Supply chain fraud continues to plague companies, poll says

04-Apr-2016 - Last updated on 05-Apr-2016 at 13:46 GMT

Rod MacLea, Director, Supply Chain at Amgen, explained that there is a great opportunity for pharma to learn from other industries. (Image: iStock)

Related tags Supply chain Risk Finance

For the third year in a row, about 30% of Deloitte poll respondents say their companies experienced supply chain fraud, waste, or abuse in the previous year.

"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.”

Life sciences and health care respondents reported the greatest instance of fraud at 35% in 2016, up from 31% in 2014.

"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,” added Pearson. “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."

According to the report, different employee groups pose different supply chain fraud risks. Specifically, project managers and invoice approvers (26%) and procurement professionals (24.7%) present the largest risk to organizations.

Additionally, while 13.7% have analytics software, but don't use it, 19.3% don't use any analytics for supply chain financial risk management.

Looking to other industries

At DCAT Week 16’ Rod MacLea, Director, Supply Chain at Amgen, explained that there is a great opportunity for pharma to learn from other industries, such as telecommunications, aerospace, and automotive.

According to Deloitte’s report, technology, media, and telecommunications reported a drop in fraud instances to 27% in 2016, from 33% in 2014.

“There is significant opportunity for efficiently and process control,” added MacLea, who added that the industry doesn’t use technology “to its fullest … or even partially.”

However, there are still many supply chain issues that are out of a company’s control.

“There were more than 500 events in 2015 that touched the industry,” said MacLea – and many of these were factory explosions and fire, with labor strikes/disruption and earthquakes following as the second and third most common events.

Ultimately, more transparency is needed in the supply chain, and as MacLea quoted, “All ships rise on the tide.”