Reducing shrinkage

July 2012 Integrated Solutions, Retail (Industry)

Automatic number plate recognition (ANPR) is not a new technology, but its broad based application in South Africa is. Business Against Crime South Africa (BACSA) launched a system that has had a great deal of success to date, but which has not had the high levels of uptake one would expect from the benefits it provides.

Fouché Burgers, project manager at BACSA, explained that ANPR entails taking an electronic image of a vehicle and, through the use of specialised software and optical character recognition, to convert the vehicle number plate into a digital identity number. The information is then tested relative to a national database for comparison with those number plates that have been previously listed for various criminal reasons.

Fouché Burgers, project manager at BACSA
Fouché Burgers, project manager at BACSA

“ANPR is useful for a number of reasons, including the identification of stolen vehicles following a theft or hijacking. In addition, the spotlight has been turned to its use as a tool in identifying vehicles that have previously been highlighted on the database as suspicious, stolen or known to have been involved in previous crimes,” said Burgers.

He explained that the challenge has always been how one effectively identifies a vehicle in motion without causing inconvenience to the driver. “ANPR alleviates this with its ability to perform analytical recognition and verify the identity of the number plate without either alerting the driver or disrupting the movement of the vehicle.”

There are two modes of surveillance – fixed cameras and mobile vehicle-mounted cameras.

Burgers said that while ANPR technology is not unique, this specific database is and represents a perfect example of evolved cooperation between businesses and law enforcement agencies.

“The beauty of the system is that authorised people can access this database remotely, via 3G communication, and verify the data against an additional 25 databases. Notwithstanding the fact that all information is strictly controlled, this database provides huge benefits to stakeholders.”

BACSA has already established relationships with two industry suppliers – Syntell and Cura – but will be widening its list of recommended suppliers as demand for the system increases. “BACSA is the provider of access to the database, and while we can recommend certain specifications and suppliers for the hardware component, the choice of supplier is ultimately in the hands of the customer.

“Acceptance of ANPR is growing fast due to the fact that the system has been seen to reduce business and house robberies; reduce vehicle theft and hijackings; reduce fraud and corruption; and improve road safety and the recovery rate of stolen vehicles. These all lead to more affordable insurance rates and, more importantly, a safer South Africa.”

On the shop floor

High value, small items are the current favourites with criminals, according to retail risk manager for Spar North Rand Division, Charles Lowings. “To counter this risk, we implemented technology through offsite CCTV monitoring to assist the guards in apprehending and identifying the culprits. We have written a standard operating procedure for our security officers that focuses on the identification and monitoring of hot products.

Retail risk manager for Spar, North Rand Division, Charles Lowings
Retail risk manager for Spar, North Rand Division, Charles Lowings

“Each security officer is responsible for identifying those items – usually found in the health and beauty aisle – that are targeted most, then doing a daily stock take on the products before the store opens,” said Lowings. “In this way the security officer is able to identify how many products were legitimately sold and how many were stolen. By implementing this system, we have managed to achieve a high level of buy-in from the security officers, since they then become an active part of the solution.

“Because we have gained a greater understanding of the modus operandi of criminals, we are able to provide the security officers with the necessary information to allow them to identify criminals. In this way, their role in apprehension and arrest of criminals increases, leading to greater job satisfaction and loyalty.

“We have also spent a great deal of time liaising with the SAPS in order to highlight the importance of targeting the theft of these small, high-value items. In the majority of cases, syndicates are responsible for these crimes, so by combining the efforts of our security officers with those of the SAPS, we are able to eliminate a large contributor to shrinkage countrywide.”

Lowings explained that all security officers at Spar are obliged to undertake a regular polygraph test in order to reduce collusion. “This limits the opportunity for theft. When opportunity is removed, desire to commit crime is also removed.”

Lowings believes that technology should be implemented to assist security officers in achieving a better result. “Technology is more cost effective and one can reduce or use the current security budget to achieve a better security service. Technology in terms of CCTV offsite monitoring and security officers together play a vital role in breaking the crime chain, and when properly trained and utilised they are a valuable asset to retailers.”

