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Businesses Fight To Reduce Theft

Without constant vigilance, valuable inventory tends to disappearBIZ SPOTLIGHT – Business Security & Safety

Retailers, wholesalers and other companies in New Jersey and elsewhere face a big problem: shrinkage. The term refers to the disappearance of inventory items from shelves, loading docks and manufacturing facilities, usually because of theft.

While the volume of shrinkage has been, well, shrinking over the long term, it still costs retailers an estimated $37.4 billion in 2005, according to the most recent National Retail Security Survey Report complied by the Center for Studies in Criminology and Law at the University of Florida.

As a percentage of sales, product theft stood at 1.79 percent in 1991, the year that the National Retail Security Survey Report was first launched. By 2005, as more businesses adopted countermeasures like video cameras and security tags linked to alarm systems, the rate of shrinkage had edged down to 1.59 percent of sales.

For people like Robert Oberosler, senior vice president for distribution, supply chain and asset management at Pathmark Stores Inc., a Carteret-based supermarket chain, it’s a never-ending battle of trying to identify weak links and develop systems to guard against their exploitation.

“In a retail environment, shrinkage can be traced to a number of causes,” says Oberosler, who’s worked with department stores and other retailers during his 30-year career. “Customer shoplifting is only one type of shrinkage.”

Employee theft is also a concern. For example, a cashier who rings up a friend’s order may give the person credit for an outdated coupon, or bypass the price scanner and make it a freebie.

“Sometimes a customer may place items in the bottom of the basket,” adds Oberosler, referring to the metal or plastic mesh that may stretch across a shopping cart’s rails—below the basket but above its wheels. “Products [often beverages, paper products or detergents] placed there are likely to be below the line of sight of a cashier and will often not get picked up and scanned.”

While some shoppers may put items there to avoid paying for them, others may be unaware. “It’s not unusual to see a shopper leave a store, load his or her car and then drive away leaving items in the bottom of the basket,” says Oberosler. “But often it’s simply a scam.”

To counter that, Pathmark is testing LaneHawk, an optical scanner mounted near the bottom of a checkout aisle that uses object-recognition technology to automatically detect and identify items stored below the basket. It then flashes the description and price of the items on a cashier’s display screen, placing them in a discrete section of the screen.

Thus alerted, the cashier can ask the shopper if he or she is aware of the items under the basket, and either tack them onto the bill or remove them and have them reshelved. The supermarket is currently testing LaneHawk in its Jersey City, New York City and Philadelphia stores.

According to the 2005 National Retail Security Survey, shrinkage at supermarkets and groceries was equal to about 2.38 percent of their total sales. At the high end, retailers of accessories such as hats, scarves, belts and other easy-to-lift items, reported the highest theft rate of 4.69 percent of sales. The lowest were camera and photography stores, at .3 percent, probably because most of their goods are kept in locked displays.

Some security-product providers, like Checkpoint Systems Inc. in Thorofare, guard against shrinkage at a variety of points along the supply chain.

One Checkpoint product line, Evolve security tags, can be affixed to the outside of canned goods and other products or embedded within items like clothing. Equipped with radio frequency identification technology, the tags can be used to track and identify goods as they’re warehoused or moved to different locations and can interact with retail point-of-sale systems to record sales and update inventory. The tags can also be linked to alarm systems to alert security or other personnel if an item is removed from a store or other area without payment or

other authorization.

“As consumer goods move through the supply chain, they are subject to theft, damage and paperwork errors,” says Checkpoint CEO George Off. “Tags like Evolve can help retailers and manufacturers gain improved inventory visibility so they can improve merchandise availability for their customers.”

Other companies, including Tri-County Security, rely on a combination of technology and flesh-and-blood presence.

The Vineland-based company equips warehouses, construction sites and other locations with guards, cameras, card-access and other systems.

“I’ve been in the security business for 20 years, and thieves are always trying new approaches,” says Cheryl Chalow, executive vice president at Tri-County. “In a warehouse, they’ll try to slip small, expensive electronic items into their pocket or handbag, or they may throw them into a dumpster on their way out of a facility and try to sneak back later to fetch them.”

One current assignment has Tri-County guarding a 36-acre residential construction site to prevent thieves from taking appliances or cabinets.

Chalow says her employees can go undercover to try to head off some kinds of theft. “In some cases our employees will be hired by a client company as a factory worker or in another position, where they can see if there’s an employee-theft ring in operation,” she says. “Shrinkage is a big problem for businesses. But unfortunately, cost-cutting is usually at the top of the list for many business owners, so they often won’t take steps to fight it until their merchandise starts

to disappear.”

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