When organizations experience supply chain fraud, the outcomes can be dire. Loss of revenue and diminishing company reputation are only two possible consequences, but they may be the most important.
A smattering of brands that produce oregano in Australia discovered recently that they need to pay more attention to their operations in order to circumvent supply chain fraud. An Australia-based watchdog organization called Choice discovered that out of 12 randomly selected oregano products, seven of them were made up of ingredients other than oregano, by as much as 50 to 90 percent. This story isn’t the only one of its kind, by far – other recent uproars concerning the amount of wood pulp in parmesan cheese, for example, are common indicators that the supply chain needs to be monitored closely.
What can organizations do to prevent supply chain fraud? Here are three things supply chain managers need to keep in mind when it comes to making sure their operations move smoothly:
In order to more effectively work to increase efficiencies and reduce overall supply chain costs, organizations need to consider the risks of fraud along the way. Because employees play such a big part in both creating and mitigating supply chain fraud, it’s critical that companies have internal controls in place, especially as systems become more complex with the addition of partners and countries.
One of the best things a company can do to minimize the risk associated with supply chain fraud is to employ the use of supply chain analytics tools in order to collect and analyze important data and determine where discrepancies lie. The majority of companies don’t have a plan in place for when supply chain fraud occurs, but analyzing current gathered data is one of the most important ways to make sure your organization is on the right track.
Where does fraud come from? There are both internal and external sources of supply chain fraud, each with their own disparate challenges. However, it’s critical to understand that project managers and invoice approvers represent the largest fraud risk. The responsibilities of these employees include, among other things, invoicing the number of hours worked by warehouse or factory workers.
There are a few ways to ensure the supply chain is being monitored effectively. For example, according to Journal of Accountancy contributor Sabine Vollmer, it’s important to track labor unit data in the smallest practical increments. This will help prevent situations wherein employees who work regular hours are given overtime compensation, or where money is given to people who aren’t even on the payroll.
“Individual fraudulent labor charges can add up, especially in a large organization, because more people are involved in incurring, approving, and invoicing labor charges,” Vollmer wrote.
The most important thing to note is that clear insight over the entire supply chain can help prevent fraud. Monitoring numbers and ingredients closely using software is one way of gaining that oversight.
3. Invest in the right tools
When it comes to detecting, managing and mitigating fraud in the supply chain, it’s important for organizations to make sure they’re putting the right tools in the hands of operations managers responsible for supply chain oversight. Inspirage supply chain management solutions help streamline operations and make it easier to analyze and monitor every step in the supply chain, from the factory to the warehouse to delivery. In addition to supply chain tools, it also proves helpful for companies to invest in solutions like Agile Product Lifecycle Management software in order to track changes to product design and any returns that may be required for a certain item.
Contact Inspirage today for more information.