8 Tips: Fight Fraud in Supply Chain Management
You don’t have to look far to find instances of fraud in the supply chain. With so many moving parts, it can be difficult to insulate your business from the potential risks of operating within the global supply chain.
Vendors, carriers in your supply chain network, warehousing operations, and more must all be put under the microscope and properly evaluated to avoid any risk management concerns. But that is sometimes easier said than done.
Whether working across multiple verticals that span the globe, scaling your business, or working hard to streamline outdated processes, it can be easy to overlook something that can have a much greater impact than you might realize.
So what is the solution? How do you protect your business and relationships from potential fraud?
The simple answer is to put systems and processes in place that emphasize supply chain integrity and can alert you when potential concerns arise. But, like most things in the supply chain, it is a bit more complicated than that.
Trax empowers enterprises with globally complex supply chains to gain full control of their transportation costs. Using cutting-edge technology and machine learning, we help global organizations fight fraud in supply chain management.
Understanding the Scope of Supply Chain Fraud
Today’s organizations operate with extensive networks and vast amounts of transactions, opening the door to potential fraud. Corruption, bribery, fraudulent billing, procurement fraud, and theft are all concerns that every organization working across the global supply chain must be aware of and be ready to address.
But fraud isn’t as straightforward as it was a few decades ago. In 2022, the number of supply chain cyber-attacks surpassed malware attacks by 40%, impacting a startling 1700 entities across the globe. Sadly, these numbers are only projected to rise in the coming years.
To make matters worse, because of the interconnected nature of the global supply chain, a single attack can create a domino effect that impacts millions of people worldwide.
Establishing a Culture of Vigilance
This article isn’t meant to create a doom and gloom scenario but to shed light on real concerns that can negatively impact your business and cost your organization millions of dollars.
The good news – there is light at the end of the tunnel.
By establishing a culture of vigilance and putting support structures in place, you can offset the likelihood of fraud impacting your business. But that may be easier said than done.
From the technology side of the equation, tools like freight audit and payment (FAP) systems can monitor and alert when potential fraud occurs. Where it gets a little more messy is changing the culture of an organization. To put it more bluntly – change is hard.
Eight Tips to Combat Fraud in Supply Chain Management
Now that we have set the stage and made it clear that combating fraud may be an uphill battle, let’s turn our attention to practical tips to help insulate your business from potential supply chain management fraud.
Vendor Due Diligence
As we mentioned earlier, global organizations have notoriously complex vendor networks that are constantly fluctuating. Conducting thorough background checks on vendors and suppliers can be cumbersome, but it is ultimately the first line of defense against fraud.
To make the vetting process more manageable, consider implementing a risk assessment framework to help categorize and prioritize vendors and their associated risk levels.
Supply Chain Visibility
Visibility in the supply chain might seem like an oxymoron because we all know it can be as clear as mud sometimes. However, recent advancements in tracking and monitoring technologies have vastly improved supply chain visibility at all levels and stages of the supply chain.
Modern tools can provide end-to-end visibility by leveraging data analytics and edge computing to detect anomalies in real time.
Contract Management
Contract management might not be the first thing that crosses your mind when someone mentions preventing fraud, but billing fraud is a significant concern. Hundreds of thousands of transactions each year have made it easier for billing theft to occur, especially if audits are conducted post-payment.
Freight audit and payment systems have built-in technology to automate the contract management process. Through AI and machine learning, they can flag deviations from previously agreed-upon terms before the payment is made to the carrier.
Cybersecurity
Cybersecurity could have easily been at the top of this list, and understandably so. Digital attacks are increasing at an alarming rate. Those working within the supply chain are more exposed than ever.
Investing in robust cybersecurity measures alone is no longer enough. Additional measures, such as cybersecurity audits and vulnerability assessments, should be conducted throughout the year and addressed in real time.
Employee Training and Awareness
FAP systems and cybersecurity might be new school approaches, but old-school strategies, like employee training and awareness, can still be highly effective in combatting fraud. This does require comprehensive training programs designed to educate employees on fraud prevention.
This could be a piece you already have in place, but it may need to be adjusted to incorporate some of the leveraged technology to bring things full circle.
Regulatory Compliance
What was the old G.I. Joe slogan – “Knowing is half the battle.” Staying on top of relevant supply chain regulations and compliance changes can be difficult, a fact that is not lost on our team but can also help avoid fraud.
This is an area in which AI can be of tremendous help. FAP systems are constantly monitoring regulatory changes and can flag potential concerns for your internal compliance team, making them more effective overall.
Supply Chain Resilience
It can sometimes be hard to swallow, but fraud may not be entirely avoidable. Even with the latest technology and preventative measures, it can still occur. A contingency plan for supply chain disruptions caused by fraud or other crises can make it easier to pivot, minimize damage, and mitigate the overall risk.
Third-Party Audits
Sometimes, the best thing you can do when examining your process and supply chain integrity is to get a fresh set of eyes on the situation. Engaging third-party auditors periodically can reveal potential security risks and vulnerabilities you might not otherwise see because you can’t see the forest for the trees. Any findings should be followed up with a clear plan of action to avoid issues down the road.
Combat Fraud With Trax
At the end of the day, combating fraud in the modern supply chain revolves around systems and processes that can help you actively monitor and flag potential threats. Taking a proactive approach, with tools like a freight audit and payment system, can help you mitigate risk, reduce operational costs, and scale your business more effectively.
At Trax, we are all too aware of the threats facing organizations working across the global supply chain. We are committed to providing our customers with tools to fight against fraud and cyberattacks. To learn more about our suite of transportation management spend solutions and the security measures native to the platform, connect with our team.