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The dead spot caper.


THEY ARE CALLED VENDORS, deliverypersons, or route salespersons, and they are being blamed for an alarming number of grocery and convenience store losses. An industry-wide study of 34,000 convenience stores conducted by SRI International concluded that approximately 25 percent of theft in the industry involved vendors working alone or in collusion with employees.(1)

Another study suggests that improperly checked route salespersons steal one third of what is supposed to be delivered. However, because much of this sort of crime goes undiscovered or unreported, the report indicates that the estimate is probably low. It attributes the greatest percentage of retail theft to employees, but in grocery and convenience stores believes that vendors steal as much.(2) George Crawley in Introduction to Retail Security also states that vendors steal as much as employees in supermarkets and breaks down the problem even further by indicating that among vendors, beer vendors account for the greatest dollar loss.(3)

The neglected factor in all these reports is that route salespersons who service retail stores are probably stealing as much from their own distributors as they are from retailers, and, since the settings are different, the methods are different. Recent interviews with route salespersons indicate that distribution center theft is just as severe, theft methodologies perpetrated against distributors and retailers are interrelated, and distributors can do much more to ease the problem.(4)

Theft techniques used to steal from distributors who service retailers vary with the type of product and with the distributors' procedures. Factors that affect theft methodology include daily or weekly truck reconciliation; use of the computer in the trucks; counting the product on the trucks and in the warehouse; access to load sheets, cash, invoices, and the product; and the analysis of sales trends by the distributor.

Traditionally, the distributor has opted toward cost-saving procedures rather than instituting detailed auditing policies to uncover dishonesty. One reason for this is the distributor's misconception that theft problems related to route salespersons almost exclusively involve stealing from the retailer. Some distributors reason that the route salesperson must account for all merchandise leaving the warehouse, and that what happens at the point of retail delivery is the retailer's problem.

In the final analysis, the dishonest route salesperson does not discriminate as to whom he or she steals from, and the distributor is often as vulnerable as the retailer. The information presented in this article is the result of interviews with route salespersons conducted by the authors over an 18-month period and reveals various methods of stealing from the distribution center.

ALMOST ALL DISTRIBUTORS carefully count the merchandise on incoming trucks at the end of a shift. They know how easy it is to be deceived if the driver counts or is involved in the count during the reconciliation of the truck. Therefore, stealing from the distributor usually occurs after the shift-ending check-in. The following are some techniques used to deceive distributors.

Reloading. After the route salesperson has reconciled his or her cash, invoices, and merchandise at the end of the shift, an order for new merchandise will be placed through the warehouse so the truck can be reloaded for the following morning. The route salesperson will then count and accept the new merchandise from the warehouse and restock the truck. During this time there are two opportunities to steal from the distributor.

First, the route salesperson can steal merchandise from another truck that has already been reloaded. In the morning if the victim does not catch the shortage, he or she is short at the end of the shift. If the shortage is discovered, the victim claims the warehouse has made a mistake and has the truck recounted. The distributor is then obliged to make up the shortage.

Second, two route salespersons can collude, moving merchandise from one loaded truck to the other. The shorted driver then claims a warehouse error as in the first method. Regardless of when trucks are reloaded, drivers can collude to move merchandise from one truck to another. It is almost impossible to prove anything, as long as the shorted driver waits until the other is out on the streets, because the driver with the extra product is going to get rid of it immediately to avoid being audited by the distributor on the route.

Some distributors lock reloaded trucks at night, but the switch can come during the reloading process before the trucks are locked or after the trucks are unlocked in the morning. Some distributors allow drivers to lock their own trucks and keep the key. That policy does nothing to stop shifts of the product from one truck to another.

Dead spots in trucks. The design of some delivery trucks allow full cases of the product to be hidden from view. For example, some beer trucks will accommodate two cases of 12-ounce cans on top of fully loaded bays. Drivers with access to the product are reported to hide cases from view before being checked out for the following day.

Load adjustments. Normally trucks are reloaded in the late afternoon or early evening so the route salesperson will be ready to go in the morning. Warehouse employees involved in the reloading process are naturally scheduled to work during the afternoon and evening; therefore, the warehouse is closed or lightly manned in the mornings.

