WHERE IT HAPPENS
With an understanding that the supply chain is both internal and external to an organization, supply chain fraud can occur at any link in the chain, for example:
– Fixed Assets
– Trigger Events
– Purchase Orders
– Quality Assurance
– Sales Commissions
Common Supply Chain Fraud Categories:
– Asset Misappropriation â€“ Misuse / Abuse
– Asset Misappropriation â€“ Theft
– Contract & Procurement
– Regulatory â€“ Government & Industry reporting
SUPPLY CHAIN FRAUDS
With perpetrator possibilities being both inside and outside the organization, where is fraud likely to occur?
Percentage of Supply Chain Fraud by Area and Median Occurrence
11.2% Customer Service $50,000
1.8 % Human Resources $64,000
14.0 % Sales $96,000
2.8 % Warehouse / Inventory $100,000
2.4 % Information Technology $138,000
30.3 % Accounting $199,000
3.8 % Manufacturing / Production $245,000
20.9 % Executive $900,000
3.0 % Purchasing $1,000,000
9.8 % Other N/A
* Source ACEF: 2006 Report to the Nation
Of particular interest:
ïƒ˜ The average loss across these departments was $310,222, with an approximate weighted average (excluding Other departments) of $314,011.
ïƒ˜ While Purchasing had one of the lowest occurrences of fraud at just 3%, this department also had the highest median loss at $1M.
ïƒ˜ Accounting had the highest occurrence of fraud at 30.3%, but it was significantly lower than several other departments, and its median loss of $199,000 was significantly less than the average median loss.
ïƒ˜ Executive management was responsible for perpetrating both the second highest occurrence of fraud (20.9%) and the second highest median dollar amount ($900,000).
Other articles in this series:
Guest Author: Norman Katz
Copyright Â© Katzscan, Inc. â€“ Source: Supply Chain Fraud White Paper
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