Monthly Archives: July 2009

Fighting Corporate Payment Fraud

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A recent article in Supply & Demand Chain Executive on “Fighting Corporate Payment Fraud” noted that nearly three-quarters of organizations experienced payment fraud in 2008. While the typical loss was only $15,200, some organizations experienced fraud that was orders of magnitude greater, and if you’re a small business, $15,200 could be the difference between paying two employees this month and not.

So what can you do? Given that the most common type of fraud is check fraud (with over 90% of the organizations who suffered fraud being attacked with check fraud), the second most common is credit and debit cards, and the third is ACH payment fraud, one thing you can do is implement a comprehensive defense against payment fraud by improving your internal controls and utilizing bank solutions available to you. For example, in addition to the paper, electronic, and online security controls that you can institutionalize, many financial institutions now offer payment fraud protection solutions that include debit blocking, payee verification, and post-no-check solutions. It won’t address every type of fraud, but if it prevents you from losing a hundred grand for a few bucks, it’s worth it.

March Madness 2009 Statistics

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Editor’s Note: This post is from regular contributor Norman Katz, Sourcing Innovation’s resident expert on supply chain fraud and supply chain risk. Catch up on his column in the archives.

First, my apologies to any college basketball fans who are thinking this post will be discussing hoops. I get about 15 different business magazines each month; they are a very useful resource for keeping up with what’s going on in the world.

In the March 2009 edition of Inbound Logistics, the top 12 corporate ethics and compliance concerns of executives surveyed were listed. Product Safety & Liability came in at # 6, with Information Security and Financial Integrity last at numbers 11 and 12 respectively. Anti-bribery, Conflicts of interest & gifts, Anti-trust contact with competitors, Mutual Respect, and Records Management beat Product Safety & Liability. Information Security and Financial Integrity was bested by Privacy, Proper use of computers, Export Controls, and Careful Communication.

Hmmmmm … I’m a little more concerned for my own health and safety now, I think.

In the March 30, 2009 edition of Information Week, 400 respondents to the senior management top security priorities survey showed that 35% of respondents are concerned about protecting data from outside hackers, and 18% are concerned about protecting data from unauthorized employee access.

In the April 2009 (well, it’s close enough to March) edition of CSO Magazine, 1000 ex-employees were surveyed about data security: 79% said they took data without their employer’s permission, with 59% admitting outright to stealing data, and 82% said that employers did not perform audits prior to their dismissal. (24% also stated that they had system access after dismissal.)

Okay…..with Information Security and Financial Integrity ranked so low in the area of concerns, and employers more concerned about outside hacks than inside theft (by a 2:1 ratio), is it any wonder that so many employees were able to steal data before and possibly even after their dismissal?

The distribution of intellectual property – customer lists, item prices, suppliers & costs – can cause serious competitive harm to an organization, so much so that it could suffer serious impacts to financial performance.

Protecting an organization from leaking data requires internal and external focus, and I submit that it takes two different groups of talented people to properly address each security vantage point. Protecting the network infrastructure via the use of hardware & software firewalls, anti-virus software, spam monitoring, web site filtering, data copying & transmission prevention, etc., are tasks best left to the folks who are experts in network infrastructure hardware and software. Identifying gaps in business processes and excessive application user rights & roles – especially those that contradict a person’s job description – are best left to business systems analysts and the folks who are in charge of business software application functional administration.

Taking this a step further, I have long wondered why CIO’s (Chief Information Officers) are given responsibilities better designated for CTO’s (Chief Technology Officers). In my opinion, this is an ideal separation of responsibilities. Working separately the CIO and CTO can focus their talents and resources on their individual areas of expertise. Working together, the CIO and CTO – and their respective teams – can ensure that any solution presented for the enterprise satisfies the business need and works within the technology standards established. (And if the right solution requires standards changes or other enhancements, let the right group handle it.)

What do you think readers? Is it better to have a CIO and CTO working together in mutual collaboration, or keep all technology tasks – from network infrastructure to business applications – under one C-level executive?

