A team of employees were evaluating costs for their organization – they noticed a spike in inventory over the past couple of years. So, what was the driver? They narrowed their findings and found that the increased costs were related to transmission parts, truck batteries and tires. Because the organization specialized in long haul truck repairs, it wasn’t unusual for this business to carry a larger inventory of those items.
When the team studied the repair logs, they noticed that the amount of supplies purchased as opposed to what was being used for repairs — well, they didn’t match up. Was there a delay in reporting repairs in the system?
The team decided to conduct an unannounced visit to determine what was causing the supply costs to spike and determine why the parts ordered didn’t align to what was flagged as repaired in their system. They met with the supply group and the repair team at their location and noted that some of the employees kept leaving and returning to the meeting. After their hour-long visit, the management decided to do a spot check of inventory. They noticed a shortage of supplies and brought the discrepancy to the repair team, but the contact person said they had an overflow spot and the additional supplies were at another location. The contact member also noted that it was close to lunch, so invited the visiting team to go to lunch with them and then check the inventory at their overflow location afterwards. The management team agreed.
While the group was at lunch, the group of employees that were unfortunately stealing the supplies knew that the inventory shortages were about to be discovered. They attempted to hide the theft by relocating inventory that had already been counted in the home office and relocating it into the overflow area. But, the management team was already onto them. Unknown to these employees, a special chalk marker was used on the supplies in the home office inventory to indicate the inventory had been already counted. When the team showed up to the new location, the management quickly identified their chalk marks and knew their concerns of theft had been well-founded.
Unfortunately, a few employees were taking supplies and re-selling them. Management quickly acted on the theft, a new team was assembled, and a new set of controls were put into place to address the weakness that led to the theft.