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27
Jan

FCPA Enforcement on the Rise

The Foreign Corrupt Practices Act (FCPA) continues to be an area of increased enforcement by U.S. agencies.  Eight of the top 10 FCPA settlements have occurred in the past two years and leadership at the SEC, DOJ, and the Attorney General have made it clear they intend to expand focus on this area.  Both the SEC and FBI now have dedicated FCPA teams and the recent Dodd-Frank Act has provided for increased “bounties” for whistle blowers.

In addition, the UK Bribery Act of 2010 is currently scheduled to be implemented in April of this year.  This act goes beyond the FCPA’s focus on bribery involving government entities and expands the scope to commercial bribery.  The UK Act, as currently drafted, also eliminates exceptions for “facilitation payments.”

If you have retail operations, sourcing offices, or manufacturing operations in other countries, you had better be sure you understand these regulations, the duties they impose, and the potential consequnces of violations by your organization, any subsidiaries, and any contracted third-parties.  If you are not sure what your responsibilities are, email us and we can discuss.

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26
Jan

Guest Post on LPI Blog

Yesterday, LP Innovations published a guest column from me on their blog at titled “Loss Prevention as Management Science.”  In this post,  I argue that we need to do a better job, as an industry, of helping senior management understand that shrink results can be influenced by certain practices, routines, and activities that are largely within our control.

Senior management needs to view us as experts in what those tactics and techniques are and how they are best implemented within the context of a specific organization and culture.  This is in contrast to be viewed simply as “fixers” who can catch shoplifters, gain admissions from dishonest employees, and respond when a store manager breaks a key off in the front door.  Yes, those are things we do, but they do not encompass our mission or impact on the organization’s financial results.

As always, I would welcome your comments, disagreements, or thoughts…

19
Jan

Guest Blog: Eric White on “Making the Most of Retail Audits”

Getting Ready for 2011: Tips for Making the Most of Retail Audits

In order to prioritize 2011 retail initiatives, both LP and operations professionals must have current insights into what is going on across the organization.  With stores located in different states, regions or even countries, managers need to consider that each retail location faces different operational challenges, management strengths and weaknesses and economic and demographic environments.  These distinct circumstances make it nearly impossible for all stores to execute in exactly the same way. 

Yet for LP professionals working at the corporate or regional level, it can be difficult to obtain a clear view of what is happening at each individual location and the variance in execution.  In some organizations, managers may rely on word of mouth, conversations, and other informal communications, which provide neither a clear basis for comparison nor a comprehensive view of the situation.   

Most retailers conduct audits in an attempt to measure and compare consistency and compliance across stores.  While employed to some extent by almost all retailers, in many cases these audits are inefficient, ineffective and oftentimes extremely burdensome.  Some retailers use audits consistently to monitor highly regulated issues such as food safety and fire codes, but in areas like operations, marketing and security, retailers are not as committed to audits.  Other retailers effectively issue audits, but then fail to systematically follow-up on issues identified. 

In the year ahead, there is potential to use audits to monitor processes for improved insights and performance across the entire retail organization, but only if they are designed and executed well. This is not as simple as it may seem, as there are many potential pitfalls in audit design, issuance and follow-up.  Here are some tips for getting it right.

Simplify, simplify, simplify – Among the most common mistakes is making audit questionnaires too complex.  Multi-part questions force respondents to make a judgment call as to whether they should answer “yes” or “no” when the answers vary for different parts of the question.  Complicated questions that can be interpreted in a variety of ways also inhibit the effectiveness of the audit and can generate inconsistency of results due to variation in interpretation.  It’s best to ask simple, one-part questions that can be definitively answered with either a “yes” or “no.”

Design in coordination – Smaller, more frequent audits should be designed in coordination with larger, more comprehensive audits.  This serves to avoid contradictions in messaging and also to ensure that all activities are moving toward the same finish line.  The smaller, more frequent audits should align with a retailer’s more comprehensive, less frequent audits.  Meaning that if stores can and do pass the small audits, they should be well on their way to being able to complete the larger audit.

Ask the right things – Audits must be relatively short and manageable to impose minimal burden on the auditors and encourage them to participate in a timely manner.  In order to effectively collect the information needed about the great expanse of areas to be evaluated, it is important to focus questions around aspects of the process that may be broken.  For example, don’t ask “Are returns being processed correctly?”  Corporate already knows that returns are causing great problems in the store.  Instead, ask a series of probing questions such as “Are broken or faulty items that are returned being shipped back to the manufacturer within 5 days?” and “Are all returns processed with a receipt?”  The answers to these questions will help determine whether it is a problem with vendor warranties or return policies or if returns are simply being processed incorrectly without a receipt.

Practice immediate follow-up – Audits are a valuable tool because they indicate discrepancies in performance and areas that need to be addressed.  Retailers lose the value of audits if they fail to immediately follow-up by assigning tasks, opening investigations or sharing issues.  Retailers should identify tools and processes to assign immediate follow-up on issues after an audit.

With these tips in mind, retailers can ensure that their audits deliver meaningful information and serve as a catalyst for action.  From prioritizing risks that should be mitigated by loss prevention to identifying operational issues that need to be addressed, the effective use and follow-up of audits can position retailers to maximize their time and resources for the benefit of the company.

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We are pleased to feature this guest blog by Eric White from Wren Solutions.  Eric has over 20 years of experience in our industry and currently serves director of retail strategy for Wren.  White maintains his regular blog at http://www.wrensolutions.com/LPXtra_blog/ and can be reached via email at eric.white@wrensolutions.com.

18
Jan

Is E-commerce Lowering Your Shrinkage?

