Outsource Loss Prevention, Reduce Shrink

A lucrative LP program — one that reduces shrink and protects profits — can be expensive to maintain. Indeed, maintaining an operationally sound LP program demands consistent, accurate, and thorough review of policies and procedures. Yet, policies and procedures are difficult to uphold when your sparsely staffed internal LP team is tasked with overseeing several locations throughout the United States. John Trott, VP North American consumer direct and global e-commerce at Timberland, dealt with this very situation. He needed to provide better and more consistent LP support for countrywide store locations without losing revenue.

Increase Audits For Enterprisewide Efficiency
Timberland offers outdoor footwear and apparel via its retail stores, e-commerce platform, and factory stores. The retailer relied on its two-person internal LP department (i.e. a corporate LP manager for the East Coast and a regional manager for locations west of Chicago) to perform audits and investigations at all 68 brick-and-mortar locations. The LP department's small size caused two problems. First, due to distance between store locations and cost of travel, Timberland's LP managers were only able to conduct one to two audits per year depending on a store's shrink level. Timberland requires all audits last a minimum of 3 hours. During this time, the internal LP team observed things like store conditions, product pricing, and contact with customers. The LP team also reviewed core policies with staff members (e.g. doors being locked, garbage removed properly, bag checks conducted). The second problem — equally as important as the first — was the lack of data Trott received from the audits. The audits are often used to make decisions and understand the business. One or two audits a year is not enough on which to draw appropriate trend conclusions, such as gaps in both communications with customers and POS data. "It's not that Timberland's shrink number was poor, though we wanted to improve it," says Trott. "When you have 68 stores across the country, it is hard to sufficiently support them with just two people. We needed a more economical LP solution."

Outsource For Total LP Coverage
Trott turned to LP Innovations (LPI) for a solution in 2007. LPI outsources a network of regional LP managers, auditors, and client services representatives for the retail industry. During its first year with LPI, Timberland used LPI auditors to conduct audits at each store location. Because LPI managers are regional, they are able to visit Timberland locations on a more frequent basis. Timberland's director of stores meets with LPI's director of corporate services every other week to review audit information. LPI presents information to Timberland, but all decisions and actions, such as hiring and firing, are done by Timberland.

Based on the success of the audits, Trott hired LPI to support the remainder of the retailer's LP program full time, and he eliminated the retailer's internal LP team. Now, LPI conducts investigations and exception-based reporting (EBR). Certain events prompt an investigation, such as a call from an employee to the retailer's anonymous hotline, which is located at corporate. LPI uses EBR to monitor questionable scenarios or red flags, such as returns without receipts or multiple purchases on one card in a single day. Before LPI conducts an investigation, investigators meet at the retailer's corporate office to determine if a store-level investigation is necessary. Because LPI has a large number of investigators around the country, they respond to the problem and arrive at the stores quickly, usually within one day.

Since making the decision to outsource its LP functions, Timberland has improved its shrink record 0.4%. The number of audits per store has increased to at least three per store per year. "Responsiveness to red flags has gone up," says Trott. "If you can pick up on red flags early, investigate them, and determine the cause, the sooner you can rectify the issue. I suspect that because we are reacting to red flags sooner, our shrink number has reduced."

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