No, this won’t be an article on how to rob your employer in the best and most quality way possible. This will be an article on my observations while working with various automotive customers and on the creative approach of employees in robbing their employers.
This experience might be useful to some of you. Maybe not! Nevertheless, owners and managers of companies of the automotive industry will definitely find this interesting to read. Maybe some new ideas will arise on how to spot and stop internal theft in your automotive company.
1. Selling non-original spare parts as original ones for cash
These are companies that carry out service works of specific car brands and sell original spare parts. These companies may be approached by customers who wish to purchase original spare parts but want do the repairs at another shop.
Scenario: a customer who needs a specific [original] spare part, e.g. a brake disc, arrives. The salesman confirms that it is possible to order the respective spare part and that it will cost approximately USD 200. While carrying on the discussion, the salesman may say that in case the customer does not need a receipt, he/she may pay in cash for the same original brake discs that were supposedly “purchased incorrectly by another customer who then left them at the workshop”. The price will then be half off. If the customer agrees to such a deal, the salesman uses suppliers known to him to purchase non-original substitution parts, which cost a lot less, he puts them in the original packaging that has been collected over time at the workshop and sells them to the customer without a receipt. Thus the salesman earns the respective difference of the sum by tricking the customer, as well as the employer.
Spare Part Management with Elva DMS
2. Alteration of sales invoices with the aim to display more goods sold than have actually been sold
Customers of such a company purchase spare parts in bulk. They may be stores, workshops or other enterprises that order large quantities in one shipment (e.g. oil, filters, window cleaners, fuses, etc.). Once during the period, all of the respective customers receive an invoice on the delivery of goods to be post-paid, which includes, for example, 20-30 items. Out of the respective items, part of the goods have a low mark-up, but they are very marketable, while part of them have a high mark-up, but they are sold less often.
Scenario: an invoice is prepared for a customer order, which includes, for example, 20 items (part of the goods with a high mark-up and part with a low mark-up). The employee hands out the invoice to the customer and the customer takes it to be paid. However, before submitting it to accounting and being registered in the system, the employee makes manual corrections. The changes are usually made regarding the discounts of specific product groups and the number of units delivered. In the modified invoice the number of easily marketable low mark-up goods is increased, while for the high mark-up goods the customer discount is raised. As a result, the final sums of both invoices are identical and the average mark-up of the invoice stays within norms, while there are actually excess low mark-up goods left in the warehouse. Accounting does not have any complaints regarding the “papers”, nor does management. Thus the dishonest employee takes these “unwanted leftovers” home with him. He then sells them at a cheaper price and in cash to his friends, regular customers or on eBay.
Inventory Management with Elva DMS
3. Changing a perfectly good spare part to take possession of it
This example applies more to those companies, which carry out maintenance (repairs) of their vehicles themselves and the spare parts, which are expensive. For example, heavy equipment or transportation companies.
Scenario: A vehicle is brought to the in-house workshop of the company, and it needs to undergo one of the standard maintenance works, for example, changing oil. The mechanic carries out the required task and also does diagnostics. As a result, he “fictitiously discovers” that, for example, the generator might go out of order soon and that it should be changed as soon as possible. He coordinates this with the responsible employee. Considering that this is an in-house workshop and it is important for the company that the vehicle works in full order, the changing of the spare part is approved, even though the respective spare part does not need to be changed.
A new generator that costs, for example, USD 1000 is ordered. After that the spare part is physically changed for the respective vehicle. Whereas the old spare part is taken off. But, as it turns out, the old spare part is still in good technical condition. As a result, the used spare part comes into the possession of the employees of the workshop. It is then sold through various advertisements or car graveyards as a used spare part. At the same time, these employees continue to follow the demand of used spare parts on the market. As soon as they identify an increased demand for a specific spare part, they know what to “change” during the next maintenance work.
Elva DMS for Heavy Equipment Maintenance
4. Selling cars without including the foreseen promotional equipment
Any car dealer who tends to use extra promo goods during the sales process in order to encourage the customer to purchase the car.
Scenario: The management decides that the salesman may offer additional extras at his own discretion, for example, giving a new rooftop cargo carrier as a gift should the customer decide to purchase the car on the same day. The customer is not always informed about these inside agreements. The salesman is able to conclude a deal with the customer (without the rooftop cargo carrier), however, the management of the company does not know about it and thinks that the “campaign is working well”. As a result, the salesman sells the car, whereas the promo rooftop cargo carrier comes into the possession of the salesman and is later sold on the Internet or to a private customer for cash.
Such situations and similar ones are discovered at various companies from time to time. What’s interesting is that not only new, recently hired employees steal at their companies, but also employees who have worked there for years and seem loyal also do these things. Many cases may be identified by analyzing the data of the DMS system, but the IT system is not the only thing that may help.
So what can be done? Here are some ideas that could help:
- Pay attention to employees who have worked for an inadequately low wage for a long time. The readiness to work for a small wage is one of the indicators. Maybe the employee does not have low demands, but he knows how to earn more in a different way?
- Key performance indicators, including mark-ups and discounts, must be checked regularly and in detail. This has to be done at the level of invoices, product groups as well as products.
- Processes unrelated to IT must be implemented, for example, storing/ utilization containers for worn out spare parts.
- Internal workflows must be implemented in the DMS systems – confirmations for specific transactions (for example, volume of the discount).
- Marketing directed towards sales, if the sales campaign is of an open type – the customers must be informed at showrooms, on the website or in marketing materials that they will receive a gift when purchasing the car. If the sales campaign is of a closed type (used only when the customer insists on a discount), processes should be formed that would provide information on the gift presented to the customer in the documents, for example, by including the complimentary product in the invoice with a 100 % discount.
- Training the heads of departments on what to control and how to do it, as well as explaining what should be given the most attention in order to prevent lawless actions in time.
I invite you to share your experience with thefts and the monitoring thereof in the automotive industry in the comments. This will be interesting and useful to all readers.
HI Alvils, interesting article. I want to share something I encountered in Czech republic at a well known Lexus dealer here. Couple of years back I had a small accident which broke one headlight and left little damage on my spoiler. I was well insured and the insurarer directed me to this dealer for repair. The light was supposed to be replaced and spoiler as well. The fix was done fast, and according to a local friend, it was recommended that I would ask for the old parts when picking up the car. The request was denied (they said all parts had be thrown to garbage allready). 2 years later the headlight started to collect inside water and I took it to another dealer, who said it was broken light which had been glued together (in the back), and spoiler was also fixed and painted (it was starting to break up again). I now had a very expensive light and spoiler broken (again), and wrote a letter to Lexus CZ to complain about the dealers practice. Only to receive an email where they said the dealer had done nothing wrong (according to the dealer). I’m sure the owner or management had nothing to do with this, but probably employee’s making extra buck. Needless to say, I went to another dealer with my services. This story just tells you how bad apples can damage your business….for those curious, then the first dealers name started with T and ended with an o….they also sell Toyota. So watch out for these guys.
Thank you for sharing this very interesting experience of yours. Sorry to hear you had to have it though. I hope this will never happen to you again.
Unfortunately these kind of things are happening everywhere in the world. I think that sharing this might help customers and businesses to combat this issue.