? The Research Clinic features Internet research links, training, and apps by renowned Internet research specialist Paul Myers. IntelTechniques is a similar site by leading expert Michael Bazzell. “These are great sources with links and helpful tools for finding people, social media analytics, and other great stuff,” said Honey. What tools are available? The Open Source Intelligence Tools and Resources Handbook 2018 is a comprehensive list—327 pages—of tools to help investigators explore and make sense of social media information. “Everything you could ever need to know about is in there,” said Honey.

8 Free Tools to Help with Your Social Media Investigations By Garett Seivold, LPM Senior Writer

With 69 percent of adults on at least one social media site, including 88 percent of individuals under thirty years old, there is a wealth of information out there for investigators to comb through. Few social media users implement the strictest privacy settings, which provides even more investigative fodder. With so much information available, social media investigations are a potential time-suck, warned Heather Honey, president of Haystack Investigations, at the 2018 GSX conference in September. “You want to have a plan in mind,” she said. “First, identify what information you have about a person of interest. Second, know what information you’re trying to find.” Getting help from especially valuable online tools can also help investigators to be more efficient in social media investigations, according to Honey. In her conference presentation, she detailed investigative tips as well as many of her favorite tools. For example, if you’re looking to dig into Twitter, she recommended TweetBeaver, which provides useful, free Twitter analytics and allows investigators to search and download timelines and identify friends, followers, and Twitter IDs. “It can sometimes be helpful to identify who has followers in common, and what’s really great about this is that it allows you to download lists into Excel for you to do your own analysis,” said Honey. “You can export a list of followers and even conversations between users.” Or what if you spot a useful Instagram video that you want to preserve? DownloadGram is an online Instagram photo and video downloader that Honey recommended. “Suppose someone who is out on workers’ comp posts a video of himself mowing the lawn on Instagram? This tool

JANUARY–FEBRUARY 2019

Offender Perspectives on Self-Checkout Theft

By Stephanie Lin, LPRC Research Scientist The convenience of self-checkout has made the service increasingly popular among customers in recent years. Retailers also take advantage of the self-checkout technology to reduce labor costs and speed up the checkout process. Unfortunately, this convenient option is popular |

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PRODUCT SHOWCASE

among genuine customers and fraudsters alike. The seemingly easy process presents many fraud-related vulnerabilities and can impact Stephanie Lin the bottom line of many retail businesses. Problems like sweethearting, tag-switching, and operational losses can be difficult to detect if retailers don’t adequately supervise the area with associates and technologies. Through interviews with dozens of shoplifters with recent self-checkout theft experiences, I explored their shoplifting behaviors, methods, and the thought process behind why they chose to leverage this method to conduct theft. In addition, I investigated the impact of self-checkout associates and how their engagement with the customers would impact the shoplifting experience of offenders.

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Why Self-Checkout Theft?

The main reason offenders leverage this theft option is because they felt self-checkout theft is easier to get away with, either through prior experiences or established rationales. There are several contributing factors to why offenders believe self-checkout theft is easier to get away with. Almost all offenders I interviewed indicated they use self-checkout for shoplifting because they receive less attention from both employees and other customers. Some offenders indicated that if they ever got caught, they could always say they accidentally or inadvertently took the items, had been distracted during checkout, or misused the technology due to its complexity. Furthermore, several offenders are under the impression that self-checkout theft is harder to prosecute because it’s hard to prove the intent behind the taking of unpaid items. The psychology behind shoplifting using a machine is rather interesting; some offenders confessed that because they are interacting with a machine rather continued on page 66 LP MAGAZINE

JANUARY–FEBRUARY 2019

Offender three said, “You have an extra set of eyes on you, so you’re less likely to slide an item covered by another item.” Regardless of level of engagement the self-checkout associates seek to provide, the main force of deterrence is attentive self-checkout associates who pay attention to customers and their surroundings. Moreover, employee training can be crucial in combating self-checkout theft. Educating associates on suspicious activities and red flags indicators and then engaging with the would-be shoplifters could enhance the overall effectiveness of customer service at self-checkout. The Loss Prevention Research Council (LPRC) continues to help retailers shaping strategies to maximize convenience, minimizing costs and losses through the SmartCheckout Centers of Excellence. Check out the video associated with this article online to see clips from actual offender interviewers: losspreventionmedia.com/insider/ shoplifting-organized-retail-crime/offender-perspectives-on -self-checkout-theft/.

