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Exception Based Reporting Analysis – Is Enough Ever Enough?

Posted on 1/26/12 9:30 AM

For almost two decades, exception-based reporting (EBR) tools have been widely used by retailers to analyze point of sale (POS) and other business related data. Even though these tools have saved considerable time and resources in the analysis, detection and resolution of concerns, the use of these tools still requires time and resources. So, how does one determine the necessary number of analysts to properly analyze their exception-based reporting information?

Some companies hire a single analyst, expecting that individual will find enough exceptions. Others have hired a team of analysts, assuming the more resources looking for issues, the more exceptions will be found. These decisions are often made based primarily on available budget or existing resources. What if you needed to determine the return on investment (ROI) of the analyst prior to determining how many analysts are needed?

The simplest approach is to look at past theft results, including admission dollars. From these results a formula is calculated to determine how many analysts would provide ROI from expected payroll dollars. Although this approach appears easy to determine ROI from expected payroll, it misses the overall value and expectations of an EBR tool and the complete role of an analyst.

Exception-based reporting tools provide a plethora of data. The data that is available can support areas beyond POS related theft, including: operations, sales audit, finance, inventory control, loss prevention audits, training and much more. Shortcutting your analysis team may leave you limited in your ability to assist the company with a highly effective tool.

Here are some considerations when trying to determine how much analysis is enough (and how many analysts).EBR Analysis resized 600

  1. What is your vision for utilizing exception-based reporting? Catching POS related theft is still one of the main priorities; however there are other uses of exception-based reporting tools. Will your team be responsible for looking at margin issues? Determining the validity of contests? Controlling inventory concerns related to manifests, transfers or damages?

  2. What, if any, limitations do you expect from either your chosen system or with your data? Depending on your environment, there may be limited data coming into your EBR system. This limitation may make it either impossible or more difficult to run reports, analyze data or develop certain reports within your system. Determine what reports or queries you expect to analyze regularly. Once you have the list, determine how frequently you expect to run these reports and how much time is necessary to conduct a proper analysis.

  3. Will your analysts solely conduct analysis or be responsible for supporting others? Too often a retailer hires a single full-time analyst only to have them start working on special projects, then working on other department functions, therefore reducing the amount of analysis being conducted. To determine the appropriate number of analysts or analysis time, you need to determine how much time will be spent analyzing data and how much (if any) time will be spent supporting others. This includes handling special analysis requests, supporting a field team or other departments.

        Not sure if your department can support more than one analyst? We work with a company who decided to have an internal analyst support operations and corporate requests, while outsourcing loss prevention analysis to the LPI team. They were able to use budgeted dollars on outsourcing, without having to add payroll costs.

        Another example is a company who uses the tool within different departments, but by trained individuals in each department using the tool. Their loss prevention department has one analyst handling LP responsibilities and sales audit has its own analyst using the tool for their needs. The analysis is broken down by function as well as by person accessing specific data for their specific purpose.

        Determining the number of analysts in order to conduct appropriate analysis is not an exact science. It is a balancing act based on certain factors (like the ones above), along with known performance metrics. Once these factors are mapped out and reviewed you will be in a better position to determine how much time is needed for adequate analysis and how many analysts can get you there.

        Written by Tim Casey, CFI, CPP

        Director of Corporate Services

        Topics: Audits and Investigations