WHAT CAUSES FRAUD?
There are many theories and psychological studies as to why a person commits fraud. Some of the different theories propose that fraud is committed due to:
â€¢ The Western culture that emphasizes material goods in association with social status, where we are forced to â€œkeep up with the Jonesesâ€.
â€¢ External pressures beyond our control, such as the healthcare costs of sick parents or children, daycare expenses, etc.
â€¢ Pressures we may not be able to control, such as gambling and drug addictions.
â€¢ The lack of good morals and values being imprinted upon a person by their social groups, especially beginning at a young age.
â€¢ Revenge against the organization due to poor pay, being overlooked for advancement, overworked, etc.
In regards to supply chain frauds, while revenge against the organization is a strong candidate for perpetrating fraud, another culprit is the internal pressures that build within to either increase performance or decrease task times. This is typically the result of management pressures to cut costs without providing the necessary tools to achieve the new performance goals, or due to the establishment of unrealistic benchmarks.
For example, if the manufacturing department is pushed to produce more without any increase in staffing or machinery, at some point supply chain fraud is likely to occur, whether the fraud is the falsification of production output or the production of inferior quality goods. And while the manufacturing department will be held to blame for the failure to produce first-quality goods, it is really the fault of management. The manufacturing employees, out of fear of losing their jobs, may have reverted from â€œflight or fightâ€ to â€œfraud or flightâ€, opting to perpetrate fraud rather than lose their jobs. Fear becomes the motivation to perpetrate fraud, with the sole intent of retaining employment.
Supply Chain Pressures to Increase the following:
– New Orders / Recurring Orders
– Picks Per Hour
– Manufacturing Throughput
– Receipts Per Hour
– Quality Assurance Testing
Supply Chain Pressures to Decrease the following:
– Order Entry Time
– Manufacturing Time
– Picking Time
– Receiving Time
– Quality Assurance Time
Other articles in this series:
Guest Author: Norman Katz
Copyright Â© Katzscan, Inc. â€“ Source: Supply Chain Fraud White Paper
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