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My question is regarding a supermarket business which is run by my dad. Recently, I saw him upset and asked the reason, and he told me that there was big loss in the market inventory in just 5 month, which was realized by inventory count.

He told me that it's most likely done by the employees with the assistance of our customers. The situation is exactly like this:

Let's say we have customers who runs cafe and restaurants. They regularly buy certain products from our shop in greater quantity than regular customers. For example, when one of these special customer comes, let's say he buys meat. The price for this meat is $40/kg. However, our employees agree with this customer and calculate the price of the product for $10/kg and the customer pays only $10/kg to our cashier (there's only one cashier and because of many customers, he can't check every price label carefully).

Apart from that, the customer pays extra $10/kg to our employee while they meet secretly on weekends at someplace else.

I would like to know suggestions for preventing this kind of theft.

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    How exactly do you know there is this level or exact kind of conspiracy between cashiers and customers? Do you have some kind of evidence? Or is this purely imaginary speculation on you or your fathers part? – morbo Dec 16 '19 at 11:00
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    @KenanMikayilov So for all you know, your father could be trying to steal from the company and blaming it on a conspiracy between customers and employees and using you and them as credible scapegoats? I would suggest finding evidence and going to the police if such large theft and conspiracy is an issue, on top of fixing the technical problems – morbo Dec 16 '19 at 14:26
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    @KenanMikayilov why would anyone commit a crime, especially around their own business...like burning it down for insurance fraud, or stealing from company profits...I‘m not saying it makes sense, but there is several hundred years of precedent for it....what i am saying however is, you should be finding evidence of your conspiracy before pointing fingers. At this very moment you‘re explaining missing product/money by pointing fingers alone. – morbo Dec 16 '19 at 14:35
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    @morbo I understand what you are trying to explain but please, consider that it is in a country where there is no rule of law. So, puting it simple, even if he is paying for insurance for 20 years, in case of fire insurance wouldn't pay the 20% of the actual damage done to the business by fire. – Kenan Mikayilov Dec 16 '19 at 14:38
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    @KenanMikayilov According to your profile you are from Poland. Is there really so much corruption in Poland that you can't report this kind of theft to police? Or is the business located outside of Poland? – MSOACC Dec 16 '19 at 17:39
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  1. Automate the inventory system. You should have realized these losses in a month at the latest, not 5 months later. Ideally, you would have realtime inventory numbers and sales data but that is probably fairly expensive.

  2. Pre-package meat. Everywhere you can eliminate human interaction, you eliminate a chance for fraud. Pre-packaging the meat with barcodes means that it cannot be mislabeled for a particular customer. Take away discretion in packaging as much as possible.

  3. Put up spy cameras and microphones (subject to local laws) if you suspect that your employees are cutting these deals, get proof. You can use that proof in several ways. It could be used to make a $20 per kg bulk rate to the customer. It could be used to prosecute employees. It could be used to ban certain customers from the store.

  4. Maybe you are from a country where it is normal for cafe owners to buy things in a grocery store at retail prices, but that seems odd to me. Are there no bulk suppliers for them? Maybe create a more wholesale ordering process for these customers with lower prices.

  5. Regular audits of the meat department. Weigh the meat at the beginning of the day. Then weigh the meat at the end of the day and compare to the sales for that day. A few of these spot audits should scare some of the problematic employees.

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    On point 4, from briefly working in a chain grocery store and some observations as a customer, restaurants folks do indeed buy some supplies from the local grocery store. Regular employees are not authorized to change prices, if you want to buy a whole box of carrots, there's a special bulk price sheet in the back or it's in the system already. Also regular folks that do this typically have a relationship with the store manager, i.e. the guy who does have authorization to give special pricing. – pboss3010 Dec 16 '19 at 13:48
  • An, when you do this, you will probably notice someone resign ... take your own conclusions from that – Mawg says reinstate Monica Dec 17 '19 at 6:37
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Fix the loophole in system rather than focusing on correcting the personnel

Correcting or changing the personnel may not assure that the problem will be fixed, but having a proper system in place, which can avert such occurrences would be a better solution.

