Security Issues with Vendors, Employees, and Customers Chapter 10

Objectives Describe the different forms of supplier error and dishonesty Illustrate the different forms of employee dishonesty Identify security problems in purchasing, receiving, storing, and issuing

Objectives (cont’d.) Explain behaviors that could indicate employee dishonesty List methods for protecting your customers from being harmed by other guests

Supplier Error and Dishonesty Vendor error –Unwittingly sending products or invoices that have problems Vendor dishonesty –Purposely misleading the buyer by delivering inferior products, shorting deliveries, or billing for undelivered products

Sales Scams Sales representatives will contact people outside the buyer’s office –Attempt to sell knock-offs or poor quality, high priced items Backdoor selling –Bypassing the buyer to go directly to an individual who will use the product

Product Substitutions and Shortages Mistakes can be made at the warehouse when loading trucks for delivery –No intent of deception Seller could knowingly substitute items of lower quality or short deliveries –To make an unearned profit

Inventory Theft by Delivery Personnel Inventory shrinkage –Can occur from internal or external staff –Can occur with sales or delivery staff stealing from their customers Items can be removed from the delivery after it has been inspected Clean linen can be removed along with the soiled linen and resold to other customers

Employee Error and Dishonesty Handling food and alcohol requires a high standard of ethics Dishonest employees have more opportunities than suppliers to abuse an employer’s trust –Because they have more access to the product

Security Problems in Purchasing Methods to protect from purchasing fraud –Separate the functions of buyer and bookkeeper, and buyer and receiving clerk –All emergency purchases must be approved by owner or chef –Require receipts and document all cash paid out

Security Problems in Purchasing (cont’d.) Methods to protect from purchasing fraud (cont’d.) –Invoices must be marked “paid” –Owner should periodically verify existence of all companies who receive payments –No payments to P.O. boxes –Employ an accounting firm to audit books

Security Problems in Purchasing (cont’d.) Methods to protect from purchasing fraud (cont’d.) –Use locks and security cameras –Give receiving clerk time and authority to do their job –Employee parking distanced from entrance –Manager should be present when trash is removed from the building

Security Problems in Purchasing (cont’d.) Types of fraudulent invoices –Padding invoices with charges for products that were never shipped –Conspiracy with bookkeeper to pay fraudulent invoices and split the payments –Paying invoices from fictitious companies Reciprocity agreements can be difficult to manage

Security Problems in Receiving Receiving clerks must perform duties faithfully, even with trusted purveyors Inventory substitutions –Seller may bribe receiving clerk to accept lower quality items than were ordered Kickbacks –Seller offers payments in some form to influence purchasing decisions

Security Problems in Storing Access to inventory must be limited –Proper locking system on access doors Items that are formally counted and methodically recorded tend to be measured more accurately Stock may be stolen by employees –Best deterrent: vigilant management

Security Problems in Storing (cont’d.) Other deterrents to employee theft –Conduct unannounced inventories –Inform employees during training that procedures are in place to detect theft –Use electronic locking systems and security cameras

Security Problems in Storing (cont’d.) Inventory value padding –Overstating value of items held in inventory –May be done to “earn” a bonus or to keep a job –Another method is to substitute lower priced products and remove the higher priced products and sell for a profit

Security Problems in Issuing Chef might order supplies using normal requisitioning system only to have some expensive items diverted by issuing clerk Station-chefs should check-in their received storeroom supplies, comparing their requests with deliveries

Preventing Tampering Tampering or altering a product to make it dangerous for consumption is a potential threat to the industry –Accidental food contamination (E. coli) Methods to maintain safe food supply –Know suppliers and make sure employees purchase only from approved suppliers

Preventing Tampering (cont’d.) Methods to maintain safe food supply (cont’d.) –Inspect cases for signs of tampering –Control access to kitchen and food storage areas –Keep exterior of building and storerooms well-lit –Clean and check the ventilation system

Preventing Tampering (cont’d.) Methods to maintain safe food supply (cont’d.) –Keep fresh foods covered –Keep chemicals in their own locked storage areas –Monitor any self-serve areas; remove and dispose of any suspect items

Summary There are many ways a company can lose money through mistakes and outright dishonest y –Dishonest sellers –Dishonest employees Backdoor selling involves going around the buyer

Summary (cont’d.) Theft can occur in purchasing, receiving, storage, or issuing –There are many methods to deter theft Tampering with food is an industry threat –Many practices should be followed to prevent tampering