Proving the Business Case for the Internet of Things

Deloitte finds third of firms suffer supply chain fraud

William Payne
April 7, 2016
Research by consultancy firm Deloitte indicates that about 30% of companies experience supply chain fraud. The research also shows that just only 29.3% of respondents’ companies use supply chain analytics to detect fraud, with two thirds of companies relying on employees to detect and report supply chain fraud.

According to Deloitte, two  industries saw supply chain fraud rise between 2014 and 2016: life sciences and health care respondents report an increase to 35 percent in 2016 (31 percent in 2014); and energy and resources was 34 percent in 2016, compared to 27 percent in 2014. Conversely, technology, media and telecommunications reported a drop to 27 percent in 2016, from 2014's 33 percent. 

Over 2,660 professionals participated in the poll which was conducted in January 2016. Respondents worked in industries including consumer and industrial products (28.5 percent); financial services (24 percent); technology, media and telecommunications (12 percent); life sciences and healthcare (9.6 percent); and energy and resources (7.5 percent).

Some employee groups pose larger supply chain fraud risk. Project managers and invoice approvers (26 percent) and procurement professionals (24.7 percent) present the largest risk of supply chain fraud, waste and abuse in respondents' organizations.

Many firms do not use supply chain analytics. While 13.7 percent have analytics software, but don't use it, another 19.3 percent don't use analytics for supply chain financial risk management at all. 

Analysis of invoices for fraud prior to payment is low. Just 27 percent of respondents' organizations analyse unpaid invoices for evidence of supply chain fraud, waste and abuse prior to payment.

Larry Kivett, Deloitte Advisory partner, Deloitte Financial Advisory Services LLP, added, "As distress from falling oil and gas prices puts pressure on the energy and resources industry, many leaders are working hard to avoid leaving any cash on the table. Using supply chain analytics to identify and investigate supply chain financial risks can help stem fraud schemes that we increasingly see in today's challenging, complex and global environment."

"In my 20 years conducting forensic investigations, trust in employees and third parties is often misplaced," said Mark Pearson, Deloitte Advisory principal, Deloitte Financial Advisory Services LLP.  "As a result, many organizations are trapped in a pay-and-chase model for fighting supply chain fraud —invoices are paid first, then retribution is sought much later when fraud is found, if it's found at all. But, the supply chain forensics leading practice is a comprehensive and proactive, predictive approach tailored to organizational structure and industry sector."

Pearson continued, "From a life sciences and health care perspective, regulatory and legislative pressure is expected to heighten around pricing and transparency for plans, providers, and pharma and devices makers. It's a good time to verify that your supply chain is not hiding any unsavory vendors or other fraud, waste and abuse that could cause reputational harm and costly remediation later."