You haven't mentioned the scale of business at your supermarket. But assuming it's a medium scale business such that you can hire and manage to pay the support staff, you should consider investing into automated checkout machine/point of sale system.

If you have a manual system, there's a higher chance of such thefts, but with an automated system, such frauds can be greatly reduced.

While I don't know how a supermarket point of sale and inventory management system operates, a more sophisticated system should also have bar code stickers and security scanners at gate which could prevent unaccounted sale of commodities.

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    Automated checkout machines can be a problem for theft too. At least, they are in the US. Consumers are more willing to try to cheat a machine than a human cashier. And in terms of packaging the meat and labeling it, falsifying the weight can be as easy as placing a coin below the scale to interfere with the weight measurement (as demonstrated in the Sopranos). – Stephan Branczyk Dec 16 '19 at 10:00
  • @StephanBranczyk Thank you for sharing those points. I am not a US resident, and it's good to have a local perspective. – Nimesh Neema Dec 16 '19 at 10:08
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There is a reason financial accounting is a degree in most Universities. There is a lot to learn. I suppose your options are to hire someone who has such a degree, hire someone who has the relevant experience (even if it's just on a temporary consulting basis), or study that field yourself (even if it's just a couple of courses you take online on business management, accounting, and auditing).

With that being said, here are a couple of suggestions:

  • Know your biggest clients. Track their purchases over the years and over the months on a spreadsheet. If restaurant or cafe owners changed their spending habits with your store, or that they don't correlate with the spending patterns of other restaurants/cafes. Try to reason why.

  • Know your employees. If some of your employees seem to live above their means. Try to figure out why.

  • Invest in high-resolution motion-activated cameras that are aimed at the scales and at the cashier, and that store the footage for a long time. That being said, the bigger those files and the longer you need them stored, the more expensive it's going to be, which brings me to my next point.

  • Implement more frequent inventories and spot audits.

  • Train all your employees in being able to spot the cut of the meat and therefore roughly the quality/price of the meat by just glimpsing at it. You can make a game out of it.

  • Institute an employee reward system, for catching large mistakes and/or for catching internal thieves. At UPS in the US for instance, their reward is $5,000 for catching employee theft. The amount would actually vary, but an employee would only get the full amount if his information helped in the arrest and in the successful prosecution of a fellow employee (and of course, security personnel and managers are exempt from being able to receive such a reward since it's already their job to catch the bad guys).

  • Implement a reward system for finding security flaws and generating potential solutions. After all, why pay a consultant to tell you where the weaknesses are in the system when most likely, your own employees already know where the weaknesses are and possibly know how to fix them themselves.

And obviously, you are not located in the US since you stated the quantities in kilograms. But wherever you are, just know that theft-prevention is highly dependent on the local laws that you have at your disposal, so not knowing your local laws, that really limits the kind of suggestions we can give you.

And ultimately, you need an expert in theft prevention and proper financial controls, whether it's you or your father becoming one, or someone else you hire who is already one.

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I feel that your question has a couple of issues in it - for example "He thinks...It's exactly". One can not "think" that the situation is A; and then in the next paragraph say it's exactly A.

I would follow Hanlon's razor. Do not attribute to malice what you can attribute to stupidity.

So I would increase the rate of inventory checks as a starting point; but then I would go through and check the scales; prove they've been reset properly each day. Get some secret shoppers to buy some meat and check that the weight that was rung up matches.

In addition; just having a company wide announcement that a large amount of produce has gone missing; and steps will now be introduced to establish if there is a culprit will most likely deter the person doing it again if there is one. Stating that "if there is" will highlight to the innocent employees that you're not jumping to conclusions...

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If you suspect theft, and to a degree where it hurts the company, you should hire a specialist aka a private detective. Such a person can be introduced as a new hire, keep their eyes open, and will likely find out if something untoward is going on.

When you have proof of theft, check with an employment lawyer if you have enough evidence to fire someone on the spot, or enough evidence to give notice to someone. And if you have evidence that someone stole from you, police needs to be contacted as well.

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