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than a human being, psychologically, they felt less guilty about stealing. During the interviews, I explored the reasons why some offenders target specific stores. Some feedback is rather sedentary and cannot be acted on, such as the omnipresence and proximity of the brand, size of the store, or the variety of products a retail chain carries. However, many offenders identified lack of employee oversight as the biggest opportunity retailers can act upon to reduce theft opportunities at self-checkouts. In addition, some offenders reported that outdated technologies and lack of consequences for shoplifting can precipitate more shoplifting incidents.

Role of Employees

When asked to identify loss prevention technologies in the self-checkout areas, many offenders interviewed recognized the associates as a deterrent before perceiving the surrounding technologies. Some offenders even reported that an attentive self-checkout associate is more effective at deterring theft than advanced technologies. Needless to say, self-checkout associates play a crucial role in deterring shoplifting. One offender even commented on the importance of an attentive associate in deterring shoplifting: “A lot of stealing got by because of lazy employees—employees are not paying attention or are on their phones. It’s all about the employees. If the store has employees who are more attentive, then self-checkout theft would be hard.” As previously mentioned, a majority of the offenders admitted to intentionally using self-checkout services to avoid employee oversight. Therefore, increased associate supervision at self-checkout areas can help a store mitigate theft. However, there is a fine balance between the level of engagement associates should provide and its effectiveness in deterring shoplifting. In general, there are two categories of thoughts from the offenders. On one hand, some offenders suggested that employee engagement and assistance during the checkout process would discourage from stealing. Offender two said, “Employee engagement would deter me from stealing because that kind of lets me know that I’m being watched, even if they just say, ‘Is there something I could help you with?’ or ‘Do you need any help today?’ It’s a lot easier to shoplift from a store when employees are not as engaging.” On the other hand, some offenders suggested that self-checkout associates do not necessarily have to be engaging to deter shoplifters; rather, they just need to be aware of the overall checkout process. As a matter of fact, these offenders even indicated it might be helpful if the employee is simply overseeing the area, rather than engaging with customers, as some offenders intentionally wait for moments when employees are assisting other customers so that they may shoplift without the risk of drawing attention.

JANUARY–FEBRUARY 2019

1-800 Shoplifting Assistance By Stefanie Hoover, CFI

Sometimes, things just fall in your lap. I’d been trying to decide what to write about for this blog, you know, something interesting and topical to really get folks hooked and coming back. Nothing was really striking me as The One, until I got a phone call… Let me set the scene: I was enjoying a semi-quiet spring morning working in my home office. No kids were around, as they were in school, but the two very loud English bulldogs were adding some background noise with their snoring. Suddenly my phone rang, and yes, I answered it! I know, it’s such a crazy concept, especially since I didn’t recognize the caller from Portland, Oregon. After a couple of attempts to answer (the caller hung up on me twice), I started to speak with the gentleman. He stated that he had found our company via a Google search and saw that we sell exploding dye packs. We do sell these, along with a lot of other products. So I immediately started continued on page 68 |

