On the Line: Exposing Theft in Manufacturing

When your business is in manufacturing, you are the steam engine on a locomotive of consumer progress. Product quality and efficiency start with you—producing the best results so the next link in the chain has a reasonable chance of success. This means hiring the best people to work in your plant is paramount to clearing the black. Human Resource departments dedicate themselves to recruiting the best of the best for their company, but even the most qualified and dependable candidates can give you ugly surprises with dishonest behavior, including malingering, fraud, and most significantly, theft.

All industries experience internal theft lowering their profits, but manufacturing is one of those most heavily affected. The Association of Certified Fraud Examiners (ACFE) has reported in global industries, internal theft accounts for more than $3.7 million of eroded profits every year. The ACFE has determined, for manufacturing and production industries, the median loss is $194,000 per company.  There’s no short of manufacturing industries who suffer this loss, but to a thief, some are more lucrative than others. The top five manufacturing targets of thieves are pharmaceutical, metal, cargo, electronics, and cigarettes. The opioid crisis in the United States is not only responsible for millions of dollars of theft in pharmacies, but also in the plants where drugs are manufactured, or the warehouses where they are stored. Warehouse and plant workers often swipe units of electronics and fabrication materials for use in their own homes. These items can go for a small fortune on the street, or they can be resold on the black market to avoid being traced.

The larger the theft, the quicker it is noticed, but no company should have to wait for a large loss to implement prevention strategies. Any high-ranking employee or human resources employee can recognize the signs of internal theft, if they know where to look. For example, employees might report recent loss, or seeing product in unauthorized locations. Employees may be exhibiting suspicious behavior, like repeated rendezvous in the parking lot, or the surrounding area. Outlandish material possessions, such as new cars, designer shoes, and expensive jewelry, might suddenly be a regular part of the employee’s life. Low morale is one of the most common causes of internal theft, as employees who feel undervalued suddenly rationalize to themselves they deserve to take something from the company for their hard work and sacrifice.

As such, human resource departments are always reshaping their recruitment process to ensure they hire only quality individuals to be a part of their team. And this goes for all ranks within a workforce.  While a lower-level employee may not be noticed themselves, higher-level employees are the ones poised to cause significant loss to the company with their status and access to important company records. When everyone is a suspect, HR must implement procedures and methods of prevention that not only educate employees on the warning signs of theft, but also craft a culture that promotes honesty—if you see something, say something. These preemptive measures can be things like a comprehensive employee handbook, specific training to recognize signs of theft, effective security and monitoring systems, and a confidential tip line so that employees can report suspicious behavior without fear of reprisal. In manufacturing industries where groups of employees are assigned to their own sections, it’s important to have regular team meetings to maintain contact with the workforce so policies to protect the company can be reviewed and modified to improve and protect daily operations.

However, despite having a plethora of prevention methods in place, bad apples can still slip through the cracks of due diligence. When all attempts to handle a theft in-house have failed, there is still recourse. Many companies feel the need to handle all matters of theft internally, using teams of Human Resource employees or their own in-house investigator, but in-house operatives often lack the cohesive experience that comes from working in private investigations. The initial instinct might be to use an informal, in-house operative. Unfortunately, using an in-house operative has the potential to backfire quickly. If this investigator is known to the company’s workforce, their undercover efforts to sus out the culprit can be exposed easily, allowing the perpetrator to modify their methods, or disappear entirely before being identified. Poor investigations cannot only leave the perpetrator with an out, but can also exacerbate a workforce’s low morale, as employees become suspicious and paranoid.

Hiring a private investigator to investigate an internal theft has a wealth of benefits for business owners. Most obviously, an external, third-party investigator will be a fresh, unknown face to a company’s workforce. This “new blood” can freely move about the company inconspicuously. Their new hire status coupled with expertise in interviewing subjects will allow them to question other employees without suspicion. Private investigators also have a better chance of thoroughly investigating middle to higher management. As previously stated, these are the employees with the most access—able to alter inventory sheets and cost analyses. Over a period of time, a private investigator can hide in plain sight, keeping meticulous records on conversations and reporting surveillance findings that can be cataloged for any terminations resulting from the investigation.

Terminations under messy circumstances like internal theft can often have legal repercussions, on both the side of the employer and employee. Companies may feel inclined to prosecute for the losses to the company, or an employee who feels they were wrongly terminated may sue. Internal investigators who have improperly handled an investigation can be the lynch pin that brings any legal proceedings to its knees. Improperly gathered evidence or illegal methods of fact-finding will compromise the company and their position in terminating the employee. Terminated employees can argue the company fired the wrong person in the interest of finding a solution, or argue the termination is vindictive action. However, an external operative like a private investigator has no stakes in the outcome of any investigation. Their only loyalty is to the truth, and as such, their investigation is dependent on facts, not company politics. Private investigators are impartial third-parties, which leaves very little room for a thief to argue wrongful-termination.

When producing a quality product, the integrity begins in manufacturing. Regardless of the type of product being manufactured, theft at this level of production is profitable to an organized thief—especially one who knows how to cover their tracks. Keeping the investigation in-house certainly has public relations benefits, but ultimately, one of the tenets of quality private investigations is confidentiality. Confidentiality between a private investigator and a company will allow them to deal with the theft discreetly, but thoroughly. Their third-party status means they have no dog in the fight, and their solution will stand up to the highest level of scrutiny.