Warehouses are, by definition, cavernous storage places for bulk goods and not intended for eye appeal. They are, by design remote and spacious, allowing for cheaper facilities than those in commercial or retail districts. Both these factors contribute significantly to the potential for loss through theft.
Many warehouses also lack modern security and technology features and are staffed at low levels.
They may house a variety of unrelated goods if the warehouse is a shared facility. They also have limited outside visibility (which, in turn, reduces risk of break-ins) and limited door egress, other than a couple of man-doors and a receiving area usually away from street traffic.
Warehouses may have low inventory turns and high dollar value of assets inside. Interior layout is designed for efficiency rather than loss prevention. Losses, because everything is in bulk and often in large containers, may go undetected for a year or so, when managers rely on case count rather occasional container inspection.
In the movie series, The Sticky, starring Margo Martindale and Jane Fionda, a bumbling security guard shows how easy it is to steal from poorly monitored bulk warehousing.
Open cases
Check shelves regularly, looking for open or resealed cases that likely are behind full cases. By concealing partial cases behind full stock, thieves can go undetected for prolonged periods.
FIFO
First In, First Out inventory management ensures the oldest product is rotated out of stock before it expires. However, stock that is not in rotation may be hiding missing or partial products.
Accuracy of content
To avoid detection, thieves may substitute low end goods in cases marked as higher priced. Look for swapped cases or cases that are disposed of in garbage without explanation.
Stack outs of goods in inappropriate locations
In order to create a secure location with obstructed view in which to conceal goods, employees may place pallets in improper places, in such a manner that they create a “fortress” wall obstructing direct or camera views.
Camera views
Employees who plan on stealing or relocating goods will watch cameras and move to areas that are not properly monitored.
Goods near exits
Look for goods that are out of place near exits, as this may indicate that a theft is about to occur and the product has been staged for removal.
Employee vehicles near remote exits
Check to see that employees are parking in assigned spots and not near exits. One employee of a grocery warehouse worked half days on Saturdays. When he arrived, he parked in his designated spot, but an hour or so before the end of his shift, he moved his vehicle to near a remote exit, where he loaded his truck with stolen merchandise in less than ten minutes. (He was the Saturday supervisor)
Items out of proper order in category
Items that are warehoused are placed in specific areas for easy identification and access. Items that are targeted for theft often are relocated to other areas, so that the high-end merchandise, which is often monitored, does not get flagged as at risk.
Items at remote exits
Items stored at remote exits indicates t6heft in process, or employees preparing to move items from their proper placement to a nearby vehicle or waiting accomplice outside the doors. On occasion, these stacks of goods may indicate that an employee has a sweetheart arrangement with a driver or supplier who will remove the goods when the opportunity arises. Take note of the items and where they have come from. You may be able to identify another partner or another staff member from that department who also is involved. If you have a holding area for suppliers to pick up return merchandise or damaged merchandise, be sure it is not near the exit and make sure that no goods are stored near the holding area for returned goods.
Unsecured exits
Unsecured exits should be alarmed. While fire regulations prohibit locking of fire doors with deadbolt or padlock systems, panic bar locks are permissible and should be used on all exits. These doors should have alarms, as well. Unsecured exits invite employees to use those exits to move merchandise to the outside. We have experienced scores of theft cases where employees have taken advantage of unsecured exits.
Employee not remaining in designated work area
Staff that tend to wander are either not working to their capacity or are moving about and perhaps availing themselves of the opportunity to move merchandise from one area to another that they intend to steal. Employees should not need to wander throughout a warehouse if they have designated tasks and your policy manual should specify so
Employee overly accommodating of management
A staffer who is too accommodating of management, but reluctant to accommodate fellow employees is an employee who bears observing, as the effort to “suck up” to management may be a diversionary effort to deflect attention from one’s own deviance. They may be relying on close relations with supervisors to be able to exploit gaps in security or attention.
Offering to work outside regular hours
Frequently offering to work outside of regular hours or beyond the hours that they are assigned for, for little or no extra pay may indicate that the employee may be attempting to convince the upper management that they are trustworthy. By so doing, they create an opportunity for themselves to either take merchandise or to manage record keeping or money to their advantage.
Taking control of transactions
A staff member who is unwilling to let other employees or lower level management take over some of their duties often is doing so because they have data, information or activities that they wish to conceal. The idea that they are devoted workers may be true but it is equally likely that they are making sure that their illegal and illicit activities are not detected.
Staffers who have a close relationship with suppliers
It is normal for a receiver/shipper to become quite familiar with regular delivery drivers, salesmen, shippers and so on. However, such a practice opens the door for collusion and for working with those outside people to the detriment of the company, either by providing merchandise, falsifying documents or other participation in forms of fraud and theft. For this reason, rotating staff through the receiving function minimizes the risk of such activity.
