Trouble Times Three: Theft, Assets and Your Company’s Brand
Over the past few years DTE Energy, a Detroit, Mich.-based utility, has lost tens of millions of dollars in revenue because of energy theft. People are literally manipulating live wire that could easily create shock, fire and explosions that can lead to property damage, personal injury and even death. Energy theft is a nationwide issue for utilities, but for Southeastern Michigan the problem has become an epidemic in recent years given the economic strain there.
But energy theft was a problem for the utility even before the economic issues developed in the area. “Energy theft has steadily increased over the years as customers came to realize that the crime was under-reported and enforcement was non-existent,” says Lynch. “Illegally restoring gas or electric is not only dangerous to the individual committing the act, it’s a danger to the entire community. Building explosions can occur when gas services are tampered with and building fires are even more common when electric services are tampered with by untrained individuals. Moreover, in many instances the hook-up man risks serious injury or death when tampering with the service.”
HOW BIG IS THE THEFT PROBLEM?Of course, Lynch and his team have reason to celebrate. But you can bet that Lynch has not stopped working to thwart energy theft just because he’s tasted success. The same can be said of other security professionals who protect their company’s assets. Whether it’s energy, greeting cards, high-ticket electronic items, or liquor, preventing theft and keeping track of a company’s assets is a tough job.
• There are fewer employees on the sales floor, creating more shoplifting opportunities.
• There is a reduced social stigma of shoplifting.
Many thieves have found that selling their stolen items through various on-line auction sites results in quicker sales and much higher prices than the traditional selling of items on the street or at a local flee market, the report says. This easy access to a much larger audience has resulted in shoplifting becoming a highly popular way to quickly get cash.
THE ORGANIZED IN ORCOrganized retail theft is increasing as well: Losses are reported to be more than $30 billion annually, triple what they were just 10 years ago. These thieves work in teams often using distraction to commit their theft of items such as over-the-counter medicines; razors; baby formula; batteries; CDs and DVDs; tools and designer clothing. It is not uncommon for retailers to tell of experiences where groups of professionals, hardcore, or international shoplifting gangs “hit” their stores using “booster-bags” and similar shoplifting devices. Losses routinely are reported in the hundreds and/or thousands of dollars per incident.
According to a survey by the National Retail Federation, 89.5 percent of retailers surveyed say their company has been a victim of ORC within the past 12 months, a slight decrease from last year’s 92.2 percent. The NRF survey also found that 58.9 percent of retailers have seen an increase in ORC activity in the last 12 months, down from the nearly three-quarters (73 percent) who said so last year.
‘AVOIDING THE WALL’Security and loss prevention directors are using myriad technologies to reduce theft and track assets at their organizations.
Dave Abramson is using exception reporting software loss prevention training, and the field operations staff to hold all Hallmark store employees accountable. Abramson is manager of loss prevention for Hallmark Cards, Inc. He and his staff run the loss prevention operations for Hallmark corporate stores, in addition to providing consulting services to private store owners. There are more than 3,000 Hallmark stores nationwide, 375 of which are owned corporately. And don’t let the price point of an average greeting card fool you. Abramson says, “We lose a lot of low-priced greeting cards, some that cost just $1.00. People steal Mother’s Day cards that they then give to their Mom.”
EMPLOYEES FIRSTNo one wants to hire the “bad apple,” the hiring mistake that can come back and haunt you. This is important in preventing loss and theft, as well. Jim Figueredo, loss prevention director for Tuesday Morning Inc., a retailer specializing in upscale closeout merchandise with more than 800 stores across the U.S., says that other than the advancement of technology not much has changed from the past in dealing with the protection of assets within the industry. Figueredo says his company currently has the lowest shrink they’ve ever had and the least amount of fraud by industry standards.
“The challenge comes again in the form of people,” Figueredo says. “Finding seasoned investigators isn’t a problem. Finding knowledgeable, well rounded loss prevention professionals who are self motivated and have the passion and desire to go the extra mile and provide quick resolutions is the ultimate challenge. The industry can teach folks how to conduct an investigation or find a suspicious transaction, but we can’t teach a person to have passion and desire. The industry itself has grown leaps and bounds in assisting the LP professional with improved investigative technology and techniques along with certifications and higher standards.
Nothing Matters More Than The BrandIn today’s global market, brands and products face an array of threats to their reputation – and to the company’s brand. Here, brand protection expert, Jim Rittenburg, chair of the International Authentication Association (IAA), answers questions about brand security.
What are the issues facing brand managers today?
It’s an interesting time. Brands and products are always most under threat during an economic downturn but, as you might guess, this is also the time when budgets are most under threat and the money needed to invest in brand security is at its tightest.
It’s important that brands don’t simply use the current tough trading conditions as an excuse to ease back on their security efforts. Brands face threats from a variety of angles in today’s global market – particularly from counterfeiters and brand pirates who attempt to produce credible look-a-likes and pass-off products with impunity.
Are some brands and products more at risk than others?
