Recently, I listened in on a webinar sponsored by RILA titled, “Survival Skills in the Era of Doing More with Less,” presented by Walter Palmer, President of PCG Solutions. During his presentation, Walter mentioned some common challenges as to why LP professionals fail in their efforts to get senior management support or justification for their program initiatives. These challenges include:
Failure to articulate a business case
Failure to convince senior management of “cause & effect” of what we do
Lack of data & details to support resource requests
Lack of courage to question the myth of “do more with less”
Later in his presentation, Walter made the statement, “Fixing shrinkage is a retailer’s greatest opportunity to increase shareholder value and margin growth”. It was this statement coupled with the challenges he often hears expressed that made me think about why LP may not often get a “seat at the table” when it comes to high level business discussions.
Are we speaking the right language?
A loss prevention professional or department is responsible for reducing loss and for most, that loss is measured by the calculation of a shrink percentage. For many, their entire LP initiative is focused on this single metric, realizing success when it decreases and failure when it increases.
Is it possible that we are too focused on this metric and the use of a word (shrinkage) that may not be considered as important of a metric by the rest of the company?
Walter’s statement mentioned two key sets of words; shareholder value and margin growth. He also ties these words directly to the reduction of shrinkage. My question to you is how often do you use those two sets of words when talking about shrinkage results?
Departments such as Buying, Merchandising, Allocation and Distribution all deal with inventory and are affected by inventory loss (i.e. shrinkage). How often do they mention “inventory shrinkage” in their discussions with other departments or do they focus on other metrics to determine their success or failure?
Should loss prevention “translate” our language or results to coincide with other departments’ metrics in order to show the true value of loss prevention? Could we, as loss prevention, start to discuss how our initiatives have lowered turnover costs, improved associate efficiency or customer service and increased shareholder value and margin growth?
Are we too focused on theft?
Sure. We understand that internal and external theft costs a company more than any other form of loss. It has been engrained in our heads for several decades and for the majority of LP departments it is the focal point of their program; detecting, investigating and resolving theft.
Would we be more valuable if we focused more attention to those areas of loss outside of theft?
Holistically speaking, the prevention of loss includes many forms other than theft or inventory loss. Could a focus on preventing loss outside of theft and inventory provide your LP department with a much larger role in your organization?
One success story I often speak about is from a VP of Loss Prevention who based his entire purchase of an exception based reporting system on an ROI against margin improvement and increased sales. His ROI was not based on the norm; dishonest employee apprehensions and shrink improvement. The focus was on markdowns, marketing promotions and his company’s loyalty program. The first year return on investment was in the millions, all back to the company’s bottom line, without factoring in a single dishonest associate dollar amount (although he got plenty of those too).
Remember Walter’s statement and as you think about how you can bring greater value to your department or your company, think about how you can approach loss prevention from a much larger perspective than inventory loss. Think about how loss prevention supports the overall business.
Written by David Johnston, Director of Business Development
Do you support this discussion or disagree with these statements?
Do you think loss prevention is often focused too much on shrinkage and not enough on other areas where losses can occur?
We would be interested in hearing from our readership, which includes loss prevention, operations, finance and C-level professionals.