Volition stops the rot in a fraud fraught petrochemical supply chain

14 August 2012

Imperial Logistics’ operating company and supply chain specialist, Volition was originally tasked by the client, a listed multinational petrochemical company, to streamline the delivery process across their West African depots. What quickly became apparent, however, was that this client was, quite literally, leaking income. Fraud, corruption and inadequate systems resulted in as much as 230 000 litres of fuel unaccounted for in one instance.

Volition’s Lucille Jansen van Vuuren notes that fraud and corruption are not unheard of in the supply chain environment in both the private and public sectors, and may take the form of unauthorised rebates and kickbacks, as well as dubious vendor relationships. “But, while the risk can never be fully eliminated, an organisation can implement controls to reduce the likelihood of these occurring,” she stresses.

Serious concerns

Volition’s initial investigation into this petrochemical firm’s operations revealed a number of serious concerns. “No fixed service standard had been set, and no vehicle standard had been laid down,” Van Vuuren explains. In addition, no service level measurement was in place, there were virtually no contracts, owner operators were diverting loads of their own accord and an inadequate billing system meant that shortages could not be identified, except through manual reconciliation of thousands of invoices. The client was leaving itself wide open to fraud and corruption, with service providers exploiting the fact that there was no process to verify loaded volumes, and loading, billing, scheduling and delivery confirmation systems were not integrated. The latter issue really created opportunities for fraud, she says. Late delivery was also not being measured, which was leading to the loss of clients and income.

After the first findings were investigated in depth, documented and presented to the COO of the company, Volition was requested to cancel the initial brief and focus on identifying all risks in the supply chain process, and to recommend measures to “stop the rot”!

The crackdown on theft and corruption

The first step in tackling this was a communications programme to publicise the crackdown on theft and corruption, and the company’s zero tolerance policy. A process analysis and optimisation phase then saw inefficient processes either eliminated or re-engineered by Volition to conform with better practice.

Corrupt drivers were found to be the main reason for ullage differences that were resulting in fuel discrepancies on delivery. In some cases, they were colluding with loaders, to tilt the vehicle when doing a reading, while in other instances they were siphoning off fuel in transit. The solution to the first problem was the installation of a dedicated, monitored and CCTV recorded site for recording loaded volume. To address the issue of theft, Volition recommended creating a driver database, where “approved” drivers would be registered.

Joint wealth creation opportunities

Bringing suppliers, including carriers, in from arm’s length – where the client’s losses had no real impact on them – was also a crucial element of Volition’s strategy to combat fraud and corruption. Using the Volition Strategic Sourcing Methodology, a strategic alliance, with joint wealth creation opportunities, was developed. Its aim was to provide all role players with a real and meaningful interest in the client’s success.

To address this company’s critical lack of an integrated reporting tool, Volition implemented a full blown Business Intelligence solution that captured all the relevant information, integrated with the newly installed vehicle tracking system, and provided updated information on actual quantities loaded, dispatch dates, progress of vehicles, deviation from planned routes, actual delivery times and quantities, as well as balances due by customers and due to carriers.

Triggers were built into this solution, to ensure that the client was alerted to any potentially harmful actions, including the use of non-approved suppliers, vehicles and drivers, discrepancies in loaded volumes and ullage volumes, invoice and delivery values, as well as any deviation from planned routes and delivery dates.

A major success

This project was deemed a major success. Volition changed attitudes towards fraud and theft both internally and externally. Visibility was provided on trends, culprits and process gaps, giving the client the opportunity to curb the incidences of pilfering, tampering and re-routing of loads. “Our petrochemical client is now able to ensure proper servicing of its clients, resulting in increased sales,” Van Vuuren states. “A saving of hundreds of thousands of US Dollars in lost income was achieved, and we have also successfully instilled a culture of accountability,” she concludes.

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