It used to be taken for granted that it was only luxury and high-end goods such as perfumes, spirits and designers clothes that were most at risk from counterfeiters and pirates. However, that’s no longer the case with counterfeiters – aided by advances in technology – turning their attentions to any branded item that will generate a profit. As a result, everyday household items including cigarettes, beverages and hardware items are equally targeted.
All sectors are affected in one way or another and popular targets include sports goods and merchandise, automotive parts, engineering components, pharmaceuticals, software and audio video parts. In many of these cases, protecting the integrity of brands can be the difference between life and death.
So what is the true scale of the problem?
Quantifying the size of the problem has always been difficult. Many cases of counterfeiting, piracy or diversion simply never come to light. However:
• Counterfeit drug sales alone will reach $75 billion globally in 2010, an increase of more than 90 percent from 2005, according to the U.S.-based Center for Medicines in the Public Interest.
• The automotive industry is losing approximately $12 billion globally due to fake parts.
• In 2007, European Union Customs seized more than 79 million counterfeit and pirated goods and handled more anti-counterfeiting cases than ever before. A total of more than 43,000 cases were dealt with in 2007, up nearly 17 percent from 2006.
How do these practices affect brands?
They threaten the revenues and profitability of legitimate companies. Credibility and reputation in the marketplace is also at stake with counterfeiting having the ability to undermine trust in even the most respected brands.
And if revenues are affected, manufacturers have less money to reinvest in new product development and taxes are cut. The impact is therefore felt across the supply chain with everyone from manufacturer, supplier and distributor through to wholesaler, retailer and customer at the end of the chain affected.
In the most extreme cases lives can be put at risk, potentially invoking legal liability claims.
Are brand managers more aware of the threats to their products today?
Yes, managers and brand protectors are generally more attuned to product security in today’s market. Turning a blind eye is not an option. Those product manufacturers that remain unaware of the extent of the problem, or worse still ignore it, will eventually find that once the damage is done, the costs to repair it are far in excess of what prevention would have cost in the first place. In some cases recovery is impossible and the harm caused becomes fatal.
What role does authentication have in enhancing brand security?
With threats to brand integrity growing, there is an increasing need for quick and easy ways to differentiate fake products from genuine ones. The function of authentication technology is to help customs, police and consumer protection agencies identify the genuine product in ways that are not obvious to counterfeiters, who are increasingly adept at copying products and packaging.
Authentication can be used anywhere. Devices come in a wide range of forms and have multiple applications on products and packaging in industries and sectors worldwide.
What does the future hold?
One of the big talking points at the moment is product coding and tracking systems, because they are seen as an effective means of controlling the supply chain and deterring counterfeits.
Pilot projects are already underway in several industries, most notably the pharmaceutical sector, which has undertaken a three year, multi million EU-funded initiative called the BRIDGE project to test the viability of tracking every pharma product distributed in Europe. The food and drink sector in Europe is running its own TRACE project to monitor products from “farm to fork.”
If you had one message to get across, what would it be?
The main thing for brand and product owners is to be proactive and remain vigilant. This means installing different layers of security on products. The more layers of security you apply, the more difficult it becomes for the counterfeiter or the pirate to copy or misuse your brand. And ultimately this will very quickly lead to greater market-share, increase your profits, and most importantly of all, gain customer confidence.
Top Ten U.S. Cities with Biggest Organized Retail Crime Problem, according to the National Retail Federation• Baltimore/Washington, D.C./Northern Virginia
• Los Angeles
• Miami/Ft. Lauderdale
• New York/Northern New Jersey
• San Francisco
The Human Factor and Missing LaptopsIn an Aberdeen Group study, for every 100 enterprise laptops or what Aberdeen calls endpoints that went out to employees, only 85 came back while five were lost or stolen, one of these was successfully recovered, and 11 are missing and unaccounted for.
Stephen Brower, shareholder at law firm Buchalter Nemer, who often solves legal problems that a company may face when assets are not protected, says that security managers are failing to see the human factor with asset protection. “There’s a terrible problem with computer laptops walking off in organizations,” he says. “One reason is that they are of high value. But in many cases it’s not all that clear that the company means that it is their property. The corporate culture from security should be to explain ‘This is our laptop, here’s the tracking number and you as an employee have to sign a form saying you are using it.’ Remind the employee that the company knows it’s their laptop, not the employee’s laptop. That’s the human factor.”
Laptops Disappear Regularly
• 100 Go Out
• 85 Return
• 5 Lost or Stolen
• 1 Recovered
• 11 Missing
Source: Aberdeen Group
What About Airline Cargo?In August of this year, the airline industry met a key requirement of the 9/11 Act by screening 100 percent of air cargo on domestic passenger aircraft. To meet the mandate, TSA created the Certified Cargo Screening Program (CCSP), which allows certified facilities across the country to screen cargo before it reaches the airport. CCSP facilities must be approved by TSA and adhere to strict security standards, including physical access controls, personnel security and screening of prospective employees and contractors. A secure chain of custody must also be established from the screening facility to the aircraft.
Keith May, manager of cargo regulatory compliance for American Airlines’ Cargo Division, is responsible for the rollout and compliance of 100 percent cargo screening requirements worldwide.