Problem
Case Study
Background
Our client, a leading foreign distributor of alcoholic beverages in the region, hired you as a consultant in warehouse and Inventory Management to carry out the stock take value.
This process requires that every item in the stock is counted and valued at its cost. During the stock take value, the team discovered that some products had been replaced with counterfeits. Moreover, some goods were declared unfit for sale or damaged. The team then realized that those items were sold in the black market. The management system was generally flawed.
It was found out that the number of "no sale" transactions was high and that the company was experiencing a shortage in cash. Of course, misstatements in the inventory caused errors in the net income and gross profits. The consultancy company estimated the damage at several million dollars. The company lost good business opportunities as costumers were complaining about the bad quality of some bottles of wine and liquors. The team also identified the culprits: The Sales Manager and his team of three younger employees. As a consequence of the fraud, the team had to structure the inventory from scratch, rebuilding the inventory management system to protect against fraud as much as possible.
Task
• Based on the incidents of Inventory fraud as mentioned above, identify any five measures that the Enterprise could use to prevent fraud and catch the felon.
• Briefly describe any three reasons why the warehousing client might be concerned with pilferage.
• The Client (distributor of alcoholic beverages) has compiled the following data on a unique set of beverages it distributes. Perform ABC analysis on the data.