FRAUDULENT MARKDOWN, SWEET HEARTING AND INTERNAL THEFT
BUSINESS PARAMETERS
1. With regards to check fraudulent mark downs, cases of sweet hearting and internal theft, a retail business modelled on SAP usage, would generally design the following parameters :-
(a) If it is a franchisee model, then losses up to certain level would be recovered from the franchisee.
(b) Mark downs shall be permitted on STAND ALONE bar coding machine as controlling it centrally on portal basis is not only prohibitive in cost in a large chain, but, also due to the amount of data handling, it cannot be handled centrally.
(c) Certain conditions would be laid down to monitor mark down process.
(d) To control sweet hearting, retailers would implement sound security policies entailing additional cost in infrastructure like CCTVs, posting of security guards etc.
(e) Effectively monitor shrink levels at front end.
2. Evidence suggest that despite stringent controls laid out in the SOPs of the business, a fraudulent mind shall try and remain a step ahead of business controls.
VIOLATIONS TO ABOVE PROCESSES
3. Case No 1 (Fraudulent Mark Downs) Though the business process lays down adequate checks to control this activity, but, it has been noticed that the supervisory functions fail at relevant time by design or default. For example, there is a motivation for franchisee to get involved himself / herself in this act for the following reasons :-
(a) It is known fact that by resorting to dishonest practices, he lands up earning more than what he would be paying as compensation to losses.
(b) Though, the processes lays down adequate checks in system in terms of data monitoring but it has been experienced in Indian conditions that :-
(i) There are no data analyst (pattern recognizers) placed suitably to detect such cases.
(ii) There is a serious mismatch between the revisit capability of Security and Loss Prevention team at stores. Ideally, all such cases should have been detected during the period that contains original recordings and those recordings are not overwritten. For example, if the CCTV recordings are available for 10 days, then the loss prevention team should be able to analyse all transactions within this span of time to cross check their findings, otherwise, the data would get over written and would be lost forever.
(ii) Shrink figures can be dressed to look attractive as is exemplified in separate blog on the subject.
(iii) Printing bar code labels for such markdowns on stand alone machines is a serious business drawback and can only be controlled if suitable reports are generated based on data available in data warehouse.
4. Case No – 2 (Sweet Hearting) As routine matter, all major retailers have installed CCTVs to deter the cases of sweet hearting. But, that is only half job done. The efficacy of such centralized CCTVs is best demonstrated when used as “preventive tool” rather than “detection tool”. It implies that CCTVs should be continuously monitored from back end and FRONT END TEAM MUST HAVE A FEELING THAT THEY ARE BEING OBSERVED CONTINUOUSLY. That is best achieved when back end team constantly keep feeding inputs to front end team in total synergy of efforts.
5. It is a proven fact that over a period of time, if the most honest person is constantly conveyed a fact that dishonest person is getting scot-free continuously, there is hardly any incentive left for people to remain honest.
6. Case No –3 (Items being taken away from exit without bill). Such instances are not a figment of imagination, but, a fact of life in present day scenario where in the deployment of Security Guard conforms to more of fashion trend rather than a preventive tool. This can be best avoided if suitable contract is signed with service provider indicating that the agency would be suitably fined should their Security Guard be found indulging in such malpractices. HAVING A SECURITY GUARD WITH NO CONTROLS IS MORE DETRIMENTAL TO BUSINESS THAN NOT HAVING A SECURITY GUARD AT ALL.
RECOMMENDATIONS
7. The following are recommended :-
(a) Suitable reports can be generated from the available data in data warehouse, which could be used to discern a pattern and establish the prima facia case.
(b) Security and loss prevention team should have a revisit capability depending upon the time
for which recordings in CCTV storage device are available.
(c) Suitable data reports be generated to discern if shrink figures are being dressed up or not.
(d) Exemplary fines be imposed on security agency providing security guards in the event of
their guards being found guilty of acts causing loss to the company.
(e) Build a culture of honesty in business. It is best done by talent transformation team,
continuous sharing of experiences by security team and rewarding he honest employees.
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