Easy access to staff parking lot
Staff members who can access the parking lot readily from obscured or remote locations or without being seen have an increased opportunity and risk of taking merchandise out of the business. If a staff member is parking regularly near an exit, take note, as it may may be as innocuous as wanting to leave quickly from work or they may be loading merchandise into their vehicles.
Open boxes available for repack
On your regular tours through your warehouse note any boxes at any location that are open and are either empty or partially empty. Note, too, nearby merchandise that may be packed into those boxes. This occurs often in loading docks. It is common for employees to work together and have the receiver or shipper who tosses stuff into the compactor also discard boxes of goods for a fellow employee. That employee may have repacked the boxes with merchandise that they plan on retrieving later and taking off premises.
Staff routinely arriving early for work or leaving late without cause
Note staff that arrive unnecessarily ahead of other staff to work, or that leave later than other staff. Staff that don’t take breaks, staff that seem to be too good to be true or staff that prefer not to have a lunch hour warrant monitoring. Keep track of their extraneous activities, because they may be using these quiet hours to steal or commit acts of fraud or theft.
Hidden items
Do a thorough exam and walkthrough of your warehouse on a varying schedule (so as not to be predictable), taking note of places where employees can conceal goods. For example, note smaller items hidden behind large boxes or pallets, goods mixed in with damaged goods and so on. These hidden items are never innocuous and often indicative of organized theft.
Desirable items out of place
There are many items in any business that are theft targets because they are desirable to employees. It may not be the obvious stuff that is of value. For example, a person who is working on equipment at home may need the tubular steel: not a desirable item for most people, but for his project it possibly may be. A person that is doing electrical work may need tools. A person that that is building his own business may need items that are difficult to come by that you have installed in you operation. For example, specialty custom-built equipment may be a target. Knowing your staff and knowing what their are interests are will be able to help you relate the desirability of items that are out of their normal storage place or out of the normal display place. Once you identify out-of-place goods, match those out-of-place items to the employee and the employees’ habits or hobbies that would make the item desirable.
Excessive breaks
Almost hand in hand with the employee that doesn’t want to take breaks is the employee that takes excessive breaks and seems to be out of place or out of his department. because of those breaks either he is scouting items to take, he is moving items or is planning a strategy to steal the merchandise. This employee poses a double risk to your business in that is that he is unproductive but also there is a risk that he maybe planning theft from your operation.
Extra labels
Extra labels seem like a bit of an archaic indicator. However, the labels that I’m referring to are more the packing labels, UPC code labels, routing labels and even identification labels for items. Take note of labels and labelling devices that are where they shouldn’t be. A courier company used bar codes to scan high-ticket pharmacy items out of a secure area. Two employees were re-ticketing low-priced item labels on high-theft items. This resulted in an overage in one category, a shortage in another and a significant financial loss. Especially if they are labels for low value or low price items that are found near items of a higher value and higher desirability that activity is an indicator that those pricey items will be rebranded with the lower labels. Secure and track all label usage.
Category overages
Where you have overages in a category or array of goods, showing more inventory than you should have when you do your counts may seem like a desirable thing. It is not. It definitely means that the inventory management system does not accurately reflect the inventory you have. You either will have an extreme shortage in another area or you have a manipulation of the data in that category that may have resulted from either fraud or theft from employees or suppliers. One store manager in a chain routinely falsified year-end counts, showing an overage. When he departed, the incoming manager was burdened with having to show the true counts, resulting in an extreme inventory shrinkage report.
Excessive supply usage for projects
Whether in your warehouses or in the field, monitor the appropriate level of supplies that are required for each project and take note of those that are high usage of supplies, even if the profit margins are accurate. High usage of supplies may be either carelessness on the part of the people that are working on the project or maybe an indicator that those people are taking supplies for themselves
Employee resistant to being monitored
Employees who express abnormal dislike or resistance to having their work checked for completeness, quality and accuracy may be attempting to conceal other issues. This may be an indicator that the worker has been manipulating time spent, supplies used, quality shortcuts or work not intended for company benefit.
Irregular hours of access to facility
One company reported that an employee, who worked as a field worker, often did not show at the client’s place of work as scheduled, but did show at irregular hours of his own choosing. Another worker for the same employer arranged in a clandestine manner, with the client, to attend at hours not scheduled by his employer. The workers would then claim overtime when they worked the assigned hours on their own schedule. Both also were accessing the employer facility after hours, using passkeys given to them for emergency use, and were pilfering shop supplies. When we arranged for access to be monitored electronically (without the employees’ knowledge), we were able to detect their patterns.