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January 13–15, 2019 National Retail Federation Retail Big Show Jacob Javits Center New York City nrfbigshow.nrf.com January 24, 2019 Cyber Security Summit: Silicon Valley DoubleTree by Hilton, San Jose, CA cybersummitusa.com February 13, 2019 Cyber Security Summit: Atlanta cybersummitusa.com February 24–27, 2019 Retail Industry Leaders Association LINK Retail Supply Chain Conference Gaylord Palms Resort Orlando, FL linkretailsupplychain.rila.org February 25–27, 2019 INNOVISION 2019 Wyndham Grand Orlando (FL) Resort Bonnet Creek innovisionconference.com March 6–7, 2019 International Supply Chain Protection Organization ISCPO Conference 7-Eleven Store Support Center Irving, TX iscpo.org March 18–21, 2019 Merchant Risk Council MRC Vegas 2019 Aria Resort and Casino Las Vegas, NV merchantriskcouncil.org April 2, 2019 Cyber Security Summit: Denver Hilton Denver City Center cybersummitusa.com April 2–4, 2019 International Association of Interviewers Elite Training Day Chico's Headquarters Fort Myers, FL w-z.com April 9–12, 2019 ISC West Sands Expo Las Vegas, NV iscwest.com April 25, 2019 Cyber Security Summit: Philadelphia Philadelphia Marriott Downtown cybersecuritysummit.com

thinking about what this guy may need; he must be calling from a bank or some financial institution. Then he said something curious: “Do you sell exploding dye packs for clothes?” Hmmm, strange question. Me: Sir, are you part of a bank, or do you work for a retailer? Guy: Uhhhh, I was curious if you know of tags on clothes that have exploding ink. I saw a dude with ink on his hands and face, and I’ve never seen that before, you know, with clothing. Me: Well, sir, there are all kinds of different technologies out there. What exactly are you looking for? Guy: I shoplifted one time in the fitting room and saw the ink tag bust, and it didn’t explode, so I’m wondering if you sell the exploding kind. Could you sell me one? Me: One tag? Guy: Yeah, so I can see it and see how it works. Me: Sir, are you a retailer? Guy: No, I just wanted to buy a couple of these tags. Me: Sir, I only sell to retailers, and it would be a much larger number than one tag. Guy: So if I find someone with a business license and call you back, will you sell to me? (people laughing in the background) Me: Good luck with that, sir. Have a good day. Guy: OK, I’ll call you back. True story. I wanted to share this with the loss prevention community as it’s a demonstration of the absolute lengths people will go to, but I also thought it might make you smile. I’d love to hear your crazy stories. If you have a good one, email me at stefanie.hoover@controltekusa.com. Who knows, you might give me ideas for my next blog.

More on LossPreventionMedia.com For more original news content, see the following articles: ■■ The Busiest Shopping Days Are Here: Top Tips to Prevent Holiday Shoplifting ■■ Is Black Friday Turning Gray? ■■ The Cost of Repeat Offenses by Consumer Shoplifters (sponsored by NASP) ■■ UK Retailers Beef Up Employees’ Ability to Help Combat Terrorism ■■ Undercover Loss Prevention vs. Visible LP: Has the Debate Changed? ■■ Physical Safety Barriers: Low Tech Can Be Highly Effective ■■ How to Save Money on Retail Security Services—Without Hurting Relationships with Suppliers ■■ Don’t Get Stung by Fraudulent Returns This Holiday Season ■■ Tis the Season—But This Time, without Toys“R”Us ■■ Did Black Friday 2018 Meet Expectations ■■ Winning the Ongoing Battle against Identity Theft ■■ Violent Crime Prevention: Innovations from Anti-Violence Summits ■■ Inaugural Anti-Counterfeiting Conference Focused on Cash Management LPM Voice ■■

Will Retailers Push Past Frustration to Jump-Start the Future of Shoplifting Prevention