Before leaving in the morning, the dishonest route salesperson will claim to need some number of extra cases that he or she forgot to reorder the evening before. That often necessitates unlocking the warehouse so the load adjustment can be made. Distributors rely on whoever is available to open the warehouse and pull the product. During this time the warehouse is virtually unguarded and subject to easy thefts either by the route salesperson requesting the load adjustment or by an accomplice. In addition, the distributor's employee who is conveniently available to open the warehouse is in an excellent position to collude with the route salesperson.

Dump or stale island. An important part of the reconciliation process at the distribution center involves returns. Many distributors require route salespersons to stop by a dump or stale island to drop off their returns. The employee manning this location is often low-level and may be less than conscientious, taking the driver's word for the number and type of returns.

In addition, this employee may be easily subject to collusion. Even if the dump island receiver catches an error, it is called nothing more than an "honest mistake," and there is rarely a procedure for reporting such mistakes to management.

Route salespersons with an unusually high or low dump or stale rate are probably stealing. Reports indicate that thieves stealing large sums often throw stale material away rather than bother with perceived trivial amounts. The honest route salesperson must receive credit for all returns to earn a fair wage.

An unusually high dump or stale rate might indicate a route salesperson who has stolen the product and cannot sell all of it soon enough. The alternative is to turn it into the distributor for credit. In this method, even though the route salesperson might not have stolen the product from the distributor, it is the distributor who must pay for it and who ultimately loses. If it was stolen from the distributor, the loss is double because the distributor loses once when it was stolen and again when credit is given for the outdated or damaged returns.

Daily and weekly reconciliations. Some distributors reconcile delivery trucks on a weekly rather than a daily basis. For instance, the route salesperson starts with a full truck on Monday and orders a new product each evening until the end of the week when the truck is finally counted. In theory this practice reduces distributor costs, but the danger is that during the week the route salesperson can manipulate invoices and cash without worrying that a daily truck audit would reveal discrepancies.

Collusion. The potential of collusion at the distribution center is much greater than that which exists between the route salesperson and the retailer's employees. Distributors' employees with access to product, invoices, cash, or load sheets can collude among themselves, with route salespersons, and with retailers.

Collusion between the route salesperson and the distributor's receiver or warehouse personnel is the most publicized, but anyone with access to load sheets can alter them. Those with access to invoices can alter or destroy them, and collusion can occur between a bookkeeper and a retailer without involving the route salesperson.

MANY DISTRIBUTORS EQUIP delivery trucks with invoice-generating computers. This innovation can save time, eliminate computation error, stop some kinds of invoice alteration, and solve the problem of interpreting handwritten invoices. However, these computers have generated four new techniques used to steal. These methods are used on cash customers since most distributors do not send cash accounts a monthly summary statement.

Buy-back. There are two instances where a route salesperson will give a retailer credit for the product: damaged or outdated merchandise that is returned to the distributor for credit and merchandise nearing expiration that is bought back and then resold to other customers to avoid dumping.

Both are legitimate, but the second type of buy-back can be used to add inventory on the truck. This practice can cover up a theft and also ensure that excess merchandise is not present on the truck in case the distributor conducts a random audit on the route.

After completing the invoice, the route salesperson will print another invoice showing fictitious buy-backs from the same customer, but only the distributor will get a copy of the buy-back invoice. The customer's copy is destroyed. This will cover merchandise stolen from retailers and could also cover merchandise stolen from the distributor. The route salesperson will not use this method when stealing from the distributor, however, since someone might notice the coincidence between the shortage at the warehouse and the buy-back.

Voided invoices. The second theft technique involves voiding a computer invoice after it has been completed. The computer asks if the completed invoice is correct. Before responding "no" to the computer inquiry, the route salesperson will tear along the perforation and remove the customer's copy and then enter a command to void the invoice. The only record in the computer is that an invoice was voided. Unless the distributor accounts for all invoices there is no distributor record of the voided transaction.

This method allows the driver to sell stolen merchandise to cash customers with the retailer's copy of the invoice as the only paper trail. It is a good way to dispose of merchandise stolen from the distributor since no record of the sale exists to compare against missing merchandise at the warehouse.

At the end of the invoice the computer will ask the driver if an extra invoice copy is needed. Normally there are two copies--one for the distributor and one for the retailer. Using this method the driver will ask for one extra copy that, incidentally, looks like an original.

