Brand Elverston sits down with Mike to discuss the role that Asset protection plays in a retail environment, its impact on OSA and technology trends to support AP.

Brand spent 12 years serving his country in the Military and 22 years in Asset Protection at Walmart. He now owns his own consulting company called Elverston Consulting.

I am super excited to have Brand Elverston on the

podcast for today. Brand started his career in the US Military

serving our country for over 10 years as a field artillery

officer. He then went to Walmart, where he spent over 22

years working for the world's biggest retailer in the area of

asset protection. And now he's started his own company called

Elverston Consulting. Brand and I have spent many years together

working in the asset protection and technology space, and it's

my pleasure to welcome him to today's podcasts. Brand, great

to see you. Thanks for joining us on the podcast.

Thanks for having me. Good morning, Mike.

Yeah, so we just, we just covered your,

your introduction here, thank you very much for all of your

service, with your military background, we appreciate you

taking care of our country. And, man, to some degree, today, I'd

rather have you back in that spot. Today we are we're kind of

in a big mess but we won't get into that topic, because that's

a whole different conversation. But 22 years at Walmart, and now

you're out and basically helping companies, solution providers

and things like that with asset protection. We're really trying

to focus on on-shelf availability, because we know

how important that topic is for customers. And obviously, for

retailers and suppliers. But this portion of asset

protection, we've really not covered a whole lot. So we want

to focus on that. But before we get into that, I'm gonna ask:

we're all customers, right? We all shop in stores, and we all

buy stuff online, etc. So I love to ask people, if you've had a

personal situation over the last three, six, 12 months, whatever,

where you have been disappointed because something you wanted was

not available available either in a store, or you ordered it

and the cut your order, etc? And how did that make you feel? Any

examples you want to share with us?

Yeah, it's, it's frustrating. Number one,

you know, because in my mind, there's a bit of a difference

between out of stock physical presence; so when you're in the

store, and they're out of an item (forget COVID) pre-COVID,

that was relatively rare. Typically, they would have what

you wanted, but - introduced COVID - two and a half years of

supply chain issues. It happened to me for the first time from

Amazon, I was ordering copies actually editor copies of my

first book, and it was short shipped. So I thought okay, is

this carton one of two or what the deal is, and interestingly,

got a hold of Amazon customer service. No questions asked,

immediate credit to keep the stock. I had another instance:

my inlaws, probably about six months ago, something completely

different showed up. It was a box full of a dozen Rubbermaid

totes, that was huge. And she had ordered something completely

different. So again, I called Amazon and they're like, "Hey,

keep it we don't want it back." I was thinking next time the

Amazon truck comes, you can have it back because it's a big

package. But they didn't. So I say all that to say the customer

service experience to me matters. Yeah, I didn't get the

product. Yeah, I gotta reorder it. But to me, that takes a bit

of the sting out of the inevitable. But, you know, those

could be instances where it's a medical supply, or it's a

birthday present, or something that's really important. It may

take on a different feel. But in both cases, the customer service

made it.

Still disappointed you didn't get the product. But

at least you felt like you got to talk to a real human and they

took care of it for you, which is awesome. Right?

And I've not done any OGP ... at any major

retailer, I haven't done that my wife has. But I haven't

experienced that and OGP.

Got it. Got it. Awesome. So let's, uh, let's

kind of transition a little bit. What we really want to focus on

is the asset protection space. I think a lot of people understand

the word asset protection. And then I think it used to be

called loss prevention. But before we get in there, what

what would you be? I mean, you bet you spent your entire career

in this space, what exactly is asset protection? What does it

mean? And if I'm gonna ask if I'm an asset protection, kind of

what am I responsible for?

It changed in the 20 years, 22 years I was in,

in the career field and it depends on the retailer, but at

a Reader's Digest version is the definition has evolved into a

broader scope of impact. So when I joined in '95, it was pretty

much cops and robbers. Everything was how many

shoplifters did you catch? Did your team catch this month? How

many internal cases? Everything was pretty much myopically

theft. And then leadership changes and other contributing

factors, we started pushing the bookends out to say, "hey, you

know, there are wrinkles from point of origin, all the way

through the supply chain to on shelf availability. And if

you're going to make a real impact to this thing called

shrink, you have to understand and affect all of the components

and where companies get in trouble." So not everybody's the

same. So you go to retailer X, they may still be in the cops

and robbers space, and their shrink is stunningly high.

