Tips & Tools

Reducing fraud in the Engineer To Order supply chain

Total ETO

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With so many moving parts, diverse organizations and multiple schedules involved, supply chain optimization can be a tricky endeavor for many Engineer To Order manufacturers.

 

One of the key ways to streamline this major component to daily operations is by eliminating waste, fraud and abuse. Unfortunately, not enough Engineer To Order companies are taking advantage of the tools available to reduce fraud in the supply chain.

 

As noted by Digitalist Magazine, the Association of Certified Fraud Examiners found roughly 5 percent of lost corporate revenue stems from fraud, with supply chains one of the biggest sources of these cash outflows. By locating and stanching the amount of fraud, waste and abuse in the supply chain, Engineer To Order manufacturers can potentially increase their profit margins.

 

Fraud, waste and abuse

According to a recent Deloitte poll, roughly 30 percent of respondents reported experiencing fraud, waste or abuse in their supply chain. This marks the third year in a row this poll has had a reading of about 30 percent. The poll surveyed 2,660 professionals in industry ranging from consumer and industrial products to financial services and from life sciences and health care to energy and resources.

 

“Project managers and invoice approvers posed the greatest risk for supply chain fraud, waste and abuse.

Despite the exposure to risk in the supply chain, only 29.3 percent of these respondents said they employed analytics to reduce the chances of fraud, waste and abuse. Instead, an overwhelming majority of those polled – 67.1 percent – were confident that employees would take the initiative to report any wrong-doings or schemes they see in the supply chain.

 

Among the other findings uncovered by the poll, at 26 percent of employees, project managers and invoice approvers posed the greatest risk for supply chain fraud, waste and abuse. Procurement professionals were second at 24.7 percent.

 

“In my 20 years conducting forensic investigations, trust in employees and third parties is often misplaced,” explained Mark Pearson, Deloitte Advisory principal, Deloitte Financial Advisory Services LLP. “As a result, many organizations are trapped in a pay-and-chase model for fighting supply chain fraud – invoices are paid first, then retribution is sought much later when fraud is found, if it’s found at all. But, the supply chain forensics leading practice is a comprehensive and proactive, predictive approach tailored to organizational structure and industry sector.”

 

Without a clear-cut internal process and/or enterprise resources system in place that tracks and manages payments and losses in the supply chain, it can be difficult for Engineer To Order manufacturers to keep tabs on all material purchases and invoices. This increases the chances for serious cases of fraud, waste and abuse.

 

“It can be overly optimistic to rely solely on employees to uncover and report fraud.”

Optimizing the supply chain

While it’s not out of the realm of possibility for executives and managers to think that employees will discover and report instances of fraud, waste and abuse in the supply chain, it can also be overly optimistic. Employees are busy paying attention to their daily duties and normal responsibilities, so relying upon them to notice dubious or otherwise suspicious activity will not necessarily eliminate these problems.

 

As noted in Supply and Demand Chain Executive, the ever-evolving global economy requires leaders to be capable of rapidly responding to these constant changes. This is necessary to tailor a resilient and efficient supply chain that can adapt to and manage risks and upheavals.

 

Since so many of the respondents to the Deloitte poll indicated that they expected employees to uncover and report instances of fraud, abuse and waste, it’s imperative to have a supervisor or manager who is dependable and trustworthy, in addition to being a proven leader. However, in the absence of this one-of-a-kind individual, incorporating supply chain analytics and a configurable ERP system can help mitigate the risks associated with fraud, waste and abuse in the supply chain.

 

“Using supply chain analytics to identify and investigate supply chain financial risks can help stem fraud schemes that we increasingly see in today’s challenging, complex and global environment,” said Larry Kivett, Deloitte Advisory partner, Deloitte Financial Advisory Services LLP.

 

The right solution

Since such a large portion of Engineer To Order manufacturing requires a specially tailored approach to building non-standard and low volume products, it’s vital that these companies have the right tools to optimize costs, quality and delivery.

 

Total ETO provides an affordable solution for Engineer To Order manufacturers. In Total ETO, all data points related to the supply chain are captured and tracked, thereby reducing the chances of fraud in the supply chain. Receiving can quickly view purchase orders, log received parts, generate data and bar code labels, produce quality inspection and initiation non-conformance reports. With so many ways to track and manage inventory in real time, Engineer To Order manufacturers can alleviate their exposure to the risks associated with fraud, waste and abuse in the supply chain.

 

Learn more by watching our product tour or requesting a demo today.

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