A lot can happen in the depths of a million-square-foot DC. Ace Hardware Corporation has several of them. In fact, all of Ace’s DCs are between 500,000 and a million square feet. That adds up to several million square feet of hundred-foot-long racks and bins stacked 20 or more feet high, spaced merely feet apart from one another. During peak shipment periods, it’s several million square feet of forklift fury. These facilities are the funnels of product shipment to the retailer’s 4,600 worldwide cooperative stores, through which $13 billion worth of merchandise flows annually. With so much active, crowded floor space to monitor, Ace Corporate Loss Prevention & Business Continuity Planning Manager Scott Lindahl has his work carved out for him.
Monitoring Millions Of Feet Of DC Space
Employing security personnel to cover this much real estate is cost prohibitive for virtually any company. That’s where the cost justification for video surveillance comes into play. But until recently, Ace did not have optimal CCTV coverage in its DCs. Some of Ace’s 20 to 32 units per facility were appropriately trained on specific areas of concern, such as access points and forklift path intersections. But Ace knew there was room for improvement in its DC security schema. For one, it needed better external surveillance. “Video coverage in the parking lots and shipping and receiving yards is just as important,” says Lindahl. “With workplace threats and violence and cargo security always topics of concern, protecting our employees and company assets doesn’t just take place in the building.” Further, the surveillance units stood independently of the network. Therefore, if an incident that deemed investigation was caught on film, the facility’s security staff had to search through sometimes hours of video, find the incident, burn the footage in question to CD, and forward it to the corporate investigations unit for follow-up.
Unfortunately, adding enough cameras to cover its vast DC infrastructure was nearly as cost prohibitive as manning it with small armies of security personnel. Instead, Ace turned to Vector Security for a solution that would improve mobility – both of footage and the security devices themselves – and get the retailer on a proactive device maintenance plan. Vector installed networked cameras that feed footage to a server where it is indexed and filed for easy access. Now, Ace has the technology in place to give LP professionals throughout the enterprise access to footage of incidents simply by connecting to the corporate network and calling it up on their desktops. In addition, the cameras the retailer now deploys feature pan and zoom functions, giving it more and clearer visibility into DC events. This allows the units Ace deploys to cover more ground without adding significantly to its camera infrastructure investment.
Integrate CCTV And Access Control
Pan and zoom features are especially beneficial in environments where CCTV is integrated with other LP and risk solutions, as they now are in Ace Hardware DCs. Ace’s cameras are programmed to react to alarms by panning to and focusing on the source of the alarm. For instance, if an access door is breached without clearance, a burglar alarm sounds. The closest camera will instantly pan to and focus on the access point that sourced the alarm. This feature both increases CCTV coverage of the facility and reduces investigation time, as the alarm/camera interaction is flagged and indexed at the server level, making it simple for investigators to find and analyze the footage. Ace’s integrated CCTV and access control network includes various hardware and equipment from Vector and camera vendor Pelco, as well as burglar alarm manufacturer Bosch-Radionics and Hirsch Electronics, which produces the retailer’s access control system.
Still, some Ace facilities are not up to speed on the integrated, networked solution. “We have a lot less awareness of and control over what’s happening in those facilities,” says Lindahl. “If the back door to a warehouse running an older system opens up, we get a real-time alarm. But unless a camera has been manually positioned to cover that door, we have no video footage. With the new system, the camera calls right up to the location of the incident.”
Where’s Your LP Focus?
If you’re considering a CCTV installation or upgrade, it’s a foregone conclusion that you’ve got something to be on the lookout for. But as Ace and Lindahl found out, criminal and risk activities aren’t necessarily the biggest justification for installing the technology. At about 2% of sales, Ace’s shrink is average in its industry. It happens in many forms, but in the DC, damage accounts for most of it. “We can measure shrink related to candy bars and pocketknives and small electronics,” Lindahl says, “and organized retail theft plays a role here, too – there’s a definite black market for contractor’s tools. Those issues are common to the industry at both the distribution and retail levels. But in the DCs, when you begin to receive and distribute patio furniture and gas grills, which are both fragile and high cube items, you deal with more damage – a whole different element of shrink.”
