Because manufacturing facilities rely on myriad supplies and raw materials, and have abundant finished product on hand, they offer numerous opportunities for theft. When combined with administrative and office functions, the chance for fraud substantially increases.
Processing may include after-market businesses, such as car customization, food processing and agricultural products, while manufacturing may include prefab structures, clothing and machining. Each has its own set of risks.
Small-scale, hands-on operations, such as welders & metal fabrication, require tools that can double as tools for the home handyman. Clothing producers provide outputs that are desirable consumer products, prone to theft. Food processors may produce items that are ideal resale items. One client, a electrical winding company, saw over $40,000 in testing equipment stolen.
The opportunities may not be evident unless you look at the desirability of items from the employee’s perspective. To what use or in what way could your assets be used, for gain, by the employee?
Raw materials
One landscaping company fired an employee who was ordering decorative rock from a specific company. While it seemed that the bulk deliveries were being received, approximately one yard out of every ten was rerouted to the employee’s home, where he bagged and sold the rock at farmer’s markets. Whether the employer had received a full ten yards was difficult to measure, because the volume of the dump truck delivering the goods was irregular.
Scoring (Low to High) 0-10
Shorting orders out
A shipper occasionally stacked pallets of boxes to be shipped to other facilities in such a manner that the interior of the pallet was missing three or four units per flat. Casual receivers at the destinations rarely counted the hundred cases supposedly on the flat and the employee was able to carry on the deception for over a year.
Scoring (Low to High) 0-20
Inspections
A clothing inspector failed many items each week for quality issues. These items were discarded and the employee later recovered them for resale.
Scoring (Low to High) 0-10
Mislabelling orders out
Cases of high end meats shipped to specific clients were labelled by one shipper as cheaper cuts, with the buyer providing a kickback to the shipper for the “error” that gained him a significant improvement on product. This can work for orders ostensibly coming in, as well.
Scoring (Low to High) 0-10
Order picking
Order pickers have the opportunity to load excess or higher-end goods onto a shipment without great risk of detection. Even with bar code scanners, the employees may scan a cheap item and load an expensive one or pretend to scan a case that is not scanned. When working with select delivery drivers or salesmen who are colluding with the employee, they can steal significant amounts of product with little risk.
Scoring (Low to High) 0-10
Poor yields
Processing facilities that do not have excellent yields analyses logs, spoilage records or supplies assessments run the risk of having produced more goods than are recorded, which may be directly stolen or be part of fraudulent transactions.
Scoring (Low to High) 0-20
Tools and equipment
One inventive railway employee actually managed to load a very heavy (2.5 ton) winch that was used to move locomotives into position into his truck and drive off. He used the winch in his friend’s auto wrecking business, even though the winch capacity was way to large for the purpose for which it was used. Another managed to secure a meat slicer that was being sent for repair, which he used in his own kitchen! Tools and equipment that seem to be undesirable may have value to the employee that the boss may not recognize.
Scoring (Low to High) 0-10
Supplies
A caterer who worked for a food processing facility regularly stole small, easily concealed quantities of specialty spices. Another stole containers of methanol (de-icer) for use in his friend’s race car. Supply theft may involve seemingly valueless items or items that do not provide an obvious gain to the thief. One employee, to keep from having to work on a project on which he did not want to work, stole the custom grinding discs needed for the project, so that the job could be delayed. He had no use for the items, other than to avoid work.
Scoring (Low to High) 0-10
Finished machined goods
Johnny Cash sang “One piece at a time,” about stealing parts for his dream car over a twenty-year timespan. It was comically entertaining, but not that far from reality. A suspect we caught built an entire machine shop of his own from finished parts that he stole, over four years, from his boss.
Scoring (Low to High) 0-10
Spoilage & Wastage
Writing product off as spoiled or as trim is a common technique to steal food products from employers.
Scoring (Low to High) 0-20
Working on one’s own projects
This may apply to an office worker or a production worker. Working on personal projects at work may not just steal time, but usually involves using company assets, supplies and materials to complete the projects.
Scoring (Low to High) 0-10
Using clients to pirate goods
One suspect added items to the customer pickup whenever a specific client’s employee was scheduled to pick up his finished orders. In this way, the thief was able to steal tens of thousands of dollars each year without detection.
Scoring (Low to High) 0-10
Credits rerouted
An employee of a processing plant occasionally would pocket the cheque of a customer who was entitled to a credit, but who was unaware. He also applied for government rebates and credits from suppliers, using dummy accounts to deposit the money.
Scoring (Low to High) 0-20
Using company assets illegitimately
A worker managed to keep his company phone long after he was terminated, with the billing continuing to flow through the company.
Scoring (Low to High) 0-10