Firming Up: Loss Prevention

When a trailer was stolen from one of Mattress Firm’s distribution centers, the chain was not ready to kiss $30,000 in merchandise goodbye. By tapping its IP (Internet Protocol) network video-surveillance system, Mattress Firm was able to recover the trailer—and a potential loss—in record time.

Mattress Firm, Houston, is a privately held bedding and furniture retailer that operates more than 300 stores. The chain is dedicated to protecting its assets, though, as thieves get sjanter, the retailer’s loss-prevention department has its work cut out for it.

“Loss prevention has changed in the last 10 to 15 years,” Maurice Edwards, the retailer’s director of loss prevention and process development, told Retail Technology Quarterly.

“Rather than have a policeman mentality and focus on catching the bad guy, retailers’ loss-prevention approach needs to be more sophisticated today,” he said. “It is more important to learn where the loss stems from, then use data to make better decisions and manage occurrences.”

Edwards boasted that the company has been very successful at reducing theft losses over the last five years. “However, our efforts are not solely focused on theft,” he said.

“We also need to prevent losses due to accidents and issues that occur when staff doesn’t adhere to operational procedures across our warehouses and stores,” Edwards added. “By monitoring these events, we can further improve efficiency and cut operating costs.”

The monitoring is done in a multitude of ways. For example, the chain relies on location audits, operational compliance programs, and more importantly, video-surveillance solutions.

Mattress Firm is a long-time user of a traditional video-based closed-circuit television (CCTV) system. However, as the chain grew to more than 300 stores, the system “had difficulty pinpointing specific activities in specific locations,” Edwards shared. “It was not uncommon for our team to sift through two weeks worth of videotapes before finding the information they needed.”

To solve these problems, Edwards began evaluating new surveillance options. The top choice had to be cost-effective, provide real-time data and seamlessly integrate with pre-existing infrastructure. “We also wanted a system that our regional managers would be comfortable using,” he said. “If we could find a user-friendly system that made it easy to look at incident clips, then we knew that system would be a go.”

When Mattress Firm started its search almost two years ago, it evaluated systems from six vendors. A solution from Jefferson City, Mo.-based Wren Solutions won Mattress Firm’s approval.

The companies signed a contract in July 2005, and the chain gradually began installing Wren’s Network Video Solution across its network of distribution centers. The solution is comprised of Wren IP cameras and Wren Video Management System (VMS) software.

Unlike traditional CCTV systems that use proprietary cabling to link cameras to a recording device, IP video solutions allow retailers to leverage their standard IT infrastructure to run video. Thus, the latter is more scalable, manageable and cost-effective.

The first step: Mattress Firm installed the solution on its Web server housed at its corporate office. Next, the chain increased the number of IP addresses available across its enterprise. For example, previously each distribution center only had three addresses.

“However since each camera records individually, we increased the number of addresses we support to 16,” Edwards explained. “This ensures that we always have access to cameras and collected data in case one goes down.”

To leverage its available bandwidth, the chain then integrated each camera within a LAN (local area network). This enabled Mattress Firm to localize data storage at each location.

While the number of cameras depends on the size of the distribution center, a typical warehouse will have between four and 16 units.

As each camera collects data, the information is filtered to the company’s data center, which is located in the corporate office. Users can tap into the system via a desktop or laptop and watch live data feeds from any camera. This data is simultaneously burned onto CDs and archived for future reference.

Since September 2005, by which time the chain had installed the new surveillance system in its first six warehouses, the chain has lowered its liability claims, added insight into inventory levels and even improved efficiencies of its warehouse-level employees.

“Historically, if there was a process failure, it could take two or three weeks to identify and address it,” Edwards said. “Now we can identify issues immediately.”

The solution is also helping the chain improve its ability to identify outgoing shipments. For example, workers pull merchandise from a pick list. The cameras “helped us identify if the right merchandise was being staged for delivery,” he said.

“If the wrong merchandise is loaded on a truck for delivery, the consumer will send it back,” he explained. “This is a waste of time and gas—an added expense due to rising energy costs.”

Once the cameras were installed, however, the chain improved order accuracy and time efficiencies among warehouse staff.

“Data also proved that our staff is doing a great job adhering to compliance within the warehouse, including cleanliness and appearance,” he added.

Edwards described how one specific incident helped the chain achieve a positive return on its investment. “Recently, a trailer loaded with merchandise with a wholesale value of $30,000 was stolen out of one of our distribution centers,” he reminisced.

The chain pulled all available data and shared this information with local detectives. As a result, the chain recovered the trailer and prosecuted the thieves within a mere two weeks.

Though the chain only partially recovered the merchandise, “The system helped us to recover the trailer,” he added. “As a result, this recovery provided us with a solid return on our investment.”

To date, seven of the chain’s 22 warehouses use the system. And this year, the chain will begin adding the system at store level. Though Edwards declined to share details on his “aggressive” rollout schedule, he expects similar results.

“We already had a successful loss-prevention program. This solution is just another step to expand our efforts to the next level,” he added. “As a result, our managers are gaining the ability to be proactive and stay in-the-know.”