Again, forget COVID. My answer to that is - and I resisted this

the entire 20 plus years at Walmart - theft is a problem.

But it isn't the total loss problem. If we don't understand

on shelf availability, capping, you know - the in stock position

and supply chain and warehousing and cross docking and all those

components - you don't understand the entire problem.

So one or two things was always my response if shrink is still

persistently high. And you believe theft is the major

driver, one of two things are true: you either suck at your

job, or theft is not the entire issue. Want to go to - and again

- you have to strip out COVID because I know companies had to

do some pretty drastic things to back off of risk theft

mitigation. But it's changed. But it's been a slow change.

Mike, I would say that tipping point really started about 2010,

meaning vice presidents taking the chairs at these major

retailers that had a background other than asset protection, or

they truly understood the operational impact. They were

broader thinkers. They weren't these myopic tunnel vision; It's

all theft, and that's all I'm gonna do.

Right? And just for perspective, I mean, you can

help this as well. I used to always, very naively thought

shrink meant customers were stealing stuff. So shrink, and

you help me understand that shrink is really just

unaccounted for inventory; inventory you're supposed to

have but you don't have where does it come from? And the

follow up question is, how do you measure it? Because you hear

"Hey, 2% Shrink is a big problem, and how do we fix it?"

But nobody really seems to understand exactly where it

comes from. And then I'll just take take service: how do you,

how do you know where this shorten comes from?

In the inventory sense, meaning, you

know, the annual, so any publicly traded company has to

have an external audit, at least annually in all of their retail

formats. So they come in, they count. And it's a big basic

reconciliation of here's what your checkbook ledger said you

own financially. And physically, here's what we counted, and then

you strip out the sales and et cetera. But you compare two

basic numbers and the gap is shrink. You own it on the

ledger, but it physically is not in the store and you didn't sell

it. The contributors to shrink back to our earlier reference

are everything from short ships from OEM. So let's take a

company up big one P&G. They ship a gazillion widgets to

every retailer on the planet. And to believe that there are

not errors, unintentional administrative errors gaps, that

case pack got pushed off the conveyor didn't get on the

truck, those things happen in supply chain just like they do

in the retail box. So it starts there. Did you get everything

you were invoiced and paid for is a question mark claims when

you are processing claims to return back to the vendor

getting the credit from the vendor, rather than just put it

in a box and hit the UPS truck and the retailer's like hey, out

of sight out of mind. Well, guess what? Didn't get credit on

the ledger. So you still own it, even though you don't have it?

Refunds, unintentional mistakes, and point of sale. All of those

things fall under administrative shrink, which, as you're well

versed on, it used to for years was on the University of Florida

National Retail security survey of which I did the Walmart data

for 20 plus years. And it's a guess, we don't know you know,

of every dollar I lost it that annual inventory I cannot

specifically and quantifiably assign 55 cents to theft, 30

cents to administrative, 10 cents to vendor fraud, etc. It's

a best guess. Now, you have analysts nowadays and you have

pretty good approximations on that. But on inventory day, you

simply get in the most tier one retailers, you get financial

accounting down to departmental level, you don't you don't get

category fine line or item. Now, that may not be true, it's a

target, they may get item level shrink. But in my experience,

where I came from, we didn't have that we had approximations.

So again, back to the earlier point, if theft is the major

driver of shrink, you either suck at your job, or that's not

the major contributor, the long tail of it is, it's it's telling

that we are not impacting or digesting the scope of the

entire problem from OEM to the cash register. If you're not

doing that you're not attacking the problem.

So let me play out what you just said. If I happen

to be an asset protection manager who's in a store, I do I

run my store 364 days a week when I, or 364 days a year, I'm

trying to check, did my customers steal something? Did

my associates or my employees steal something? Did I process

claims, right? Did I receive everything I get paid for? I'm

trying to do that? A what you're saying is once a year, they're

going to come in and count on everything. And they're going to

say you're missing 2% of all of your cosmetics. You're not even

going to tell me which cosmetics I'm missing you're just saying

this entire department is down 2% How in the world that would

like be driving or flying a plane with no instruments,

except once a year they go here's your here's your

instrument that that seems like in today's age ridiculous that

you don't have something that allows you to say, here's the

here's what I am missing of this particular item because I had it

yesterday and I no longer have it. And I haven't seen any point

of sale for it. So something happened to it. But is that how

things work? Literally once a year, I get a snapshot by

department.

