The document discusses strategies for reducing shrinkage and increasing profitability through effective loss prevention programs. It notes that shrinkage significantly impacts retailers' bottom lines. Studies show best-in-class retailers realize shrink recovery can be a top profit source, and loss prevention programs can reduce shrinkage by 20-40%. The document advocates moving from traditional reactive approaches to more innovative predictive analytics utilizing comprehensive data to identify drivers of loss, monitor trends, profile high-risk stores, and target solutions. An analytical approach and roadmap are presented for building baseline models, validating accuracy, enhancing operations, measuring results, and addressing out-of-tolerance indicators to efficiently allocate resources and minimize losses over time.

1. Loss Prevention
Control
Reduce Shrink &
Increase Profitability
Sep, 2012 Jun, 2013 Dec, 2013

2. What studies show
 Deloitte Consulting:
 Shrink is a big problem for retailers. In fact, for a typical supermarket or discount
store, the impact of shrink is felt everywhere – within individual departments,
across functions, and throughout the supply chain. This coverage makes managing
shrink difficult, but not impossible.
 The right kind of program can reduce shrink by 20-40 %. A reduction of this
magnitude puts real money back into the business.
 Larry Miller, Director in the National Supermarket Research Group, US, points out,
“Best-in-class supermarket operators have realized that shrink recovery can be
their top profit source.”
 Pricewaterhouse Coopers:
 The retail and consumer industry is one of the sectors hardest hit by economic
crime,
 In the retail sector, companies face a two-fold threat, from ‘shrinkage’ – theft of
goods by both customers and employees – on the one side, to the broader
spectrum of economic crimes such as accounting fraud, corruption and bribery,
and intellectual property (IP) infringement on the other.

3. Innovative Loss Prevention
• From Traditional to Futuristic- a path forward
• Current environment Initiative
Common
Challenges
• From traditional to future
• A path forward What
Works

4. Loss Prevention – common challenges
Traditional environment
 Information poor data;
 Continued reduction of resources;
 Reactive to failures;
 Post-incident reporting;
 Duplication of efforts for compliance;
 Absence of historical data analysis and trending;
 Minimal or no efforts on root cause analysis
Emerging vision
 Information rich data;
 Improved efficiency in resources;
 Rapid detection of trends and patterns;
 Risk identification – loss forecasting to help prevent;
 Frequent audits based on real time data;
 Collaborative efforts with other compliance teams;

5. Overall assurance
Today
 Multiple points of view related to
operations
Risks  Differing perspectives on risk
 Potential for duplication and gaps
in coverage
 Reduced visibility in the linkage
between sources of assurance
Tomorrow
 Collaboration across departments
 Develop a common view of risk Internal Controls Store Operations
related to the stores/locations
 Presents a clear path to how key Risks Compliance
risks are being covered
Loss Prevention Health & Safety
 This is more than developing
improvements in risk-based Others
internal auditing

6. Comprehensive & analytical approach
 Understanding critical
processes and existing
sources of loss; Root Cause
Analysis
 Isolating and quantifying key
drivers of loss;
 Coordinating across functional
areas to develop a common
view of risk;
 Address key drivers and Identify
Shrink Analytical
Drivers & Forecasting
monitor effectively and Trends
Engine
efficiently
 Implementing a targeted
solution to rapidly detect
early warning signs and
address out of tolerance Store
situations; Profiling &
 Better allocating resources to Clustering
high risk stores and
operational areas

7. Benefits of analytical approach
 Reduce loss across historically poor
1
Benefits performing stores and products;

2 Targeted opportunities directed at
addressing factors highly correlated
5
and believed to be causing loss;
4

3 Shrinking the interval from
detecting to resolving at stores that
3 have yet to disclose continued poor
performance;
2

4 More efficiently allocating out loss
prevention resources;
1
 Streamlining reporting systems and
5
Controls
Loss

8. Roadmap to Loss Prevention & Control
• Sep, 2012
Sep, 2012 Dec, 2012 Jun, 2013
Build baseline Rebuild baseline
models Operations models
Finance Validate Enhance Finance
Merchandize Accuracy & Operations Merchandize
Management Value Activities Management
Measure Results
Refine
Dashboard
Capabilities Finance
Finance Merchandize
Merchandize Operations
Monitor Leading indicators & Trends Management
Management Address Out of Tolerance indicators