For Canadian businesses, there is no reason to believe these figures are not representative of the kind of losses experienced in this country. (Canadian retailers lost $3 billion in in-store shrink in 2002.)

While traditional security technologies such as Electronic Article Surveillance (EAS) and closed circuit television (CCTV) systems can help limit losses due to shoplifting (second on the list at more than 30 per cent of reported losses), their applicability is limited when it comes to preventing employee theft, particularly when much of that theft is occurring at the register. Loss Prevention (LP) software hopes to address the shortcomings of these older solutions.

LP software works as exception reporting software, monitoring point-of-sale activities and reporting on anomalous and suspicious behaviour. To achieve success therefore, it needs to be tightly integrated with the enterprise’s POS system, but once in place, it can be a powerful tool. Features typical to LP software include the following:

”¢    An exception reporting engine with a database of measurement indices to determine when employees are operating outside the bounds of what would be considered “normal” behaviour. This database comes pre-populated with baseline metrics and is fine-tuned over time to be more representative of the company’s actual workers.

”¢   A report or journal creation capability that allows investigators to log all pertinent information to a particular investigation in a single file or location. With losses of the current magnitude, it is foolish to think that only a single investigation will be ongoing at a time. Keeping notes and system-generated data in one location ensures greater accuracy and the ability to seek restitution.

”¢   A browser-based interface to allow investigators the ability to access the system from anywhere at any time. Since retail operations are open for far longer than traditional business hours, the ability to be alerted to an issue and respond to it immediately is of significant value.

”¢    Though not necessarily a feature of all packages, integration with an existing digital CCTV system lends significant value to any LP software system. A picture is, as they say, worth a thousand words and linking video evidence with other notes and system data only makes for stronger cases.

While LP software can be an effective tool in stemming insider theft, it is not a panacea. These solutions require time to become tuned to the activities of the employee pool in order to become more accurate and efficient. Since retail employee turnover can be high, in many cases these solutions rarely operate at peak efficiency. Further, these tools are completely ineffective in terms of catching employee theft that does not involve the POS system, such as direct theft of inventory.

As much as retailers try, they will never be able to eliminate losses completely. Solutions such as LP software, however, can be a valuable tool in minimizing those losses and can help retailers see improvement on the bottom line.

James Quin is Senior Research Analyst with Info-Tech Research Group in Toronto.