Supply Chain Fraud - Slide

Essentially, the supply chain is set into motion by a “trigger” event. Trigger events can occur from Point Of Sales (POS) systems, Warehouse Management Systems (WMS), and Vendor Managed Inventory (VMI) arrangements. The typical trigger event is when on-hand quantities fall below a minimum on-hand safety stock. The result of the trigger event is that goods or materials are ordered.

Trigger frauds would occur when there is a manipulation of either the on-hand quantity or minimum on-hand safety stock so as to cause goods to be ordered prematurely. This can be due to collusion between someone within the buying company and the supplier because the supplier needs to increase sales revenue and/or decrease inventory by loading up inventory the customer (buying party) is carrying. Because the buying party is ordering more frequently, they decrease cash, increase goods or materials on hand, and likely decrease available storage space.

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