How Do You Keep Stolen Product Out of Your Own Buying Channel?
How Can Loss Prevention Stop Its Own Company From Buying Stolen Goods?
Stolen product can reenter a retailer’s own shelves through its supply chain, when buyers purchase from a wholesaler or alternate-source supplier without knowing where the goods came from. A source in LP Magazine’s diverter article said buyers work outside loss prevention and doubted that theft crosses their minds (LP Magazine). Loss prevention can block those purchases with the five-step anti-ORC buying program, credited to Harris Teeter’s David George (LP Magazine): brief executives, get a no-stolen-product commitment, send supplier letters, add right-to-audit clauses, and check lot numbers on receipt.
How Does Stolen Product Reach the Buying Channel Unchecked?
This recap draws on Episode 34 of the Loss Prevention Magazine Podcast, produced by LP Magazine (Loss Prevention Media) and published August 24, 2020 (Episode 34). The episode draws on LP Magazine’s 2012 feature on whether retailers help create demand for stolen goods, and the quoted speakers are identified by their 2012 titles. Tony Sheppard, then nationwide manager of organized retail crime at CVS Pharmacy, framed the problem as one of belief.
“Most companies do not believe that this type of occurrence could ever happen… the individuals who make buying decisions need to be educated about the impact ORC has and how to identify possible suspicious transactions.”
Tony Sheppard, then nationwide manager of organized retail crime at CVS Pharmacy, on Episode 34
A source quoted in LP Magazine’s diverter article said that at most retail companies, loss prevention either does not know this buying is happening or has no seat at the table (LP Magazine). The same source makes the demand argument plainly: companies that purchase stolen product are the ones creating the demand to steal it (LP Magazine). A fence needs a buyer. Loss prevention belongs in those purchase orders: when stolen goods move through a wholesaler, the last buyer can be the retailer’s own merchandising team, which is why organized retail crime controls have to extend into procurement. Store-floor training such as ORC awareness training for store associates does not reach the buyers who place these orders, so the buying desk needs its own briefing, after the step-one executive meeting.
The Five-Step Anti-ORC Buying Program From Harris Teeter
The 2012 feature credits the program to David George, then vice president of asset protection at Harris Teeter. LP Magazine’s site publishes the steps in the article, first published in 2012 and updated August 11, 2016 (LP Magazine):
- Meet with your executives and explain how buying stolen product creates demand for more stolen product.
- Get a commitment that the company will not purchase stolen product, which may mean revamping the incentive structure for buyers.
- Communicate expectations to suppliers by establishing procedures for violations and sending vendors detailed letters.
- Create a right-to-audit clause in all supplier contracts that allows unannounced visits to supply warehouses.
- Audit for compliance by inspecting lot numbers after you receive product.
“Although the Harris Teeter program reduces demand for stolen goods, we can’t do it alone… It’s going to take all of us to put integrity first and to take a stand to do the right thing rather than simply buying from the cheapest, unreliable, and low quality source.”
David George, then vice president of asset protection at Harris Teeter, on Episode 34
A supplier shut out by one retailer can still sell the same goods to the next chain that skips the five steps. Comparing notes with peer loss-prevention teams on suppliers a chain has already dropped can close that gap.
Executive Commitment and Buyer Incentives
Step two touches how buyers are paid. If a buyer’s scorecard rewards only the lowest landed cost, nothing in that scorecard asks why a price is unusually low. Cathy Langley, then senior director of loss prevention at Rite Aid, put the burden on leadership.
“It’s critical to ensure your executive team knows the consequences of ORC and the risks of potentially purchasing stolen product no matter the financial incentive.”
Cathy Langley, then senior director of loss prevention at Rite Aid, on Episode 34
“No matter the financial incentive” is the line to bring into the step-one meeting; the step-two commitment is where executives rank a verified source above a lower price and lock that ranking in before any buyer sees a tempting quote.
Who Owns Each Step of the Program
Give each of George’s five steps an owning function, and write a specific person’s name next to it, before the program is announced company-wide.
| Step | What it requires | Owner |
|---|---|---|
| 1. Executive meeting | Explain how buying stolen product creates demand for more theft | Loss prevention presents to the executive team |
| 2. Company commitment | No purchase of stolen product; buyer incentives reviewed | Executives and merchandising leadership |
| 3. Supplier letters | Written expectations and violation procedures sent to vendors | Procurement or vendor management, with LP input |
| 4. Right-to-audit clause | Contract language allowing unannounced warehouse visits | Legal and contract negotiators |
| 5. Lot-number audits | Inspect lot numbers on receipt | Receiving and warehouse staff, reviewed by LP |
The owner of step three matters most for follow-through. The letter tells suppliers the rules in writing, so send it before auditing any supplier. Give procurement clear ownership of the letter so it reaches every alternate-source supplier, and so receiving staff have a written rule to cite. State a mixed-lot rule in the letter, covering a single case that holds more than one lot.
