Cost of NOT Using Modern Supply Chain Systems: 6.8 Billion

A recent article over on CNN Money that noted that the store theft cost to your family, largely due to a 9% jump in retail theft over the past year, is $435 — as shoplifting, employee theft, and supply chain fraud cost retailers $42.2 Billion between July 2008 and June 2009, had a surprising revelation.

Breaking this mega-loss down, we find that:

  • 18.7 Billion is due to employee theft
    which could be considerably reduced with better screening, security and processes
  • 15.0 Billion is due to shoplifting
    which could be somewhat reduced with better security, but will likely always be a problem
  • 6.8 Billion is due to processing, supply chain errors, and frauds
    which could be eliminated with good systems and processes
  • 1.7 Billion is due to other causes

There’s no excuse for any errors. Good end-to-end e-Procurement systems can match every invoice against the purchase order and contract and make sure you’re only paying for what you ordered at contracted rates. Good forecasting and inventory tracking systems will prevent costly errors. And good visibility systems will allow you to spot any exceptions as soon as they occur and stop frauds, and fraudsters, in the act.

So now that you know that not using this technology is personally costing you, and everyone else in your organization, about $70 a year, why aren’t you using these systems? The reduction in loss alone over their service life-time will more than pay for them. (Not to mention the savings that a good sourcing, e-procurement, or inventory system can help you identify!)

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