Until recently, data mining was mostly used to find new ways to get people to buy more products. Now, it is increasingly being used to keep people from stealing them.  

Most modern businesses create a flood of information. By drilling down in the data with sophisticated applications, data mining can uncover the cashier who consistently voids transactions after store closing, or the one office building where staff consistently visits areas where they have no business. Because electronic point of sale equipment captures every detail of every transaction from every store, investigators who find or suspect theft or fraud in one location can ask the IT department to hunt for that activity in the data. If a cashier only does a fraudulent refund once or twice a day, for example, visual observation might never catch it.

Physical security and the information technology department have become closer in recent years, because access systems and computers tie into the corporate computer network but advanced data mining techniques mean they are going to become even tighter partners in the years ahead.  Successful organizations will learn how to create bridges between the two worlds.

Susan Terry, a Business Intelligence director with Teradata, a data warehouse company, said most merchandising operations already have POS [point of sale] information, “So you are adding a little bit of cost in terms of labour and some drill-down in terms of the transaction log but most of the data is already there.”

Data mining works by flagging exceptions that can be delivered to security managers so they can better focus their time and attention on the most dominant of potential fraud, Terry said.

Security officers may be able to get started in data mining with information they already receive from their physical security systems. The key is to assemble information that looks beyond individual locations or one-day reporting periods.  Harriet Fryman, a senior director with Cognos Corp. said, “They may have reports and dashboards about their own location but beyond that, they may not have the ability to compare current information with historical patterns or even the ability to look at the top three locations or the bottom three ”“ and that is where business intelligence is just fantastic.”

In most organizations, physical security is still responsible for physical losses, so what should they ask the IT side for? “Current and historical data beyond what their own systems can provide and some tools, so they themselves can begin identifying patterns,” Fryman answered. “The information they will get is much richer than the information they get from the systems they currently monitor.”

Dave Tyson, the Chief Security Officer for the City of Vancouver, knows he will get the best results if IT and physical security work together but he admits it can be a challenge. “On the surface there doesn’t appear to be a common language.  One speaks techie. One speaks traditional corporate security,” he said. “Risk is the common language. We all have assets we are trying to protect.” Because both departments report to him, Tyson was able to impose a simple solution when communication was difficult. “In some cases, I just said ”˜go into this room and learn how to talk to each other’”.

The demonstrated rewards of data mining can be persuasive enough.  Within a few hours of installing a Returns Control Application on top of its Teradata data warehouse, Hudson’s Bay Company broke up a fraud ring responsible for $26,000 in losses and went on to achieve complete cost recovery for the system within six months with other cases.  Employees across the 500-store chain soon realized that they couldn’t fake returns.

The steady advance of RFID (radio frequency identification) will add even more capabilities to data mining, because it will allow the tracking of individual items anywhere in the store.  Software will trigger alerts when non-clothing products go into change-rooms or items are hidden away in the shelves to be picked up by an accomplice after hours.

Phil McDouall, a senior manager at March Networks, a video surveillance vendor, said video analytics will add another dimension to loss prevention.  “Previously, the video was the passive piece and your data warehouse was the active piece,” he said.  “The data warehouse would pick something out and the report would say ”˜now go look at the video’.  Now it can happen the other way around. The video can say something happened here, so go look at the data.”

Traditional data mining techniques might indicate that a certain cashier seems to do a lot of refunds but there might be a plausible explanation.  The cashier might say that customers buy items downtown during the day but return them to her suburban location later at night when she is the only person on duty. Video analytics could reveal that she was doing returns without any customer present.  

In fact, it is possible for video systems to identify suspicious behaviour by individual shoppers or groups and issue alerts to floor personnel when they are detected entering other stores in the chain.

New roles for the physical security department beyond theft and fraud could emerge from advanced video. By scanning patterns in video images, advanced software will detect shoppers who have concealed products under their carts but it will also alert security officers when blocked exit doors compromise safety. Alerts will be triggered when someone takes too many items off a shelf or lurks in what they think is a hidden area, but it will also notice dangerous spills in the aisle or icy conditions in the parking lot.

The full range of data mining techniques will have uses in yet another dimension of loss prevention ”“ unsuccessful training. If a certain employee is routinely performing an action improperly, or if entire groups of employees appear to be making the same mistake over and over, data mining software will flag the failure and alert managers to modify the training program.

Companies have access to increasing amounts of information, but data mining tools provide one way to turn it into useful information. As the eyes on the front line of the business, security departments that work well with their colleagues in information technology to make the most of data mining have the opportunity to give their companies a real competitive advantage.