Why a Case Pack Proves Nothing on Its Own
Two federal cases show why packaging is weak evidence. In a North Carolina prosecution, Jeff Telsey of JCA Enterprises served as a third-level fence who repacked stolen goods in industry-standard case packs for resale into the retail marketplace (Department of Justice). In a separate case involving a Houston warehouse, one of the two brothers prosecuted ran GPS Wholesale Inc., where stolen products arrived, anti-theft stickers and security labels came off, and the goods were repackaged into pallets and shipped to wholesale companies in the New Jersey area (FDA). Justice Department congressional testimony states that infant formula is stolen, repackaged and then resold to both knowing and unknowing wholesalers (congressional testimony).
A lot-number check at receiving can catch what a packaging check cannot: multiple lot numbers inside a single case, which LP Magazine’s diverter article lists among the checks to run before buying from a new wholesaler (LP Magazine).
The Purchasing Department Relationship
The five steps are hardest to enforce when loss prevention and the supply chain’s purchasing side do not already talk. Jerry Biggs, then director of organized retail crime investigations at Walgreens, described that relationship as critical.
“With 8,100 stores, our purchasing department is only a subsection of those we deal with on a daily basis… But it is critical that you maintain good communication with that department. If you know those individuals, it’s more likely you can trust them to know who they’re dealing with on a daily basis, and they will be more apt to alert you to potential problems.”
Jerry Biggs, then director of organized retail crime investigations at Walgreens, on Episode 34
A right-to-audit clause in a contract folder does nothing if the buyer who first hears an unusually low price never calls loss prevention. The clause only authorizes the warehouse visit. Put the alternate-source desk on a recurring meeting with LP, so a suspicious quote gets reported before the purchase order is cut.
What the Billion-Dollar Figures Actually Show
The episode page notes that figures in the billions have been thrown around for the past two decades (Episode 34). An NRF and K2 Integrity report claimed “nearly half” of the estimated $94.5 billion retailers said they lost to shrink in 2021 was attributable to organized retail crime, and CNBC reported that this contradicted the NRF’s own annual survey, which showed all external theft accounted for just 37% of those losses in 2021 (CNBC). Leave the national total retail loss estimate out of the step-one meeting. Bring one alternate-source invoice that has no lot-number verification on receipt and ask whether receiving is allowed to reject that shipment.
What to Do This Week
- Schedule the step-one meeting and bring Langley’s line about “no matter the financial incentive.”
- Pull the current buyer scorecard and flag any metric that rewards the lowest cost alone.
- Draft the step-three supplier letter and name its owner in procurement.
- List current alternate-source suppliers and add the right-to-audit clause at each renewal.
- Check whether any single case from an alternate-source supplier holds more than one lot number before it reaches the sales floor.
Frequently asked questions
Who inside a retail company should attend the first anti-ORC buying program meeting?
Loss prevention should present, but the people in the room need real authority over purchasing decisions and buyer pay. That means the executive who owns merchandising and whoever sets buyer compensation, because step two may require changing buyer incentives before any commitment means anything.
Does a right-to-audit clause cover suppliers that are already under contract?
Only if the clause is in their contract. Adding it to new agreements leaves existing suppliers outside the audit right until it is added, so procurement and legal should inventory which existing suppliers lack it and add the clause at each renewal or by amendment, starting with the vendors that supply the most-stolen categories.
What should a buyer check before buying from a new wholesaler?
The diverter article in LP Magazine gives the checklist: where the wholesaler's warehouses are and whether anyone has inspected them, whether the owners get background checks, whether the company has been sued, and whether one box holds mixed lots (LP Magazine).
In the federal case against the two brothers, were the big retailers victims or buyers?
Victims. The Justice Department release says the defendant must pay $109,742 in restitution to CVS Health and Walgreens, the same chains whose LP leaders spoke to LP Magazine in 2012, which makes them the injured parties in that enterprise (FDA).
Should a store manager get involved in vetting a wholesale supplier?
Vetting belongs to buying and procurement, where supplier letters live, with legal holding the audit clause. A store manager who finds a single case containing more than one lot of the same item should escalate it to loss prevention immediately, not file it as paperwork.