CHICAGO -- Operators have known for decades that a dollar stolen disappears immediately from the bottom line. A comprehensive approach to profit protection was summarized by Stan Ledbetter, RE Services (Lafayette, GA), who led one of the new Operator Perspectives sessions in the exhibit area at the recent National Automatic Merchandising Association OneShow in Chicago.
Ledbetter, a second-generation operator, recalled that he joined the family business in 1971, a year after his brother Steve. They began to innovate, developing (among other things) the Debitek stored-value cashless payment system that they subsequently organized as a separate company. In 1992, they bought out their parents. The company continued to grow in full-line vending and foodservice, and today has annual sales of $65 million.
They became keenly aware of the need for loss prevention in 2005, Ledbetter explained. "My brother and I were confronted by our board," he said, "because 3.3% -- $1.3 million -- was leaving the company through shrinkage." They had met security expert Mark Manney, founder of Loss Prevention Results (Wake Forest, NC), at an industry function, and recalled that he had offered a comprehensive approach to dealing with leaky accountability. They got in touch with him, and agreed to set up a test in RE Services' Macon, GA, branch.
"We started with a 'town hall meeting' attended by the route people," the industry veteran explained. "We showed them a video, "It's a New Day," that demonstrated what we planned to do."
Manney, whose career in retail security began in 1972, has specialized in profit protection for the vending and foodservice industries since 2002. He has authored many articles on the subject, and is a frequent speaker at industry events. He became the National Automatic Merchandising Association's Knowledge Source partner in loss prevention and security in 2006.
Loss Prevention Results' strategic approach is to create a "culture of control" in the organization, through improved procedures, greater management vigilance, emphasis on security and the use of appropriate technology. Video surveillance, for example, captured an RE Services technician in the act of stealing soon after the test program began.
Ledbetter noted that Manney has found, on average, 13% of employees to be honest, regardless of temptation; 22% dishonest, regardless of danger; and 65% neutral. A principal objective of the Loss Prevention Results program is to reinforce the honest people, encourage honesty on the part of the uncommitted by minimizing opportunity and demonstrating that theft will be detected and punished, and identify and get rid of the dishonest -- some will quit when they recognize what's happening, and others can be discharged as they're apprehended. "In one division, we replaced 12 of the 16 route drivers within six months," the speaker reported.
Convinced by their tests, the Ledbetters implemented the Loss Prevention Results program across the entire enterprise. In 2006, losses had dropped from the original 3.3% to 2.8%; by 2009, they had declined to 1.6%; and last year, were running at 1.2%. "This has saved us $4.2 million so far," the speaker said.
Specific problem areas can be addressed by adopting suitable remedies. "In north Georgia, Mark advised us to re-key all our machines and start using locking keyrings," Ledbetter recalled. "And we had several resignations."
In Athens, GA, the company added a toll-free telephone number for employees to use for anonymous reports, to which management must respond. "Someone called in a tip on a ring of thieves in Atlanta that was preying on us and several other operators," he added.
At present, RE Services shows the Loss Prevention video to the entire staff annually. It has installed LPR's "vending cam" video surveillance cameras in buildings and machines, and rotates covert GPS transceivers among its trucks. The company has adopted secure in-truck transport boxes, locking keyrings and tamper-evident collection bags.
"We have cameras in our cafeterias, too, and physical security checks," Ledbetter continued. "We have procedures for delivery drivers and our warehouse people. And we practice strict key control."
Other components of the program include retention of four full-time "cash cops" in the major markets that RE Services covers, and a "food cop" who scans in stales when they are returned to the warehouse.
"Does any one thing solve the problem? No," he emphasized. "But read Good to Great [Jim Collins, HarperBusiness, 2001]. You have to believe, but you also have to confront the brutal facts -- and you have to use all the appropriate technology that's available to you."