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Benchmarking the Past

Posted on 3/4/14 11:30 AM

Benchmarking

I’m probably not alone in my disappointment over how long it took for the NRSS 2012 study to be published. Although the results are not without their obstacles, the information has served many loss prevention professionals in diagnosing and comparing internal results to the bigger industry. Its absence created a void when answering the general question of “what’s good shrink?” 

I’m still in the review process of the information, but my quick review left me with some questions as to how best to use the report results. The three biggest challenges are the number of participants, the diversity of representation, and of course the timeliness of the report. Whether or not I believe 1.4 is an accurate representation of the true industry average has never really been a consideration. Like any “average” it is made up by those above and those below. The sample size is probably sufficient, but with all of the changes to loss prevention departments, it leaves me to wonder what the landscape looks like in the places where there is no one left to report.

The diversity is a key factor for me because I work with a diverse group of retailers. Knowing how the “big boxes” fare is of less importance to my clients. Big Box retailers have more in-house staff, more employees in the stores and generally, based on expenditures would be expected to do better than specialty in terms of shrink. How much their results impact the overall average is a critical question. Consequently my review always falls to the categories of participants. How are footwear, apparel and smaller foot-print retailers doing? Unfortunately, when a category has but one participant it is risky to draw any conclusions from that information.

In today’s economy things are changing rapidly and certainly not all of those changes are for the good. Information and timely information is critical to our decision making. I’m not criticizing the obstacles faced in creating the report and I’m grateful it arrived, but the information beyond shrink results is at best “dated.” Two years later, it would not seem reliable for the purpose of any real-time comparisons and I would be highly unlikely to suggest to a client a course of action based on results so aged.

The situation brings up a more important consideration—how should we compare our results and what guidance should we use for our planned initiatives? I think benchmarking is an important element to the process, but I think what works “best” is what works best in “your” organization. The truth is, just because a company had success or failure with a particular strategy or because a company doesn’t think an investment in a particular thing will help them, isn’t the litmus test for your own strategies. How everyone else is doing is far less important than how you are doing in your program. 

I believe the most important benchmarking is how a company performs year over year. Create a plan, implement, test the results and refine until return on investment is maximized and the goal is reached. Some benchmarking is valuable. Knowing that companies who conduct more frequent audits have lower shrink can help defend the implementation of “more frequent” audits. Knowing that companies with more part timers have poorer shrink results suggests that if you have a lot of part timers, you need a plan to educate and motivate them. Capital expenditures, payroll breakouts, plans for implementation, apprehensions by sales dollars, are all interesting details, but not really written in stone guidelines to follow. 

The fact is we went an entire year without our beloved benchmark report and we still prospered. It’s absence should suggest that the real value of the report isn’t in “how” we compare to the group—last year’s shrinkage didn’t become better or worse once you learned the industry average. Your company formed that opinion on its own. The true value in such reports are the information we can find and apply to our own efforts. We probably don’t need a report for that, we probably just need good communication. Which is why I write these articles—to share ideas that may be helpful in building a better loss prevention program.

 

Authored By:

Ray Esposito, Sr. VP Strategic Development & Marketing at LP Innovations Inc

Ray Esposito
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Loss Prevention Planning Guide

Topics: loss prevention program, Industry Average, Loss Prevention Professionals

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