A Regimen For Security

Oct 1, 2007 12:00 PM

How CVS/pharmacy improved loss prevention with data analytic software

While the retail industry has a unique set of security problems, the loss prevention and operations challenges retailers face and the solutions they use to address those challenges can offer insights for all security professionals.

The latest National Retail Security Survey, conducted by the University of Florida and sponsored by ADT Security Services, shows that retailers are still losing more than $40 billion a year to theft. Increases in elements such as Organized Retail Crime (ORC) have made the problem even more difficult.

Theft is such a problem for retailers that many of them have approached it aggressively and have been willing to look at new tools for loss prevention. One of the industry's innovators is CVS/pharmacy, America's largest retail pharmacy with approximately 6,200 retail locations in 43 states.

The approach CVS has taken to security and loss prevention has been to understand its own business as thoroughly as possible — to know what is going on chainwide, regionally, at the store level and, in some cases, even drilling down to the associate level.

“As a retailer you need to know what is happening within the four walls of your store,” says Larry Foster, director of loss prevention and forensic analysis for CVS/pharmacy.

To do just that, Foster and CVS/pharmacy turned to data analytic software by Retail Expert, a part of ADT Security Services. Foster has taken the NaviStor software platform that includes point-of-sale (POS), Direct Store Delivery (DSD), inventory and pharmacy modules and worked with Retail Expert to customize it for the CVS application. He has internally branded it VIPER FSI (Visible Improvement in Profits Executions Front Store Inventory). The software helps collect and manage day-to-day data that enables Foster and his staff to track trends over a period of weeks and months.

According to Foster, they are looking at store inventory as it moves into, through and back out of the store. “We are looking at inventory movement all the way down to the SKU (stock keeping unit) level,” he says.

Some of the things CVS/pharmacy is looking at are warehouse invoices, transfers, returns, positive order adjustments and store alarms. But they are not looking for just one-time or short-term anomalies. They are looking for trends that might indicate an ongoing theft or loss problem. For instance, if they see that there is a large continuing discrepancy between the number of razor blades a store is selling and the number it is ordering, that could cause CVS loss prevention to initiate an audit to determine what is happening at that store.

The software is doing its job. CVS/pharmacy is prosecuting eight times more internal theft cases now than it did four years ago, not because the rate of theft has increased by that level, but because this type of software has made it easier to spot internal theft and take action.

“That really is the purpose of this software as a tool for the retailer,” says Lee Pernice, director of vertical marketing for ADT. “It takes exception reporting to a new level and gives them important information about their day-to-day operations that was never available before, and it allows them to act quickly on that information, make adjustments and limit losses.”

About 70 percent of the revenue at CVS/pharmacy is generated from its pharmacy — it fills one in seven prescriptions in the United States and one in five within its own markets. The high percentage of pharmacy business presents a whole different set of loss prevention challenges for the retailer. But the flexibility of the NaviStor software has allowed CVS/pharmacy to work with Retail Expert to customize the system for its special needs. High theft items in the pharmacy can be strictly scrutinized from delivery to dispensing and, ultimately, to sales.

As Foster points out, the resale value and misuse of pharmaceuticals makes them a target for all types of theft and fraud. But NaviStor gives CVS/pharmacy more than 1,600 key performance indicators (KPI) to track, looking for patterns and trends that might indicate an ongoing problem.

According to Pernice, the more information retailers have on their day-to-day operations, the better they are at limiting loss and at managing their operations.

“This type of data analytic can give them information on store performance, staffing, training and merchandising,” she says. “They can use it to make changes that lower expenses and increase sales and profits.”

Combining other elements such as people-counting devices with data analytic software makes it even more powerful. People-counting used with point-of-sale information gives the retailer a valuable piece of information — sales convergence. It lets the retailer know how many people who come into the store actually purchase something.

As for CVS/pharmacy, Foster says he hopes to add information and alarm data from the stores' surveillance cameras and EAS (electronic article surveillance) system to his information data collected by the software.

“That will give us some real visibility into external theft elements such as shoplifting and Organized Retail Crime,” he says.

“When you put all of the pieces together, what we are really providing the retailer with is a picture of what is going on in their business at a very detailed level,” Pernice says.

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© 2008 Penton Media Inc.

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