Spar is a great example of the benefits of implementing an ANPR system. “We faced a huge challenge in identifying suspicious people who had the intent to commit crime.

“One needs to consider that those committing credit card fraud and shoplifting usually use the same vehicles repeatedly to convey them quickly from one point of theft to another. By utilising ANPR we have been able to identify suspicious vehicles by comparing their number plates to those on the database. In this way, we are then able to track and apprehend suspicious vehicle occupants before they enter stores,” said Lowings.

He added that the Spar Group started with a mobile ANPR vehicle and after two years decided to install static cameras. “We have seen a marked reduction in crime. In addition to this obvious benefit, the system has market research advantages. Landlords can acquire information on trends such as peak traffic periods, which can be used to the advantage of retailers, to increase revenue.”

Alleviating CIT heists

The Secure Cash Distribution System (SCDS) is another BACSA initiative aimed at reducing robberies. The system, which was recently subjected to a three-year pilot study at a major Gauteng shopping centre, has a number of benefits for retailers, banks, shoppers and cash in transit companies.

Effectively reducing cash contact to the minimum, the SCDS operates on the principle of moving cash from retailers and banks to the secure cash distribution centre, located within the shopping centre premises, by means of a secure air tube system and other secure devices.

Sophisticated and effective security features provide access to the cash distribution centre, thus averting any possible hostage scenarios. This sophistication extends to within the cash distribution centre, providing comprehensive coverage of all actions performed.

Once received within the cash distribution centre, cash is counted, sorted and recycled back into the ATMs in the shopping centre using counting devices designed to improve the audit trail of the cash and improve efficiencies in the cash counting cycle. This process reduces the number of cash-in-transit movements to cash centres and also the number of times the cash is handled. This results in a longer life for bank-notes and a reduction in the cash in circulation a benefit that has met with the approval of the South African Reserve Bank.

“The SCDS eliminates the carrying of cash in public and removes the need for armed cash-in-transit personnel being present in the public areas of the mall, thus rendering the use of armed security officers unnecessary. Radio frequency identification tags identify each depositor and the receipt of each container is covered by video surveillance to prevent any security breaches,” said BACSA project management consultant, Debbie Pryer.

BACSA project management consultant, Debbie Pryer
BACSA project management consultant, Debbie Pryer

Pryer, who moved from the UK 10 years ago is passionate about removing guns from shopping centres. “When you eliminate guns and implement technology, you eliminate violent crime and loss of life. South Africa has an unacceptably high level of crime-related injuries and deaths and this needs to be addressed on all possible levels.”

Pryer, whose work history as a specialist in the security sector is well known, is contracted to manage the CRIM (Cash Risk Identification and Mitigation) Project for the South African Reserve Bank through BACSA.

The system, which took three months to install, went live on 1 June 2011 and was lauded by the banks and retailers that took part in the pilot study. BACSA is currently negotiating with the other retailers, restaurants and financial institutions who have expressed an interest in the system.

Pryer pointed out that the SCDS has distinct OHS implications since it removes a harmful element from the workplace. “There is a lot of psychology involved in the development of the system, which positively impacts on the emotional wellbeing of all stakeholders in a shopping centre. We learned many lessons during the pilot study, which has assisted us in writing standards around the correct procedures to follow for all South African Property Owners Association (SAPOA) members.”

Business intelligence = business advantage

Bryan McDermott, a director at NewCo Technology, said that there are numerous security threats within the retail sector. “Two of these are armed robbery and shrinkage. The way to mitigate against the former is for stores to provide a deterrent to the crime. In the latter case, you need to remove the perceived opportunity by using technology.”

Bryan McDermott, a director at NewCo Technology
Bryan McDermott, a director at NewCo Technology

Matthew Dyball, MD of Lodge Security, said one of the biggest risks for South African retailers is to maintain their shrinkage levels below 1% in a protracted recession. However, shrinkage is a profit opportunity that is often missed, even though it can provide retailers with a 30% profit margin growth.