Yep. And that is SEC, Wall Street requirements

for publicly traded company is reconciliation, annual

reconciliations. And while it's not specifically designed to

identify loss, profitability, you just have to reconcile so in

a simplistic view, the taxes paid on inventory, carrying

cost, etc. As a publicly traded company, the all of that can

happen. But you get that once a year. So there is no real time,

Mike, where you as a store manager can say, Whoa, I'm

tracking a 2% shrink on my cosmetics department, you don't

know that. All you know is the thieves you caught. And rest

assured you're catching about 10% of them. Internal cases

where I'm a cashier, and my girlfriend comes in and she has

you know, three boxes of eyeliner pencils at 10 bucks a

pop, and I only bring up one box out the door goes at $90 and

shrink. We don't catch it. It's just gone. We don't know what

happened to it. So again, it's back to the methodology of that

given retailers leadership if the if the if the gravitational

pull is theft. And I'm gonna say well, "holy crap, I shrank out

$6 million in this store this year. It's all theft." I don't

buy it. I you know, instead of not peeling the onion back down

to the core. They don't understand the components and

contributions. And it's been exasperated during COVID With

all of the smashing grant videos on Omar's organized retail

crime, that through gas on the fire back to the 90s when it was

all theft, I get it. Oh RC is a huge problem. And we are not

addressing it through the legal system. I totally appreciate all

of that. But there are components we're leaving on the

table at the expense of chasing what is sexy and what we see

versus tightening up the ropes on from OEM to the register.

That's yeah.

Well, here's another one of the unintended

consequences because Justin Patton and I did a podcast

probably about a month ago that would that we'll share with our

listeners that talked about the issue of ghost inventory in our

systems. So I got a computer mouse here. The computer system

says I have five of them. The reorder point is two. I don't

have any there's none of these could be somebody stole a bunch

of these, we didn't get and whatever they happen to happen

to be. Even if you tell a store manager, you don't have five,

you have zero, you should zero it out. They'll say, I can't do

that, because then I'll get blamed for shrink. Happens all

the time in a retail counting world, like some of our big

retailers are, is that true or not? Because there's a lot of

if I change my own hand and get that

reorder going, I'm gonna get blamed for shrink. Talk to us

about the implications of that.

In my experience, the answer to that

is no. Yes, there is direct accountability for shrink on the

annual inventory. But at the end of the day, and in my 20 year

pedigree, there was rightfully so an intense myopic focus on

out of stocks. It didn't matter where we weren't very good is

fixing it. We knew how to work, we could fix the symptom, ie,

the perpetual inventory in the system was incorrect. So we

would reduce that to get flow back. But that's a perfect

example of asset protection loss prevention, when they would see

something like that. They're like, hey, that's store ops. I

don't do that. That's the wrong answer. It is an inventory

problem. And if you look upstream far enough, you got to

figure out why did that occur in the first place? And in that

scenario, you explained, if the system says I, on the system, I

had 10, but I'll look on the shelf and I have to an order

point is five. Two things happen. Number one, I don't

restock. And number two, I've got to understand why. I have

10. On hand, is it in the back room that I never get it? Ready

supply integrity problem? That's a perfect example for what I

mean by understanding the complexities of supply chain

versus your traditionalist loss prevention catcher, guys. Right.

So Brian, let me switch gears here a little bit.

Because you've done this for 22 years with the world's biggest

retailer. And now you've got your own company, basically

helping solution providers, provide technology and process

kind of solutions for that, give us some examples. Because to me,

if I am running a store, and once a year, I get a snapshot by

department of exactly what I have lost doesn't feel like a

real good solution to help me manage it throughout the year.

How are you helping some technology providers with actual

tools to help retailers and suppliers in this area?

