April 2005 | Commentary | 3PL Line

8 Steps to Protecting Against Parcel Fraud

Tags: 3PL

Parcel fraud is currently one of the most disregarded crimes in American business. But with an estimated $400 billion in losses per year due to employee theft, parcel fraud should not be overlooked.

The most obvious type of parcel fraud occurs in the workplace, with crimes ranging from the seemingly harmless—shipping personal packages on a company account—to the truly reprehensible—stealing truckloads of merchandise from distribution centers.

If one out of every 10 U.S. employees ships one personal ground package per year through their employer's parcel system, the cost is more than $70 million. And that's not counting the employee who mails a stack of Christmas packages Next Day Air from the mailroom, or the worker who ships a birthday present through the company FedEx account.

Think about how easy it is for employees working in a distribution center to make a shipping label addressed to the person of their choice, rather than the intended destination. Employees use normal protocol and replace the ship-to address with a friend or family member's address—or even their own. Unless a supervisor intently watches every employee's move, or a sophisticated preventive system is in place, it is nearly impossible to catch these transgressions.

Retailers, in fact, have more to fear from dishonest employees than they do from shoplifters, according to a recent Ernst & Young study. The study attributes employee theft with 47 percent of dollars lost to inventory shrinkage—the largest single contributor to overall inventory shrinkage. Though the volume of shoplifters is certainly greater, the dollar value of employee theft on a per-incident basis is much higher than that of shoplifting.

Vulnerabilities in distribution centers are an even scarier concern. If a distribution center uses multiple carriers, it's possible that no one checks the trucks or the drivers coming in and out of the DC. A friend of an employee, for example, might be able to drive in with a no-name truck, load it with merchandise, forge a signature, and take off.

It is nearly impossible to track these trucks down. In fact, you may not know about a stolen load until customers complain about missing orders. By that time, the truck, driver, and goods are long gone.

You may think your company is safe if you utilize cameras, alarms, and security guards. But who is watching the cameras, and are they looking for parcel fraud? It is very easy to miss. When one of your security measures catches a mistake, there is often no trail to the thief.

Fighting Back

Most companies practice audits to catch what the cameras and guards do not. But audits are virtually useless if they are not conducted properly. One common mistake is conducting scheduled audits, which means employees know they are coming.

Here are eight policies companies can use to help combat parcel theft in the workplace:

1. Perform an unannounced audit of your parcel carrier's invoices for personal shipments. Requesting electronic invoices from your carriers is the best way to do this. If your organization ships more than 100 packages per day, you should use a database application such as MS Access, Oracle, or SQL Server to analyze billing files. These systems perform complex queries on sender names, origins, destinations, and other fields that may lead to recognizing employee theft. You can also search reference fields for eBay item numbers— a sure sign of misuse unless your company uses eBay for business reasons.

If your company ships fewer than 100 packages per day, importing invoices to a spreadsheet is sufficient. Sort the data by destination names to find unrecognized destinations, which often signal unauthorized shipments.

The winter holiday season is the best time of year to perform a personal shipment audit because most employee theft occurs between Nov. 15 and Dec. 31.

2. Request electronic copies of your parcel trailer manifests. Compare the manifests to the shipped orders in your customer service system, and look for discrepancies. This offers an easy trail to investigate.

3. Test your safeguarding measures. You may be surprised by the holes you find in your theft prevention system. Once you find the vulnerabilities, you can improve your safety measures.

4. Establish an anonymous tip line. This can be a successful tool for catching employee theft. Co-workers are often willing to provide information about a suspicious employee if they know they won't be identified.

5. Conduct unannounced in-house audits. The fear of getting caught should maximize the effectiveness of in-house audits. Workers are less likely to steal if they don't know when they will be checked.

6. Screen employees before hiring. Because you can't watch an employee's every move, make sure you at least know who you are hiring. Employee screening is essential. Once you've checked applicants' backgrounds and hired the most qualified, trustworthy people, educate them about company policies on parcel theft.

7. Introduce an employee ethics program. Be sure it defines employee theft and its punishments. Promote honesty and encourage employees to use the anonymous tip line.

8. Enforce severe punishment. If parcel fraud can't be prevented, delinquents must be caught and punished. Enforcing punishment makes it known that your company does not tolerate theft.

Whether it's shipping a personal package on the company dime, changing a label to send packages to friends, or stealing a truckload of company merchandise, parcel fraud in the workplace is serious—and expensive. Is your company paying attention?