Page 155 - DCAP208_Management Support Systems

Management Support Systems

Notes
During the summer of 2008, British clothing chain Jaeger went live with a data mining
application in an attempt to identify where it was losing money. The application, which is
located centrally, interrogates data held on different systems throughout the business,
including both the head office and the company’s 90-plus stores and concessions.
In common with every other data mining application, Jaeger’s LossManager system, from
IDM Software, uses a feed from the company’s electronic point of sale (Epos) system to
spot potential fraud such as excessive discounting by a single member of staff.
“It’s a centralised system, but every single store is feeding into it. We have got time and
attendance feeding into it as well,” says Steve Hearn, head of safety and security at Jaeger.
Jaeger had used a data mining application from SFR, a small British supplier, before it
took the decision to implement the IDM system.
“We had SFR Storescan, but it had long since been defunct and we were not using it
because our till architecture had changed. I started to wonder if that was the right piece of
software for us. It was quite cumbersome,” says Hearn.
Jaeger does not disclose its net profits because it is privately owned. However, it is a mid-
sized clothing retailer lacking the colossal IT budgets available to, say, Tesco or Sainsbury’s.
Hearn’s first choice supplier was too expensive for his budget.
“I would have gone with an IntelliQ product [another British software supplier], but for
the price,” he says. IDM Software is a start-up aimed at mid-sized retailers and Jaeger was
its first retail customer.

Unlike CCTV and EAS, which are designed to catch thieving customers, data mining
applications are supposed to catch thieving employees. “We do an awful lot of work on
internal fraud,” says Hearn.
“The data mining system was put in to separate the usual from the unusual,” he adds.
Jaeger set up an audit team when the system went live in June. The team’s job is to use the
new application to identify losses wherever they occur – from dishonest employees to
working practices that waste stock.
Like other data mining applications, LossManager generates exception reports. However,
it would be misleading to rely solely on these reports, according to IDM’s chief executive
officer Khuram Kirmani.

“It’s very easy to get swamped with false positives,” Kirmani says.
The employees responsible for loss prevention (in Jaeger’s case, the audit team) use their
data mining application to generate exception reports as usual. Then they continue to use
the application to ask more questions of the data so that they can understand whether the
system is reporting a false positive or a genuine loss.

“Each question is based on the answer to the previous question,” says David Snocken,
IDM’s commercial director.
Any project’s success is limited by the user’s willingness to extract as much value as
possible.
“It depends on the amount of effort the retailer has put in,” says Kirmani. IDM says its
system has reduced losses as a percentage of sales below Global Retail Theft Barometer’s
1.3% average for UK retailers.

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