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July 21 2006 02:36 PM

Parcel fraud is one of the biggest and most disregarded crimes in American business today. With an estimated $400 billion in losses per year due to employee theft, parcel fraud should not be overlooked, and the thieves should not be underestimated. Thief is a serious word, but chances are, you are related to or friends or coworkers with someone who has committed a parcel crime, if you haven�t already committed one yourself.
When the term parcel fraud is used, what exactly are we referring to? The most obvious type is in the workplace, in which crimes can range from shipping personal packages to stealing truckloads of merchandise.
If every year, one out of 10 people currently employed in the US shipped one personal ground package through their employers� parcel systems, a total of over $70,000,000 would be lost. That�s not figuring in Suzy Q, who mails her stack of Christmas packages Next Day Air when no one is looking; or Bobby Z, who shipped his brother�s birthday present under the company FedEx account.
If those numbers shock you, it gets much worse. Think about an employee working in a distribution center. Now think of how easy it is for him to make a label to the person of his choice, rather than for the intended destination. Employees use normal protocol and replace the ship to address (known as over labeling) with that of friends, family, even their own. Unless a superior is intently watching every employee�s move or a sophisticated system is in place to prevent such an action, it is impossible to get caught.
Ernst & Young recently reported that retailers have more to fear from dishonest employees than they do from shoplifters. According to the study, employee theft is the single biggest contributor to inventory shrinkage, even though shoplifters far outpace dishonest employees. �This is because the dollar value of employee theft on a per incident basis is much higher than that of shoplifting,� says Jay McIntosh, Americas Director, Retail and Consumer Products, Ernst & Young. �But according to our study, apprehensions of shoplifters far outpace apprehensions of employees.� Though employees accounted for only one out of every 10 apprehensions, the average value of merchandise recovered was nearly seven times that of the average shoplifter � $1,525 and $223 respectively. �These numbers should raise a red flag for retailers. If, as our study indicates, 47% of dollars lost to shrinkage are attributable to employee theft, there should be less satisfaction with the ability to catch shoplifters and more emphasis on efforts to identify and deter in-house theft,� says McIntosh.
If you are now thinking, �That doesn�t happen in my company. We have security cameras, alarms, guards, reference checks and audits,� chances are your security system is much more lax than it should be. Who is watching the cameras, and are they watching for parcel fraud? Many security guards couldn�t spot employee theft if it ran under their own hands. If normal protocol were used, a guard or security camera would not be able to spot this. Most companies practice audits in order to catch what the cameras and guards missed. If the audits are used, they aren�t effective. The reason they aren�t effective is because employees often are aware that the audit is coming (i.e. every Monday at noon), the auditor doesn�t compare each individual label to the one in the system, and most distribution centers are run on a strict time schedule (meaning there is little concern with the audit). When one of the security measures catches a mistake, there is often no trail to the thief.
An even scarier thought is that of the trucks coming into the distribution center. A driver comes in, loads up his truck, signs off the paper work and drives away with as many as 3,000 parcels. If a distribution center uses multiple carriers, no one is checking the truck or the driver. A friend of an employee could come in with a no-name truck, load up, forge a name and take off. Not only is a whole truckload missing, but it is also nearly impossible to track these trucks down. The problem won�t arise until the parcel carrier reports he didn�t receive the trailer. In fact, you may not know a load of parcels was stolen until customers start complaining they didn�t receive their orders. By that time, the truck, driver and goods are long gone.
Shipping a personal package, changing a label or loading a truck � committing parcel fraud in the work place is just that easy. With over $400 billion in employee theft per year, something has got to be done.
Things You Can Do:
1. Perform an unannounced audit of your parcel carriers� invoices for personal shipments.
The best way to do this is to request electronic invoicing from your carriers. If you ship less than 100 packages per day, I recommend that you import your invoice into a spreadsheet and sort by destination names. Unauthorized movements typically stand out by mysterious destinations.
If your organization ships more than 100 packages per day, I recommend that you carefully analyze billing files with a database application like MS Access, Oracle or SQL Server. This will allow you to do complex queries on sender names, origins, destinations, as well as other fields that may lead to recognizing employee theft. I recommend searching reference fields for eBay item numbers since they are often a clue of misuse. The best time period to perform a personal shipment audit is during the winter holiday season. My experience is that most employee theft occurs between November 15 and December 31.
2. Request electronic copies of your parcel trailer manifest, and compare it to the orders that your customer service system shows as already shipped. Look for discrepancies and investigate.
3. Test the measures that you have in place to safeguard trailers against theft. You may be surprised how there might be holes in your theft prevention system.
4. Establish an anonymous tip line. This can be a successful tool in catching employee theft. Co-workers will be quick to give up information if they know they won�t be linked to it.
5. Unannounced audits can be effective. If workers don�t know when they will be checked, they will be less likely to steal, for fear of getting caught.
6. Prevention is key. If you can�t watch your employees� every moves, make sure you at least know whom you hire. Employee screening is essential in knowing what kind of people are applying for a job. Once you�ve checked applicant�s backgrounds and hired the most qualified people, educate them. Introduce an employee ethics program which defines employee theft and its punishments. If parcel fraud can�t be prevented, delinquents must be caught and punished.
7. Finally, when someone is caught stealing � be severe. Enforce punishments and make it known that your company will not tolerate theft.
If parcel theft in the work place surprised you, be sure to look for part two of this two-part series on parcel fraud, which will discuss the growing theft of parcel account numbers in our next issue.
Bill Knasinski is vice president of Parcel and Logistics Solutions for GENCO. For more information, you can contact him at 920-593-8935 or e-mail him at