Know Better, Do Better: Digital Technology and the Fraud-Free Supply Chain

Supply chain fraud comes in many forms. Over the past six months, we’ve all seen the headlines uncovering rigged quality tests, overpricing, illegal labor practices, cloaked ingredient lists, and much more. And all of these charges have one thing in common: they captured the attention of the media and damaged consumer trust.

The impact of all types of corporate fraud is profound and long-lasting. In a recent article in the Wall Street Journal, Justin Dillon, chief executive of labor activist group Made in a Free World, stated, “The message to companies is to get ahead of this. The message is that doing nothing is very dangerous. Transparency is the new black. It’s no longer a suggestive measure … it’s more of a stick.”

Companies must use their purchasing power to influence their suppliers’ behavior – as well as their suppliers’ suppliers. Asking for information and establishing zero-tolerance policies are no longer enough. Fraud prevention needs to become a mechanized, transparent, and consistent process.

The first step to exposing fraud: Digital networks

By using the strength of our digital, connected world and cloud technology, Made in a Free World is helping businesses of all industries to understand better where forced and slave labor reside in their supply chains. Also, consumers can access the database to calculate how many people are exploited to support lifestyle demands.

However, awareness is just the first step. Consumers and businesses must take this information to make better buying and procurement decisions.

Now that you know about it, how are you going to fix it before it’s headline news?

To fight fraud, businesses are taking prevention tactics out of the hands of third parties that perform periodic onsite visits and audits. Not only is this approach costly and time-consuming, but it’s proving to be insufficient. Just like Made in a Free World found digital technology to be a useful tool in the war on labor fraud, it can also help businesses proactively and cost-effectively manage any risk of fraud, waste, and abuse.

According to the Center for Business Insight inquiry, “3 Ways to Fight Fraud, Waste, and Abuse in the Supply Chain,” there are three critical ways digital technology can help.

1. Combine the power of data and forensics

On any given day, a mind-boggling amount of data is generated on a company’s products, those it sources from, and those it does not source from. Over time, this information can improve decision making on supplier selection, contracting, and monitoring. With the emergence of advanced data collection and analytical tools, companies can expand their scope of research across a broader population of transactions rather than data samples. They can correlate data-disparate systems while third-party data sources increase visibility into the supply chain by alerting gaps in supplier performance, behavioral trends, missed deadlines, and other red flags.

2. Create smarter supply chains through full transparency, deep review, and real-time action

Increasing audit frequency means that companies aren’t fighting old issues as new ones arise. By delving deeper into the supply chain, businesses can consistently monitor labor practices, reduce environmental impact, and prevent future waste and abuse. Plus, implementing a compliance plan that uses digital technology to capture and analyze data can help the business focus on anti-corruption, anti-money laundering, antitrust, consumer protection, environment, food safety, health and wellness, labor and employment, product safety, and responsible sourcing and trade.

3. Differentiate and predict future fraud

To create a corporate culture that shines a spotlight on potential issues, every employee – no matter their position, pay grade, or experience – needs to act like supply-chain detectives. Although analytics and monitoring solutions can be useful, they cannot do the entire job themselves. Managers and executives need to communicate and educate their employees with the proper context around such fraud detection and prevention systems. For example, companies can use remote monitoring tools to assess and monitor supply chain risk assessment and management.

To eliminate the fraud from your business network, you must detect and remove offending suppliers before they can access your supply chain. Educating employees and using digital technology to monitor and predict fraud can prevent operational disruption and improve business resilience. More important, this investment pays for itself by cementing good will, confidence, and trust in consumers’ perception of your brand.

Gather more intelligence on this topic from a panel of experts in Supply Chain Fraud: Theft That’s Hidden in Plain Sight.