Davis is the Director of Loss Prevention and Operations Strategy at Encapsulon, which develops loss prevention software for retailers. He says that although many retailers approach shrink from the bottom line – looking to financial statements for numbers behind the losses – it doesn’t get to the root of the problem.
The core to any loss program, adds Davis, is using available information to target the highest risk areas of your business and having specific control programs in mind.
POS Systems: Capturing Product-Level Information
Because POS Systems capture and track all the key information about a product, they are vital to the checking-and-balancing process of loss prevention. “Good POS systems provide functionality beyond the basic, calculator-type capabilities of totaling, adding taxes, and generating receipts,” says Davis.
“More sophisticated systems interface with other core data-capture solutions, so that reporting can give retail managers valuable information from inventory management, loss prevention, and even video surveillance technologies.”
Davis insists that the POS system should export transaction data into a database for review and analysis, and offer reporting capabilities for retail managers.
Inventory Management Software: Following Products through the Lifecycle
Inventory Management systems are the ‘keepers’ of product while it’s still in the hands of the retailer. “A good inventory management system should provide a comprehensive picture of the product’s life inside the retail environment,” Davis explains.
“Significant losses can occur before the product ever reaches the shelf, making this information important to retailers dissecting their losses.”
Retailers must seek inventory management systems that offer sophisticated reporting tools, Davis says. He uses the example of items that have not moved for a given period of time, say, two weeks:
“By analyzing a report of (such) items, the retailer can identify products that may be continuing to shrink,” he says. “If an item is not moving, a retailer should investigate whether it is simply not being selected by customers, if it was warehoused in the wrong location, if it was damaged, or if it was stolen.”
Video Surveillance Equipment: Shifting to a Preventive Tool
For decades now, using video as a reactive tool in data capturing has been a standard procedure in the retail world. Davis says the new era of video surveillance – now digital instead of analog – is more of a preventive measure than a reactive one.
“Retailers can employ digital video in the shrink dissection process to understand what is happening in the retail environment and to test hypotheses about loss.”
He suggests combining POS reports with a quick review of video taken at the point of sale to assess cashier protocol. If an inventory report shows an item is not moving off the shelf as it should, the retailer can review video of that particular shelf – perhaps it’s tucked away from the main flow of customer traffic.
In conclusion, Davis underlines the importance of technology in minimizing losses. “Effective employed, (these solutions) give retailers the necessary technological tools to impact their losses on the product level, which will lead to enterprise-wide savings.”