A major source of inventory shrinkage occurs when vendors short deliveries or steal merchandise during the course of delivering and stocking their company’s products. Whether this shortage is accidental or intentional, the impact can be significant.
Vendor fraud is one of the easiest ways someone is able to steal from a business without being detected as they become “trusted” suppliers with a willingness to stock shelves as a “courtesy.”
Truth is that when the vendor stocks the shelves, it becomes difficult to distinguish between the existing stock and that which has supposedly just been delivered.
U S Businesses losses from vendor fraud amounts to $107 billion or 5.5% of total shrinkage however the National Association of Convenience Stores estimates that vendors account for between 15% and 20% of inventory shrinkage.
According to Rutgers University there are 4 common types of fraud:
- Short Deliveries—The vendor is not delivering the correct amount of inventory on the shipping invoice.
- Small amounts of inventory removed from packaging or boxes
- Fewer boxes delivered than on the invoice
- Smaller sized inventory delivered than was ordered
- Delivery Reloads—Delivery person removes merchandise from recipient once delivery is completed. Delivery person waits for the inventory to be counted and then removes the merchandise from the store.
- Inventory Swapping—Vendor steals directly from the stockroom. Swapping is a common technique where delivery person exchanges good merchandise and replaces it with bad or outdated merchandise.
- Over Charging—Vendor steals by directly taking cash for the store. This happens if payment for the delivery is done on-site rather then billed later. The delivery person may alter an invoice by adding additional inventory or changing the final price resulting in an overpayment that he pockets.
Solution The implementation of a custom designed digital video surveillance system with specific attention to monitoring the stockroom delivery areas and back door.
This combined with awareness training for employees and managers along with a specific “receiving” policy will prevent vendor theft.