Norman Katz, Katzscan

Your Cash Costs You More Than You Think

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While a recent article from Stores on “the true cost of cash” didn’t actually tell you how much your cash costed you as a merchant relative to debit, credit, and other payment solutions, it did provide some good ideas on how to decrease the cost of handling, and securing, that cash.

Counting cash is costly. It takes time. It can be miscounted. Some of it can disappear in the counting process. However, automation technology in the form of “smart safes” can reduce this cost considerably.

Taking cash to the bank yourself is costly. It takes time, increases the risk of theft, and delays the credit to your account until it is received AND processed by the bank. However, cash logistics services such as armored transportation, deposit solutions, and cash processing can reduce those costs and get you your credits faster. For example, store receipts can be transmitted electronically.

It was a decent article, and if you handle a lot of cash as part of your business, you should consider checking it out.

Some Negotiation Best Practices from the IACCM

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An article from a recent edition of IACCM’s Contracting Excellence on applying negotiation best practices and advances in personal productivity technology offered some suggestions for negotiation practitioners and supply management leaders that are worth a refresh.

Noting that the changing scope of business and technological advances dictates a need for new, or at least updated, negotiation skills and that every negotiator needs to

  • know her objectives,
  • know her organization’s requirements,
  • know her, and her organization’s, competencies
  • know the resources she has available, and
  • know the targets she has to meet

the document outlines some best practices that will help her maximize the resources and competencies available to meet performance targets and negotiation objectives.

  • Establish a Replicable Process
    Repeatable processes save time and get better results.
  • Use Collaborative Tools
    These days, supply management professionals need to lead cross-functional teams to insure they will get the best deal for everyone. Collaborative tools will help them work with individuals across the organization who are located in different geographies.
  • Increase Skills and Capabilities
    Giving everyone basic training can significantly increase the benefits realized by the supply management organization. Certifying a department will go even further.
  • Mentor
    Have your “A” Team mentor your “B” team, and keep your “A” team on the leading edge by sending them to seminars with negotiation leaders at least once a year.
  • Rehearse Negotiations
    Get someone from sales with experience in the category you’re sourcing to play the role of vendor. Ask them to give you a rough time. This will not only help you understand how sales people think, and minimize the chance of being surprised in the face-to-face negotiations, but it will help you earn the respect of the sales department who might not value your contribution to the bottom line, which is five to twenty times more powerful than theirs.
  • Use supporting technology
    e-RFX can greatly simplify the initial data collection. Data analysis software can help you analyze market indices and should cost modeling software can use this data to help you understand how much a product or service actually costs. There’s no weapon more powerful than knowing a supplier’s margin before going into a negotiation.

Was China Ever Worth It?

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A recent article in the Supply Chain Management Review covered a recent AMR survey across 133 manufacturers and retailers with over 5 Billion in revenue each and asked them about their sourcing plans from China. The survey found that manufacturers, who believe China contributes the most risk in 12 of 15 categories, are now 2-3 times more likely to decrease sourcing in China.

Nothing against China, but it’s about time. I’ve been against needless global sourcing since day one. Most of the time it just adds time, cost, risk, and, because of the dismal state of pollution control in the ocean shipping industry (which accounts for 4% of all emissions that contribute to climate change globally), pollution. And it wastes limited petroleum reserves. (The stuff takes millions of years to form under the earth’s surface, thus, at any point in time, the total amount available, even if we don’t know how much there is, is limited.) We can get the same quality of VCR or DVD player from Mexico, quicker, with reduced costs in a number of categories, with less risk, and less pollution.

Now, I’m not against global sourcing … some raw materials just aren’t available in sufficient quantities on all continents, each continent has a different growing season (and greenhouses aren’t as cheap or green as you think they are), and sometimes there are only a few places that can produce a new product. In these cases, you should definitely be global sourcing. But you shouldn’t be global sourcing just because it’s the lowest cost today … you should be global sourcing because it’s the best option, and value, over the long term.