In the umbrella, like everybody else,

it's largely AI. So in a sense, a rewind: 10 years ago, there

was a lot of conversation where I came from that "look, we're

not going to get where we want to go with checklists and

expectations. We have to introduce meaningful technology

that addresses the problem and helps us correct it." Where we

get in trouble is we have a lot of technologies that help us

identify the problem, but am few that actually help us correct

it. They don't go the extra step. So for example, self

checkout. In my experience, that retailer pushed heavily

penetration of self checkout with self checkout comes

disproportionately larger increases of loss than a man

checkout lane. Proven a million times over, it's a risk. So you

introduce artificial intelligence through the

existing camera network to say, "Hey, Mike, just hit tender on

self checkout number 43." And he's got three 12 packs of beer

still on the grocery cart, real time alert, pay station

attendant engagement, we prevent that from walking out the door.

In the safety area, again, through camera systems of late,

tragically active shooter scenarios that is becoming well

it has been for a long time a grave concern of retail, but

it's technology that's going to be able to solve that and give

you advanced warning from the parking lot. I'll be at 30

seconds. You have a problem. There's somebody heading towards

your door with a rifle confirmed. accidents in the

stores, they are equally sometimes more expensive than

theft instances, people falling down on the floor. A single

lawsuit can cost you 10s of millions depending on severity.

But as far as the traditional theft component, risk, the best

and I've changed on this position as Justin Patton will

tell you, I years ago came in the camp of of everything that

we do today. item level protection strategy largely is

anchored in RFID. To be able to provide what you and I talked

about the absence of it AMH level inventory accuracy RFID

does not only the the risk mitigation and theft because it

can tell you those two boxes of eyeliner pencils went through

register 47. They weren't paid for, and they left on this door

this date this time. That helps me as a strategy guy. I'm like,

Okay, it's real. I don't have to guess when I get that annual

number. Well, what happened? I don't know, lock everything up.

Now I know, I go from using a chainsaw to a scalpel. And I

save tons of money in the process, we get better in stock

as a result becomes more accurate because we're attacking

the problem and not the symptom.

But don't we already have that solution? I mean,

every time I'm in a Walmart store and, obviously, I'm I'm

asking a naive question for our listeners because I think I know

what you're going to say. But I see these alarms going off all

the time at the store. Beep Beep Beep Beep. I mean, don't we

already have that in place? It sounds to me, it sounds to me

like a casual observer that we already have that.

So I got this mouse that I picked up. I didn't go

It reports the news, it doesn't tell you

through point of sale I left and it beeps, doesn't it? Tell me

anything. It's an alarm to say a tag is in the area. No item

level information. No date captures, zero intelligence,

today doesn't tell me that a mouse left. Now what does it

that multiplier with RFID. For me as a career asset protection

tell me?

guy is there is zero intelligence with current

systems today that you referenced. EAS, and there is a

wealth of intelligence that can exponentially make me better in

my space. In a broader sense, with RFID, I do get item level

It tells you an EAS tag depending on your

information with RFID. It's impossible with EAS, you don't

get it.

provider checkpoint or Sensormatic. A tag went through

those panels. And it is likely that it was a legitimate exit of

a potential theft. Gotcha. So put yourself in the shoes of the

exit greeter or anybody that engages when that alarm goes

off? Most retailers don't do that anymore. But let's just say

they do. Right? You don't know what you're looking for. You

don't know if 10 Customers walked out at the same time,

which are the 10. So what do you do is as a store employee, your

smile wave and they all leave the door? Because you're not

going to engage 10 people. Gotcha. Oh, it was a great

solution when you and I were in high school, but it has long out

run its value prop.

So walk me through the future looks like. Okay, so

we're gonna move from this EAS platform to something that looks

like more RFID, how does that help? Just sounds like a

different tag ,is it really helping that much?

RFID, so cost aside, Nirvana with RFID is

readers at critical choke points, ie receiving claims

cage, you know, dumpster to make sure products not going out the

dumpster, location identifier to say it's on the sales floor,

it's in the back room, points of sale, is what's really

important. And I know that exponentially drives up the

cost, but we're talking theory. So if every register can tell me

when I sold that mouse, I immediately, quote unquote,

right to its tag. I know that's not the proper technology, but

it identifies that specific mouse as being sold. In real

time. It says that in the tea log and I can walk out the door

unabated. It's paid for if I don't get a read, and it was not

rung up by the cashier go back to the eyeliner pencils where I

didn't scan the the two boxes, those two would alert.

potentially I could have a monitor at the door that says

hey, not only do you have unpaid merchandise, this is what it is.