An industry colleague recently asked me if, perhaps, retailers might be lowering shrinkage rates, in part, by the growth of their e-commerce business.  It is not really a question that had come to my mind, but I think it is an interesting topic for discussion.  I’ve outlined his thought process below and would be interested in hearing some responses from our readers.

Most retailers have now branched into e-commerce, some in a significant way and others are just testing the water, and e-commerce transactions represent about 4% of retail sales in the U.S. according to recent government figures.  While e-commerce certainly has to deal with fraud, most e-commerce business is set up in such a manner that there is very little, if any, shrinkage in a traditional sense.  Retail organizations typically account for fraud, such as credit card fraud, on a separate line in their P&L.

Therefore, if e-commerce sales are being including in total company sales and yet they contribute little, if any, shrinkage dollars, does that understate shrinkage – at least in terms of comparison to historical data?  Could this be part of the drop we are seeing in shrinkage in the National Retail Security Survey results of the past couple of years?

What are your thoughts?

14
Jan

Lessons from Latin America

I’ve spent the past few days visiting retail operations in Colombia with a client and was struck by the advantages of the staffing model here in this country and other countries in Latin America (LATAM).  While the model here is not likely to be adopted by retailers in the U.S., perhaps there are some good reminders and lessons.

Whereas in the United States where we have a mish-mash of employees working wildly divergent schedules, hours, and days, retail stores here are typically staffed with full-time employees who work six 8-hour days and make this their career.  In addition, approximately half of them work the first shift and the other half the second shift.  Staff turnover can run as little as 5% annually or less!

Think of the advantages of this model when it comes to commitment, product knowledge, workplace safety, loss prevention, human resources and the like.  Employees in this model “own” their part of the store and their responsibilities.  It is relatively easy to get a consistent message to all employees at the same time.  And, the stores we visited showed this through their merchandising standards, their employee engagement, and product knowledge.

Of course, it is easy to argue why this might not be practical in the U.S. or in similar markets, but it is a stark reminder to the challenges faced when trying to get consistent execution while managing part-time employees who might work as little as 8-10 hours in the week and where turnover can run over 100% annually.  In the U.S. model, how do you even reach your employees much less get them engaged?

This, of course, is the challenge my firm accepts when we work with our clients on their communication strategies and training programs.  Please let us know if you want to find out more about how we can help.

6
Jan

EAS Study Published: Journal of Applied Security Research

This year’s first edition of the Journal of Applied Security Research contains a case study that Adrian Beck and I authored on one apparel chain’s experience with switching from hard tags to sewn-in, soft tags.  The article highlights the importance of visual clues and difficulty of removal in creating deterrence.  An abstract of the article can be found at this link “The Importance of Visual Situational Cues and Difficulty of Removal in Creating Deterrence: The Limitations of Electronic Article Surveillance Source Tagging in the Retail Environment.”

While this study was conducted in only one retail chain, hundreds of locations were involved in the test and the results were consistent across geography, internal hierarchy, etc.  Additionally, similar results were realized in another specialty retail chain around the same period of time.  Hopefully, this article will add to the body of knowledge in our industry relative to EAS.

5
Jan

ECR Workshop on Self Scan Check-Outs: 27 January

My good friend, Adrian Beck from the University of Leicester, will be a featured presenter at the upcoming ECR Europe workshop on self scan check-outs and their impact on shrinkage.  Shrinkage and Self Scan Check-outs: The Benefits, Challenges and Opportunities is a seminar being staged by ECR Europe on Thursday 27 January at the Sheraton Hotel, Brussels Airport.

ECR Europe (Efficient Consumer Response) is a body of academics and loss prevention experts who have carried out extensive research on shrinkage in the retail sector, a problem that is costing $235 billion per year with retailers spending a record $46 billion trying to reduce the problem.

Self-scan checkouts are becoming increasingly common sight in retail and it is anticipated that the market will have grown three-fold between 2007 and next year.

As far as many profit protection teams are concerned, the jury is still out on self-scan and its potential impact upon the shrink figures.  Many struggle with the differentiation between convenience for shoppers and the ease by which potential store thieves can get away without payment or detection on non-tagged items.  Many see it as a huge threat to the business, while other LP managers believe it is an instrument to cut shrink.

The one-day workshop is to review ECR’s work on self-scan technology and present the findings from its latest research – the biggest ever survey of self-scan supervisory staff.

The workshop will also deliver retailer case studies on the business benefit of self-scan and the challenges of introducing the technology into the business. There will also be a perspective from the self-scan providers on how they are dealing with the threats of shrinkage.

To register, visit the seminar home page.

4
Jan

What Are Your Priorities for 2011?

As I was cleaning out some files last week, I ran across an article I had saved from the January 2007 Harvard Business Review titled, “What to Ask the Person in the Mirror,” by Robert S. Kaplan.  The sub-head for the article is “There comes a point in your career when the best way to figure out how you’re doing is to step back and ask yourself a few questions.  Having all the answers is less important than knowing what to ask.”  Kaplan goes on to list seven areas where you should ask yourself some questions to make sure you are on track with your performance.

It is a very good article through and through but one pull-quote particularly caught my eye – “The fact is, having 15 priorities is the same as having none at all.”  Wow, what a great way to sum up a major problem for individuals, managers, and organizations.  One of the biggest challenges we find in working with large organizations on their training programs is the inability to prioritize the most important issues.  Instead, there seems to be a tendency to try and include every issue, policy, or exception that may possibly occur during their entire working career in one training program – and it is usually given to them on their first or second day of employment!

Every individual faces the same challenge.  Wouldn’t it be better for you to focus on three or four top priorities in 2011 and ensure you get those accomplished than to focus on 15, 20, or more and fail at all of them?  A summary of all seven areas that Kaplan suggests you interrogate yourself on can be found here, but I’d suggest a read through this entire article that can be purchased here.