Tainted SC causing massive losses

Irregularities in biz processes, owing to employee fraud.
Fraudulent activities

Irregularities in biz processes are coming to the fore front every other day. Are employees loosing loyalty towards their bread and butter from retail?

Adidas, Walmart and now Britannia! All have witnessed irregularities in their companies and they all owe it to their employees. While Third party players are also to be blamed, it is the employees that gave them the opportunity to carry our fraudulent activities.

As per the Global Retail Theft Barometer 2011, India accounts for the highest retail shrinkage which stands at 2.38 per cent of sales.  Dishonest employees account for 53 per cent of the total shrinkage in the Asia- Pacific belt. However, when we speak of such retail shrinkage it deals with them stealing off retail shelves. But, here the stealing moves beyond the store floors and are recorded mostly in the supply chain process.

At Britannia, certain irregularities have been established wherein employees engaged with some suppliers to play with orders. It was swift in looking into the matter and scrutiny is already underway.  According to sources, some of the employees have been asked not to return to work unless the investigation is done with. Speculation says 28 of them have already been fired.

Walmart in Mexico, was accused of bribing government officials in most of the provinces it was operating it. To avoid the same at other locations across the globe, the company has initiated a drive to check on the vendors and suppliers for any irregularities. KPMG has also been brought on board to point out any unethical activities by its vendor’s, post which, it will shatter all ties with those who will be guilty. KPMG will put all vendors in three categories, red indicating the black listed ones, green for those who will come all clean and amber for those who may be suspicious and Walmart would take a call on whether to continue or snap ties with them. Also a programme about anti-corruption practices is being run within the company.

 

Adidas as we all know was led in to the Rs 870 crore scam by Subhinder Singh Prem and Vishnu Bhagat. Here also irregularities were witnessed in the supply chain course. Shoes and other sporting goods were diverted from the Adidas supply chain progression and kept in four secret warehouses

The point of discussion is: Who is to be blamed? Is it the employees or the Three Party Players? Well, it’s both, but in different degrees. Employees were the ones who initiated the fraudulent activity, while the 3PL players were the ones who led it to its final fate. The ticker though points more towards the employees because they are the ones who let out the confidential information about the brand. They are abusing their authority to full-fledged use of suppliers and vendors.

Another thing which strikes out in all these three scams is that they have been carried out in the supply chain process. Is it so easy to break the supply chain process? Should the entire supply chain be blamed or are just some elements corrupt? Outsourcing the supply chain or having an in-house one is not the question, making it fool proof is what needs to be done.  Also with the economic slump, the profit margins are already shrinking for retailers and they need to police their processes really well to sustain in the retail marketplace.

The need of the hour is initiatives to increase a sense of belonging in employees and is what brands should work towards before it’s too late! This is a wake- up call for all retailers and manufacturers so as to not be in a regretful situation later.

 

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