The completed extra copy becomes the retailer's copy, and the regular copies, including the one normally given to the retailer, are turned back to the distributor as a sale. The route salesperson now uses the buy-back method and prints another invoice showing that the entire order was bought back. This transaction appears unusual, but the driver's explanation to the distributor is that no one was present to receive or pay for the order, and the customer was not authorized for charge sales.

This technique is a good cover-up to use when a variety of products has been or is going to be stolen. Good route salespersons can closely predict what every stop will need, and in this case the driver may have stolen exactly what the customer who gets the extra invoice copy needs. Now everything stolen is neatly covered in one transaction, and the only paper trail is the extra copy that was given to the retailer. The truck inventory is also correct in case of a random audit.

Unauthorized charge sales. Many retailers are cash-only accounts, and the computer will note this fact as the invoice is being created. However, the route salesperson has the prerogative of overriding the cash-sales-only warning and selling on credit. If the retailer fails to make a payment, the route salesperson must pay the invoice. But rather than leave a customer without merchandise the driver may choose to collect later in the day or week.

This arrangement can also be used to cover thefts. The computer will ask if the customer has paid, and the driver will punch in "no." In actuality the retailer has paid, and the result is a convenient way to manipulate cash (this is called doughballing). The route salesperson can now be temporarily short that amount at the end of the shift with an acceptable explanation.

DISTRIBUTORS COULD FOLLOW A few preventive procedures that would minimize theft at the warehouse and make it much more difficult for route salespersons to steal from retailers. These procedures include the following:

* The distributor's receiver who counts the product on incoming trucks should be a trusted supervisor. A trained alternate receiver should be available when needed, but no one else should be allowed to reconcile incoming trucks.

* Route salespersons should never have access to partially counted or completed load sheets. Altering load sheets is simple even if the route salesperson can gain access for only a few seconds.

* Invoices issued to route salespersons should be numerically controlled in and out.

* Route salespersons should make orders for additional merchandise; warehouse employees should fill the orders. A third person should verify that the order is correct in the presence of the route salesperson who then signs for the order.

* Trucks should be audited randomly at the distribution center and on the route at random times to protect against theft and collusion.

* In-truck computers should be programmed to account for voided invoices and extra copies of invoices. Distributors should verify unauthorized charge sales and buy-backs for resale on the route.

* Route salespersons who steal large amounts must somehow manipulate invoices to account for the sale of the product. This practice can be accomplished through the computer theft methods described previously and with handwritten invoices. The thief almost always uses large-volume retailers to cover the trail, so the clue is large-volume stops with widely varying sales from week to week. If sales are abnormally low, the driver may be covering a previous theft; if sales are abnormally high, he or she may be stealing from the retailer.

* All retailers should receive itemized statements each month regardless of whether they are cash or charge accounts. This will make it very dangerous for route salespersons who manipulate individual transactions to cover thefts.

* Retailers should report discrepancies to the distributor. This would force the route salesperson to sell stolen merchandise to accounts who knew they were buying a stolen product. Such dishonest retailers are easy to spot since their purchases would be abnormally low.

Distributors should understand that theft methods used by route salesperson to steal from retailers are often interdependent with methods used to steal from the distribution center. Better controls at the warehouse will enhance internal security and provide a valuable service to the retailer.

(1)SRI International, The Convenience Store Industry in the 1980's: A Strategic Outlook (Falls Church, VA: National Association of Convenience Stores Inc., 1980), p. 27.

(2)Carol Fensholt, "Unchecked Vendors," Supermarket Business, August 1980, pp. 1-3.

(3)George Crawley, "Vendor Theft," Introduction to Retail Security, ed. James Thomas (Austin, TX: Texas Education Agency, 1982), pp. 38-40.

(4)James Thomas and Jack Henry, The Confession, a videotape produced through Peru State College, Peru, NE 68421, 1986.

About the Authors . . . James Thomas, PhD, is a professor of marketing and chairperson of business administration at Peru State College in Peru, NE. Jack Henry, whose background is in the retail industry, conducts loss prevention seminars throughout the United States.
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Title Annotation:theft by vendors, deliverypersons or route salespersons
Author:Harris, Frank; Henry, Jack
Publication:Security Management
Date:Apr 1, 1989
Previous Article:When theft is an inside job.
Next Article:A theft control approach.

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