CSCMP's Supply Chain Quarterly
February 22, 2020
Forward Thinking

More companies are using analytics to detect supply chain fraud, says Deloitte

Supply chain analytics software can help companies detect possible fraud before the company actually loses money, according to the global consulting company.

More companies are starting to use supply chain analytics software to alert them to the possibility of supply chain fraud before it happens, says Deloitte.

According to the global consulting company, 35 percent of the more than 3,220 professionals who participated in a June 2017 webcast on supply chain fraud, waste, and abuse said that their company was using analytics to mitigate third-party supply chain fraud. This is an increase of almost 10 percent from a similar survey conducted during a webcast in 2014. (In 2014, 25.2 percent of 3,056 people surveyed said they were using analytics.) Because the survey was taken only by attendees of a supply chain fraud webinar, the results may not be representative for all companies. But the results do suggest that among companies that are focusing on supply chain fraud, more and more are looking to analytics for help.

Examples of supply chain fraud include overbilling from third-party vendors, suppliers not complying with contract terms, and suppliers overstating hours worked or billing for material that was not delivered, says Larry Kivett, a partner in the Forensics & Investigations practice of Deloitte Financial Advisory Services LLP. Supply chain fraud can also include corruption, bribery, kickbacks, or instances where the procurement manager is providing preferential treatment to one supplier over others.

A company often doesn't realize that it has been a victim of supply chain fraud until it has already lost money. The value of supply chain analytics is that the software can identify patterns of risk or trouble spots before the money has been paid, says Kivett. For example, the software might see that one procurement manager is more likely to sole source a contract than other procurement managers who are working on similar projects. Or it might show that one general contractor is receiving payments quicker than others. While there may be legitimate reasons why these things are occurring, these incidents could also be indications of fraud, says Kivett. A report from the analytics software would alert the company that it needs to take a closer look at what is happening.

The growing use of analytics to detect fraud is a heartening sign that more companies are taking supply chain fraud more seriously, according to Deloitte. Surveys that Deloitte has conducted over the past four years surveys consistently show that about a third of respondents have been a victim of supply chain fraud in the past year. Yet supply chain fraud typically does not receive as much focus in the enterprise risk management process as other risks, says Kivett.

"Oftentimes we see that while companies are aware of the risk of fraud, they make the mistake of believing 'it couldn't happen here,'" says Kivett.

Most companies could do a better job of considering what types of fraud they may be susceptible to, where they could strengthen their internal controls, and learning from past fraud that has occurred within the organization, he says.

Susan Lacefield is Executive Editor of CSCMP’s Supply Chain Quarterly.

Join the Discussion

After you comment, click Post. If you're not already logged in, you will be asked to log in or register.

Want more articles like this? Sign up for a free subscription to Supply Chain Executive Insight, a monthly e-newsletter that provides insights and commentary on supply chain trends and developments. Click here to subscribe.

We Want to Hear From You! We invite you to share your thoughts and opinions about this article by sending an e-mail to ?Subject=Letter to the Editor: Quarter 2018: More companies are using analytics to detect supply chain fraud, says Deloitte"> . We will publish selected readers' comments in future issues of CSCMP's Supply Chain Quarterly. Correspondence may be edited for clarity or for length.

Want more articles like this? Subscribe to CSCMP's Supply Chain Quarterly.