Matthew Dyball, MD of Lodge Security
Matthew Dyball, MD of Lodge Security

In order to achieve this, retailers need to determine the root cause(s) of the problem. Retailers often have a knee-jerk reaction to fighting shrinkage and spend 80% of their security budget chasing 20% of the problem (their focus being on malicious shrinkage).

Dyball pointed out that a mere 20% of products sold contribute as much as 80% of the shrinkage. “Therefore, retailers need to identify their hot items and find ways to reduce their theft without resorting to defensive merchandising that ultimately frustrates shoppers.

How can they do this? By implementing end-to-end accountability (from product design, to DC, store to reverse logistics), utilising and analysing data, monitoring and generating transparency (through processes such as daily stock counting and process audits). What is measured is then managed.”

McDermott pointed out that there are three major areas of shrinkage – internal (employees), external (shoplifting) and administrative (poor adherence to systems). “The exact areas of concern are limited to perceptions by the individual retailer, since it is not possible to pinpoint exactly which areas contribute the most to the shrinkage. The percentages will vary from country to country, town to town and retailer to retailer.

“The important thing though is that no matter where the shrinkage is happening, it has a direct negative impact on the bottom line. Therefore, loss prevention should be seen as an asset rather than a cost centre since any money that can be added to the bottom line by reducing shrinkage is additional profit,” added McDermott.

Dyball said that Lodge Security has implemented a Loss Prevention Awareness programme with retail clients, which addresses compliance across the whole supply chain. “By improving compliance to procedures throughout the supply chain, you remove the opportunity for malicious shrinkage to occur.

“As part of our awareness programme, we ask our clients to use Hot Product Controllers to improve the handling process of shrinkage sensitive products. These high-risk products are fast tracked and stores are responsible for tracking their movement on a daily basis. A daily count system is implemented in the storeroom, and on the shelves. By staying on top of the situation, instead of doing stock take only every six months, retailers quickly identify where products are actually going missing, and adapt accordingly,” Dyball explained.

Dyball believes that future success depends on having an holistic approach to security and finding the balance between security officers, processes and technology.”

Data mining in retail

McDermott is an advocate of data mining as a business tool. “It is not enough to merely install a camera and hope it will catch a criminal. The camera needs to be able to provide you with business intelligence upon which you can make operational decisions. Technology provides you with data and this data can give businesses the leading operational advantage if utilised correctly. You cannot fix what you do not know.

“Once you are able to use your surveillance system to ascertain ‘feet through the door’, you will be able to improve both the safety as well as the effective merchandising of your store. The data will provide you with the knowledge of where people are moving within your store and this will allow you to situate certain products at specific locations,” said McDermott.

In terms of improved security, McDermott said that data mined from the point of sale will indicate where sweethearting and collusion are taking place within the store. “Data mining will also ensure that stock which arrives at the receiving bay is added to the inventory and then removed from the inventory when it is sold. Effective use of data mining will identify and eliminate under ringing, hand keying of items (entering the codes of lower value items for high value items) and fraud.”

Retailers continue to seek increased return on investment so the reliance on technology and intelligence will increase to meet this need. “The biggest challenge will be ensuring that employees adhere to systems. A good store manager will be able to enforce this by using an integrated approach of technology, plus systems, plus people,” said McDermott.

“Getting your security system to provide you with more value for money requires a comprehensive risk assessment, short-term investment in technology for long-term gain and the training of selected employees who exhibit expertise and technical acumen.”

Dyball believes that going forward, success will depend on the adherence to specific policies and procedures, with benchmarks put in place to allow measurable success. “In addition, there has to be an holistic approach to security, with a balance achieved between security officers, systems and technology.”

“However, all of this means nothing if you do not understand your market and its demographics. In order to achieve high success rates, one needs to tailor the solution to the geographical area the store is located in and take cognisance of this when mining data,” McDermott concludes.


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