High fuel consumption claims
Whether employees are paid for their own vehicle use or use company vehicles, when they are not supervised as to quantity of fuel purchased and billed to the company, there is a risk of manipulation. Indicators include excess mileage billed for jobs and very low liters per 100 kilometers of fuel consumption. Simply matching optimal distances to work sites and calculating fuel consumption ratios monthly, you will be able to eliminate much of the falsifying of claims.
High damage or wastage reports
Every company should be keeping track of wastage, spoilage and damage to supplies or goods so that they can more accurately control inventory and anticipated profit or loss situations. However, if high damage or wasted reports can be attributed to a specific employee or specific department, the indications may involve either a question of negligence & ineptitude or possibly a theft or fraud involving the specific products or supplies experiencing excess loss.
Hourly billings
A forklift repair company experienced high hourly billings against a maintenance contract for one of its clients, involving two of their servicepersons and specific models of forklifts. The manager overseeing these mechanics verified that the particular brand of forklift had issued recall and repair notices for the models, with a series of faults in the product listed. Assuming that the repairs were legitimate because of the recall by the manufacturer, he did nothing further on the matter, until our routine investigation began.
We questioned why only the one client had problems, while other mechanics and companies with the products did not. As well, our client had two of the same forklifts in the warehouse but experienced few problems. The other customers of our client had different agreements with the repair company that did not include comprehensive maintenance, so they would have been billed each time a repairman serviced their equipment. The target client only received a predetermined monthly flat fee bill.
This was a major clue. The two repairmen knew that the company’s service contract client would not complain about a higher level of service if it did not disrupt his operation, and the repairmen were aware of the recall notices.
High hourly billings should provide strong clues that your operation should be monitoring those specific employees more closely.
Unauthorized signing of work orders
Watch for work orders that are signed off by someone who does not have designated authority to sign them. For instance, receivers or shippers who sign work orders either for receipt of goods or for ordering of goods, or employees that are working on projects should not be able to authorize and then verify completion of work orders without cross-check and verification by another employee who is not directly involved in the project.
Employee living beyond their means
Pay close attention to employees that seem to have more of the toys and material goods or take holidays than their salaries would not permit. Even though you may not know the income of a spouse or partner who may be supplementing the cost of these expenditures, it is important to take note of people that are living a lavish lifestyle that exceeds the income levels that you provide as an employer.
Employee vehicles near exits or remote areas or loading docks
Employees should have designated parking stalls. If they do not, take note of where they routinely park. Employees that have that park their cars near exits may not be intending to steal, but that egress gives them a greater opportunity. Thus, it’s both an indicator and an opportunity for potential theft
Employees that request to work isolated or remote shifts
Employees that request shifts that do not have an abundance of other employees or people around them may be doing so simply because they like being on their own, but at the same time the isolated and remote shifts allow a greater opportunity for theft. This may indicate a propensity to take advantage of the opportunity that autonomy creates.
Employees in unauthorized areas
Unless there is a good justification for it, employees should generally be working in the area or staying in the areas in which they work unless they are on breaks.
Controlled doors jammed open
On occasion, employees will jam a door open merely to generate a breeze into a warehouse or a factory. However, those doors (especially if they are considered emergency exits) should not be jammed open or held open with a device. An open, uncontrolled exit is an invitation to theft.
Personal belongings in work area
Personal stuff in a work area, such as backpacks, shopping bags or even shopping purchases that the employee has made should not be in the work area. Such an opportunity allows the employee to put goods into those bags before they leave for work or when it is quiet and they have the opportunity to do so. Personal belongings in a work area is an indicator that employees have an opportunity to steal. It is not necessarily an indicator of theft, but should be monitored and policies against the practice enforced.
Low productivity by “busy” employee
Employees with low productivity but who always seems busy may indicate fraud potential. Some employees simply cannot organize effectively. However, an employee that has low productivity but always seems to be working may be working on stuff for himself or maybe manipulating work orders or billings to his benefit (or to a benefit of a friend for whom you are providing goods).
Employee who makes lots of excuses
Aside from being an employee that is a bit of an agitator or that can create unrest in the workplace, the employee that makes excuses for errors, makes excuses for not having done work or makes excuses for missing items is an employee that we should pay particular attention to. This indicator also is a motive for deviance, which makes the situation more likely for exploitation of any opportunity for theft or fraud.
Employee that brags and is condescending
Just as risky as the employee who makes lots of excuses or the employee that has low productivity and seems busy, the person that brags about his capabilities and his condescending is an employee who has an attitude that often leads to them believing that they can outsmart the system. This worker is more likely to be theft prone or willing to engage in fraud.
Specific category inventory issues
Where you have particular inventory categories or groupings that seem to have chronic shortages or chronic labour or production costs, if those inventory categories contain theft prone items, you may have a shortage or a problem because of theft or fraud occurring.