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August 2012


Helpful Technologies

The supply chain fraud business model relies on tried-and-true supply chain technologies that - from a methodology standpoint - convert paper-based transactions to electronic form so that the data can be cross-checked and audited.   

The core technology is the Enterprise Resource Planning (ERP) system.  The ERP system is the business system of record.  Here is where all entities (customers, items, vendors/suppliers) are stored, as well as the actions (sales orders, purchase orders, work orders) executed against those entities.  Accounting ledgers, payables, and receivables are recorded.  For items, the bills of material, labor, and operations are established.  Inventory (how much of what and where) is maintained.

(While the above description may be an over-simplification in describing ERP systems used by very large and global firms, I would also argue that functionally that is true to what ERP systems do.)
Second is the extension of the ERP system internally across the enterprise via the use of automatic identification such as barcode labeling and scanning (or radio-frequency identification) as is typically found in picking, packing, and receiving functions.
Third, the ERP system is extended externally across the enterprise's supply chain partners via a means of electronic business-to-business such as Electronic Data Interchange (EDI) for various business documents such as the purchase order and invoice.
With just these three supply chain technologies in place, a program for detecting and reducing supply chain fraud can be implemented.

Frauds in one link of the supply chain can have a ripple effect, revealing themselves very differently later in the supply chain.
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