JANUARY–FEBRUARY 2019

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PEOPLE ON THE MOVE Michael Gianino was promoted to senior district manager of AP, and Cristina Bär Muñoz was promoted to district AP manager at Abercrombie & Fitch. Chris Young is now a market LP manager at Academy Sports. Jason Calhoun was named fraud investigations manager at Adobe. John Duenas is now national accounts project manager/program manager at ADT Security Services, and Rob Skelly has been named national account manager at ADT/Protection 1. Nira Lee was promoted to training coordinator, global security and LP at Amazon. Tyree McNeal is now an LP supervisor at American Eagle Outfitters. Adam Hertel was named director of safety and security at Andy Frain Services. Patrick Stelmaszyk is now a district risk manager at Aritzia. Steve Boyd was promoted to VP of LP at the Army and Air Force Exchange Service. Eric Pidgeon, LPC, CFI was promoted to VP of AP and safety, Jeff Gilkey, CFI was promoted to director of AP operations, Joshua Machtinger was promoted to director, global safety and risk management, Joseph Rapacz is now a territory AP leader, and Yajayra Gonzalez is now an AP specialist at Ascena Retail Group. Aaron Pisors, LPC is now a regional LP manager at AutoZone. Jerry Snider, CFI was promoted to director of LP at Bargain Hunt. Hutch Hillebert was promoted to director of facilities and AP western US/Canada at The Beautiful Group. Tim Derringer, CISM has been named director of information security, Matt Barnett, LPC was promoted to central investigations manager, and Matthew Fedrick was promoted to area AP manager at Belk.

Jeff Lesser was promoted to field LP manager, North America at Disney Stores. Chris Scheutzow, LPC and Patricia Casey, CFI are now regional LP managers at Dollar General. Ganjar Imansantosa, CISM was named director of information security at Domino’s. Scott Pethuyne is now senior manager of LP analytics, investigations, and operations at DSW. Alex Ornelas-Jones was promoted to head of LP for The Duck Store Corporation.

Joshua Loth was promoted to district LP manager at Kohl’s. Evan Edwards was promoted to senior corporate investigator, investigative intelligence, while Jeremy Kauffman, Amy Cross, Donny Meadows, LPQ, Paul Moore, LPC, Jason Jones, Clint Baker, LPC, Byron Mariani, Tim McLean, and James Theisen, LPC were promoted to district LP and operations support managers at Lowe’s Home Improvement. Alberto Vanegas is now AP manager, ORC at Lululemon. Branden Bearup is now an analyst, AP innovation and implementation at Macy’s. Andy McLaughlin, CFI has been promoted to LP manager at McCoy’s Building Supply.

Haley Torson was promoted to manager, risk policy violations, and incident management at eBay.

DeRon Finney is now a regional security manager at McDonald’s.

Colin Gubernick was promoted to risk management supervisor at Eickhoff’s Supermarkets.

Jonathan Grogan, CFI and Samantha Yakush are now market LP managers at NAPA Auto Parts.

Isaac Morton was named global investigations manager, and Ben Edwards is now protective intelligence manager, EMEA (United Kingdom) at Facebook.

Jammel Ward was promoted to director of LP at Natural Grocers by Vitamin Cottage.

Joshua Rogers, CFI has been named director of AP for Food Lion. Rick Caruthers has been appointed president at Galaxy Control Systems. Matt Brenner, MA, CFI was promoted to director of global investigations and ORC, and Donald Lynch was promoted to global investigations manager at Gap Inc. Chan Park was promoted to corporate investigations and internal audit manager at Goodwill of Orange County.

Johanna Williamson, CFE was promoted to manager, programs, strategy, reporting at nbn™ Australia. Stuart Fields was promoted to senior LP manager at New Look (UK). Jennifer Thomason, CFI was promoted to senior director, global Nike Direct risk and control at Nike. Chalston Layacan is now senior corporate investigator, and Jaclyn Clarke is now a field investigator at Nordstrom. Matthew Rice is now a district LP manager at Ollie’s Bargain Outlet.

Laura Neal is now a regional LP investigator at GoWireless.

Eric Fullerton has been named executive director at OpenEye.

Romeo Acevedo, LPQ was promoted to corporate LP specialist at Guitar Center.

Brandon Aldridge, CFI is now a regional LP leader at Petco.

Peter Chie, CFI was promoted to operating VP, AP and risk management at Bloomingdale’s.

Jordan Rivchun, MBA is now leader of retail solutions and strategy and business development at Hanwha Techwin America.

Kenneth Boremi, CFI, LPC was promoted to executive VP, chief operations officer at Brookstone.