And the picture on the screen tells me the greeter it's that

person. And it's that's the product I'm looking for. Yeah.

outside the bounds of loss like it. I mean, as you well know.

And I do too from the early auto ID center days and MIT in the

late '90s forward it was largely supply chain headlong. It was

largely supply chain headline and then about 2005ish, I'm

gonna guess, we started playing around with the RFID lab in

Arkansas on shrink. Shrink visibility. That's when it

gelled with me, "wow, this not only helps us it totally

redefines the risk space in which we're playing. And it

gives me actionable intelligence whereas today I have zilch." So

it's a huge, I mean, it's not even a comparison. It's like two

different worlds.

So, from your perspective, now that you're

more of an industry expert rather than just a single

retailer, who's best in class? Who's got this kind of figured

out and on the roadmap to how to leverage technology to mitigate

asset protection issues?

A retailer? Yeah, Macy's, the apparel guys,

most notably for reasons of in stock, and they're finding out

that, you know, when the dog wags his tail. Oh, guess what we

also know whether we even own this scarf or not, what happened

to it, et cetera. So largely apparel, as you well know. And

then Macy's probably is the tip of the spear. We played with

this exact scenario years ago, I'm going to cite because I've

been retired now almost well over five years. So eight, nine,

ten years ago, for various reasons, never got traction, but

it was clearly evident. At that point in time, this was not

incrementally better, but revolutionary. In the industry,

it would tell me so much more, take me out of the dark ages.

Because if you extract RFID, and some of the AI talked about, the

industry as a whole is the same as it was in 1970. Lock stuff

up, chasing shoplifters doing manual investigations. Now, I

say that tongue-in-cheek, yes, there have been improvements,

we're a lot better. But largely until that mentality shifts of

it's not all theft, there is a problem. But it ain't the whole

dollar. As long as we're chasing the whole dollar as theft,

shrink will be persistently high, because we simply don't

understand the broader picture.

Huge. Man, this has been, this has been an

incredible Brand, I really do appreciate it. Here's a question

for you. What question did I not ask you that I should have? Talk

to me about what did I miss? What are the things that you're

working on right now you think, really the that our audience

really needs to understand and hear about?

The potential of innovative technologies, so

AI in the space, and then as dated as it sounds, a meaningful

conversation about the evolution of talent. Because largely, that

was my battle in the industry. And in some retailers, that

still is fighting against the it's all theft mentality, it's

virtually impossible to engage in a meaningful conversation to

help not only mitigate theft, but also your supply chain,

you're in stock, increasing sales, reducing inventory

levels, that you're paying a gazillion bucks on carrying

costs, accidents, from handling all that merchandise to try and

find this box of shirts or whatever. So it's those two

things talent, and we've gotten better at talent. And I think

COVID really did us a favor, because it put under pressure

test the understanding of risk in that space. So it forced the

hand of some of the traditionalists to either grow

or find something else to do. And then the introduction of AI

in the space is it's not ubiquitous, but it's pretty

close, as you well know, you know, everybody knows AI. And it

can be a powerful force multiplier in retail to address

problems that have been out there since the first merchant

put a pair of blue jeans on a table. So it's those two things:

tech and talent.

Tech and talent, tech and talent. Brand can't

appreciate you enough. Thank you so much. We're going to go ahead

and provide your LinkedIn profile, if there's any

listeners out there that are interested in reaching out to

you for any other follow up kind of questions or answers or maybe

even opportunities to work on some projects together. But

again, I thank you for your service to our country. I thank

you for your service to our industry. And I just can't thank

you enough for the time just helping us understand the whole

AP space because I think there's a miss perspective, there's some

perspective out there that AP is all about, you know, stopping

shoplifters of the door and it's just so much bigger than that.

And it sounds to me like there's a real cry for technology to

help support this particular industry at this point in time.

Indeed. That is the that's the force multiplier.

Awesome. Thank you very much, my friend. We'll talk

to you later.

Yep, take care, man.