Ace also implements specific CCTV coverage in DC areas where it becomes aware of inventory discrepancies above $10,000. “After a cycle count, our inventory teams may not be able to explain a discrepancy. That’s when they’ll ask for our assistance to help identify trends with that SKU or product category,” explains Lindahl.
Like many large retailers, Ace is experiencing an increased pace in the evolution of its store format. Especially because Ace Hardware stores are located in so many disparate settings – from urban to rural and everywhere in between – their consumers often expect to find a wide mix of merchandise beyond typical hardware store fare. Store assortments are typically tailored to their local market, with special product selection based on local consumers’ needs. As a cooperative, the corporate distribution outfit is, in turn, expected to oblige independent storeowners’ requests for high-demand merchandise. The retailer responds because it’s good for business – its outdoor furniture and appliance sales, for example, are particularly strong. But merchandising decisions affect DC decisions, which, in turn, affect shrink due to damaged inventory. “As patio furniture, for example, became a big growth area, shrink due to damage increased incrementally,” he explains. The reasons? Forklift drivers accustomed to handling pallets of lumber, pipe, and hardware face a learning curve when items such as glass-topped patio furniture are added to their manifest. Further, DCs themselves were set up in a manner that might place these fragile items in close proximity to items that could damage them, such as lumber, landscaping bricks, and so on.
“Analysis of merchandising data has led to a significant change in the operation of our DCs,” says Lindahl. “Our CCTV system provides data that helps us analyze situations like this.” Specifically, damage incidents can be tracked more effectively using data pulled from the CCTV system. In this way, DC staff can identify trends – high-accident intersections or locations where damage is more likely to occur, for instance – and modify their DC layouts accordingly. “As a result of our analysis, we’re reformatting our DCs to reflect the store layout. Hardware will be in one spot, patio furniture in another, housewares in another, and so on, rather than having it mixed all over the place. This will create synergy in our receiving, picking, and shipping approach,” says Lindahl.
A thorough camera view of how Ace handles merchandise within its DCs also helps it address loss claims with its customers (independent Ace Hardware store owners) and product vendors. “We can visually document the condition of high-damage merchandise as it’s received, put away, and loaded for shipping,” explains Lindahl. “Our technology infrastructure helps us check those boxes off along the way.” In fact, Lindahl attributes the retailer’s 99.7% outbound order accuracy rate, at least in part, to the CCTV implementation. “We can then identify the other 0.3% as other forms of shrinkage, including receiving errors at the store, administrative error, and damages or shrinkage within the DC,” he says.
Next Step: More LP Intelligence
Ace’s DC-level security approach has resulted in tangible, though hard to quantify, benefits. Security professional headcount reduction, risk reduction, and reduction in damage are among them. An increased focus on gathering intelligence from its security systems will result in further benefits, Lindahl says. “We can collect a lot of data now with networked and intelligent systems. We brought someone on board to do that analysis for us,” he says. Lindahl plans to gather more information on the number of alarms, types of alarms, and data that will help Ace standardize future security product selection. “Our analysis will help us determine if we’re running into issues with certain of the hardware we select, which will help us make better upgrade decisions,” he adds. Vector offers an online monitoring product called InSite, which allows Ace to view alarm history, user history, and other system-related data via the Internet for any monitored location. “Having access to this data electronically has streamlined what was a cumbersome audit process. We used to have to collect hard-copy system activity reports, but now we can simply download and e-mail this data as necessary, saving both time and space,” says Lindahl.
Integration will continue to be a priority at Ace. “Across the industry and at Ace, the POS/DVR [digital video recorder] integration trend has paid huge dividends from an investigation standpoint as well as for the storeowner,” says Lindahl. “We’re looking for other applications that make sense to tie into our CCTV infrastructure on the DC side. Stepping up our monitoring of the handling and distribution of hazardous materials, for instance, might be a next step.” In the meantime, Ace continues to tap Vector for new DC system design, project management, and proactive maintenance. “We recently completed a $500,000 security system installation at a new DC, and we continue to rely on maintenance and forecasting data to replace older systems before they become costly to maintain,” says Lindahl.