Nicholas Thames is now an area LP manager, supply chain at Harbor Freight Tools.

Rick Munoz was promoted to senior VP of AP at Brosnan Risk Consultants.

Bryan Miller was promoted to senior investigator, southern division at The Home Depot.

Mike Reilly is now a regional LP manager, and Dorothy Connolly, CFI and Suzanne Hammontree are now district LP managers at Burlington Stores.

Juan C. Escruceria, Josiah Leite, LPC, and Craig Chiaccheri are now district AP leaders at CVS Health.

Andre Lawrence was promoted to senior west coast LP manager at The RealReal. Andrew Barborak, CFI is now senior market AP manager at REI.

Xavier Soule, PCI is now an LP and compliance auditor at HS Brands Global.

Kyle Tomlin, CMP has been named VP of operations at Canadian Fitness Professionals.

Tom Kilgallon was promoted to director of investigations, and Scott Mclean was promoted to district AP manager at Hudson’s Bay Company.

Ben Dugan, CFI was elected president for the Coalition of Law Enforcement and Retail (CLEAR).

Bryan Barlow, CFI is now an advisory board member with The International Association of Interviewers (IAI).

Amanda Grabowski is now a senior security investigator at Comcast.

Doug Ramey is now senior group manager of field investigations, and Mark McDermott and Cody Johnson, CORCI were promoted to group investigations managers at JCPenney.

JANUARY–FEBRUARY 2019

Jeff Anderson is now area LP coordinator at The Range (UK).

The Retail Industry Leaders Association (RILA) announced the following promotions: Brian Dodge to chief operating officer, Lisa LaBruno to executive VP of retail operations, and Austen Jensen to senior VP of government affairs. Karl Hall is now an AP district leader at Rite Aid. Rene Gonzalez is now an area LP manager at Ross Stores. Brian Bazer has been named senior director of LP at Rue 21. Matt Connor, CFI was named director of AP at Salvatore Ferragamo Americas. Jon Pollard, LPC and Jason Montgomery, LPC are now territory AP managers at Sam’s Club.

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The Security Executive Council (SEC) announced the following new team members: Jerry D. Vergeront is subject matter expert, cyber risk, and compliance; Dwight Williams is emeritus faculty; Neil R. Johnston is subject matter expert, security technology operations; Alan Borntrager, CPP is emeritus faculty; and Amy Ballard is subject matter expert, security program facilitation. Teri Railey and Ted Younes are now district LP managers at Sephora. Adina Palinsky is now a regional LP director at Sherwin-Williams. Tony Raab was promoted to senior regional LP manager at Spencer Gifts. Staples announced the following promotions: Donald Tarney, LPC to director of LP, Matt Auger, CFI to senior field LP manager, Glenn M. Forrest III, LPC to senior manager, LP field operations West, and Jess DeValkenaere, LPC to senior manager of AP. Darian Griffin was promoted to VP of AP, and Omar Garcia is now a district LP specialist at Superior Grocers. Leo Doran has been named VP of LP for Tailored Brands. Tony Davis has been named VP, senior manager, program management, global security and investigations for TD Bank. Carmine Mele is now an ORC investigator, and Brittany Jeffery is now a district LP investigator at TJX Companies. Lance Storm is now a regional LP manager at Ulta Beauty. Brian Potts is now national channel sales manager at Vector Security. Mary Ellen Anastas, CFI was named chief of internal audit and compliance, Christopher Helton was named corporate AP manager, and Patrick Bresnan was named internal auditor for Veterans Canteen Service, US Department of Veterans Affairs. Ralph Frangioni and Jason Brandon are now AP solutions partners at Walgreens. Libby Stockley is now an insurance fraud investigator, and Scott Pickrel and Mike Hatzenbuhler were promoted to market AP managers at Walmart. Cory Vaughan was promoted to compliance, AP, and safety operations manager at Walmart eCommerce. Rob Wynn was named director of AP, and Scott McEntyre is now a regional AP and safety manager at Whole Foods Market. Nick Koehler, CFI is now a regional LP manager, supply chain at WilliamsSonoma. Brett Adams is now national investigations partner at Woolworths Supermarkets. Tommy Nelson, CFI is now global director of security and LP at XPO Logistics.

