Supply chain fraud cost retailers $100 billion in 2025. Here's how operations teams are fighting back

Retailers processed $706 billion in product returns in 2025. Roughly $100 billion of that value was lost not to unavoidable shrink, but to preventable fraud and abuse, according to an analysis by Appriss Retail. For operations and supply chain leaders, those figures make fraud prevention a core cost-control priority, not a compliance afterthought.

Pedro Ramos, Chief Revenue Officer at Appriss Retail, outlined a ten-point framework for reducing exposure across the supply chain, published in Inbound Logistics. The controls span everything from DC receiving practices to cross-channel return validation, and the approach reflects how modern fraud has become a multi-vector problem that no single team or system can address alone.

Start inside before looking out

The framework begins with an internal audit. Employee theft, inventory discrepancies, and receiving-area gaps are among the most consistent drivers of supply chain loss, and they are often the least scrutinized. Ramos recommends mapping risk points across stores, warehouses, and distribution centers before expanding focus to external partners.

Distribution centers deserve particular attention. DC mispicks, transfer errors, and vendor collusion can quietly erode inventory value at scale. Controls like four-eye approvals on outbound shipments, strict separation of duties, cycle counts, and blind receiving processes make it significantly harder for individuals to manipulate inventory records without detection.

Siloed data is a fraud enabler

One of the most cited vulnerabilities in the framework is fragmented data. When purchase records, return transactions, inventory systems, and customer service data live in separate platforms, patterns that would otherwise signal fraud become invisible. Integrating those data streams, including both online and in-store channels, allows analytics tools to surface anomalies across the full transaction lifecycle.

RFID technology, paired with AI-driven analytics, adds a real-time layer to inventory monitoring. Frequent lost-in-transit claims, unusual product transfers between facilities, or above-average damage reports are all patterns that automated systems can flag before they compound into significant losses. The same AI-backed tools can review millions of transactions in near real time to detect organized fraud behaviors that manual review would miss.

Partner vetting and process standardization

Fraud does not always originate internally. In many documented cases, collusion between staff and external partners, including suppliers, freight brokers, and carriers, enables invoice padding, phantom deliveries, and double-billing schemes. Regular background checks, contract reviews, and performance audits of logistics partners are practical controls that can surface these vulnerabilities before they become expensive.

Manual, ad-hoc approval workflows compound the risk. Standardizing validations and enforcing consistent check protocols across every transaction touchpoint removes the discretionary gaps that fraud can exploit. Automation also improves the audit trail, making it easier to verify exactly when and where inventory changes hands.

The $4 billion BORIS problem

Cross-channel returns represent one of the fastest-growing fraud vectors. The Appriss Retail Total Retail Loss Benchmark Report found $4 billion in fraud tied specifically to buy-online-return-in-store activity in the most recent reporting period. The root cause is architectural: most retail systems treat digital and physical channels as separate environments, creating gaps that fraudsters systematically exploit.

Verifying returned goods against original purchase data and shipment manifests closes the most obvious gap. Operations teams that have not yet unified their return validation workflows across channels face the highest exposure here.

Frontline teams remain a critical defense layer

Technology controls are only as effective as the people operating alongside them. Procurement staff, receiving teams, and warehouse workers are often the first to notice warning signs: unusual return volumes, invoice patterns that deviate from norms, sudden changes to supplier payment details, or shipment manifests that do not reconcile with purchase orders. Regular training that connects those observations to a clear escalation path can catch fraud early, before a single anomaly becomes a sustained loss.

What this means for your team

• Audit your DC and warehouse receiving processes first. Four-eye approvals, blind receiving, and cycle counts are low-cost, high-impact controls that are frequently skipped at scale.
• Map your data integration gaps. If purchase, return, and inventory data are not unified across channels, prioritize that architecture before adding new detection tools on top of fragmented inputs.
• Review your carrier and supplier vetting cadence. If background checks and performance audits are not on a regular schedule, set one, especially for partners with access to inventory or billing.
• Run a cross-channel return audit. Identify where your systems treat online and in-store returns independently and assess the reconciliation gap against original purchase and shipment data.