Preventing Truck Scale Fraud
Keep Your Scale Honest – Your Business Depends on It
Businesses are robbed every day without even knowing it. When theft occurs at a vehicle scale, management often has no idea what was stolen or who took it. How do you begin to protect yourself against a crime that is so hard to detect?
Thieves can do serious damage to a business. One global manufacturer recently determined that as much as 5 percent of its revenue was being stolen annually. With sales exceeding $30 billion, the manufacturer knew that the problem was too big to ignore.
Theft occurs throughout the supply chain, from initial shipments of raw materials to final delivery of finished products. Unless you monitor incoming and outgoing shipments carefully, you might not realize that you have a problem. Even if you suspect that inventory is missing, identifying how it was lost can be difficult. There are several possible reasons for shortages:
- Supplier fraud
- External theft
- Internal theft
- Damage or spoilage
- Accounting errors
Damage, errors, and random pilfering are usually minor issues. The biggest concern is the systematic, planned theft of a business’s valuable resources. Some thieves steal products. Others steal cash by falsifying charges for materials that they supply. Either way, a business can end up with costly shortages.
Even small amounts of missing inventory can hurt your bottom line. To understand the effect of fraud on your business, consider what it would take to make up for stolen material and the other costs associated with it. If your business sells products at a profit margin of 10 percent, you would need to increase sales by $100,000 to recover $10,000 worth of lost revenue (see Figure 1).
Few thieves will be satisfied with taking a small amount. In one recent case, several corrupt suppliers used truck scales to cheat a single facility out of $2 million for material that was never delivered. Any business would be hard pressed to increase sales enough to make up for those losses.
The full cost of fraud
Businesses should be aware of the additional costs associated with fraud.
Material shortages have a ripple effect. If a truckload of material is missing, you lose more than the cost of the material. In addition to replacing the missing material, you are likely to face costs for additional processing, manufacturing, and delays. Don’t forget to factor in the cost of criminal investigations and rising insurance rates.
These costs come straight out of your profits. Instead of absorbing the costs, you might decide to pass them on to your customers. In the long run, that strategy can hurt your business by making it less competitive.
Why vehicle scales are robbed
Vehicle scales are convenient targets because they often control the materials that enter and exit a facility. A business’s valuable resources travel across them every day. Because cargo changes hands at scales, all that thieves need to do is take a little extra during authorized transactions.
Routine audits rarely reveal how thieves operate or how much they steal. To determine the size of the problem and its causes, you need to dig deeper. The first step toward protecting your business is conducting a thorough investigation of all procedures and security systems.
Assessing the security of a business can be complicated. Cheaters are very creative about locating a system’s weak points and exploiting them. The articles in this newsletter expose some of the tactics that cheaters use. As you will see, a business can be plagued by several types of theft simultaneously.
Finding a solution
It helps to be well versed in the fraudulent techniques that thieves use. Once you fully understand the problem, you can begin to formulate effective solutions.
The same factors that make vehicle scales tempting targets also make them potential tools for prevention. With the proper security precautions, a vehicle scale can be your best safeguard against fraud.
Are you being cheated?
Learn about the top five ways criminals cheat at truck scales and how to protect your business from them. Visit the METTLER TOLEDO website and download the free fraud-prevention guide.