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PARTING WORDS

I Got Spirit. How ’bout You?

Jim Lee, LPC Executive Editor

o you believe in spirits? Not the alcohol kind or the cheerleading kind. I mean “real spirits” like ghosts, the hereafter, and visitations. One thing is for sure—we are all going to leave this world, and then we will know for sure if there is more to the story. I would like to believe there is more, so I choose to believe in spirits. And I have proof of this, but that is a personal story for another time. So I have been making what I call a “spirit bucket list”—those things I want to do when my spirit comes back to this world. I am sharing this with you because after I am gone (and I hope that is not too soon), you might see some of these things happen and give me credit for it. Here goes: ■■ At the annual Loss Prevention Foundation golf event, there will be two, not one, but two holes in one. Thinking about making them both by women, but not sure yet. Seems like we just never have a hole in one in these events, and it would be fun. ■■ On occasion, and as often as I can, you may see a grab-and-run shoplifter heading for the door and slip and fall. That would be me tripping the culprit. That would be fun to watch, don’t you think? ■■ Speaking of tripping, I have decided to hang by the men’s restroom, and when I see a scoundrel not washing his hands after doing his business, whoops away we go. ■■ I am going to sit in on a few vendor-practitioner-buyer sales calls. And when I hear either side twisting the truth or outright lying, then I am going to tie their tongue up and listen to them start stuttering. So if you hear the stutter, that is me keeping the truth on the table. ■■ Whenever there is a good VP-level job opening, I am going to keep slipping the resume of a few seasoned veterans to the top of the heap. Seems like HR and the other hiring executives take a mark down or give little consideration to those applicants who are past their early fifties or have taken an early retirement from a previous job. No other profession seems to eliminate the seasoned VP as much as retail. Well, not on my spiritual watch. ■■ What to do with CEOs and C-level executives who just have no appreciation for the LP or AP person? Can’t

JANUARY–FEBRUARY 2019

think of another group other than LP who spends as much time and energy on training and self-education, all in the spirit of getting and doing better. Yet there are some at the highest level who care only about themselves. I will have my spirit just off stage doing all I can to hurt those selfish executives. ■■ There are two things that I despise when out eating at a restaurant. The first are cheap tippers. There are more than you think. If you can afford to eat out, then you can afford to be respectful and helpful to a group of people who don’t make much and rely on tips. For many, these are second jobs or jobs to support their own education. I’m going to use all my spiritual powers to move the tip dial. ■■ My other restaurant peeve is men who sit at the table with hats on their heads. Are they having a bad hair day, have no hair, or just think it is cool and styling to wear a hat at a restaurant? Do they wear a hat at home? Do they have no respect for others sitting around them? So when you are out at dinner and all of sudden a hat goes flying off the head of someone at another table, that will be my spirit knocking it off. This will really be fun watching those hats fly. ■■ I fear I will only have time for one more spiritual task, so I choose to make it the “dobber.” Do you know what a dobber is? That is when your lower lip pushes down and out because things have gotten tough and you are pouting and boo-hooing. When you choose to work in LP and AP, there will be a lot of moments when you can get your dobber down. It can be tough. Either get out or get it on. Start earlier, work a little harder, and accept the challenges for what they are. If you feel a pushing at your back, that will be my spirit giving you the nudge. That is my spiritual bucket list. I’m not ready to start yet, so for now a nice spiritual drink may just be fine.

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January - February 2019

Articles inside

PARTING WORDS

PRODUCT SHOWCASE

PEOPLE ON THE MOVE

CALENDAR

LPM DIGITAL

PERSPECTIVES

FUTURE OF LP

CERTIFICATION

SUPPLY CHAIN

INTERVIEWING

EVIDENCE-BASED LP

STRATEGIES

EDITOR’S LETTER

LPM EXCELLENCE