For a supply chain manager, risk assessment is a daily consideration. From delays to weather events to staffing shortages, businesses are constantly managing new threats to their bottom lines. The wisest companies will take a proactive approach to risk management, predicting and preparing before reacting.
In the case of theft, one of the most significant risks supply chains face today, a proactive approach is far more effective, says Danny Ramon, intelligence and response manager at Overhaul, a supply chain visibility and risk management company. And yet some companies are still behind in this thinking, dealing with cargo theft only when it’s too late to recover the loss. “As great as it is to recover a stolen load, we consider a recovery a loss, because it should have never been stolen in the first place,” he says. “Prevention is the name of the game.” Unfortunately, he adds, the supply chain industry as a whole is still a highly reactive one.
Too many companies, according to Ramon, underestimate the risk, taking an “out-of-sight, out-of-mind” approach. Until, of course, it happens to them. The risk of theft, however, is constant. “If cargo is on the road, it's at risk.”
John Cannon, law enforcement liaison at Overhaul and retired special agent for the Georgia Bureau of Investigation, adds that visibility is key. “Once it leaves the shipping location, it's at risk. And the monitoring of that particular cargo until it reaches the destination is absolutely imperative.”
How, then, can companies better understand the realities of cargo theft and put more preventative measures in place, not only to mitigate this very real risk, but even to gain a competitive edge?
A Menu of Supply Chain Thefts
Perhaps the first step in mitigating theft risk is understanding the various ways that product may be exposed. The most common scenario, says Ramon, is full truckload thefts, also known as straight thefts, where the entire tractor and trailer are stolen, as opposed to just the product.
Strategic cargo thefts, on the other hand, are more complex and vastly underreported. “Those are usually done using some sort of a fraudulent method,” says Ramon. Often this will involve identity theft, where someone will arrive ahead of the contracted worker, claim to be the carrier or driver for the load, then roll off with the stolen cargo. Technology plays a big part in this type of theft, especially internet load boards, in that they can help the group stealing the load identify what type of cargo is in any specific shipment before they bid on it or arrive to pick it up.
Some other common thefts such as pilferage thefts, commercial warehouse burglaries and rail thefts have also been on the rise. “By and large, pilferage losses have been very small thefts historically,” says Ramon. “Over the last two and a half to three years, however, we've seen that problem increase in volume and value. Now we’re seeing large-scale pilferage for losses of up to 95% of an entire 53-foot trailer.”
In the case of warehouse burglaries, says Ramon, “you can obviously obtain quite a bit more cargo or merchandise out of a warehouse or distribution center than you can out of a 53-foot truck, so losses in those types of thefts can be much, much higher.”
The rise in rail thefts, which hit mainstream news in the last year, can be attributed to the increase in cargo density and the slowdown of the rails. In many cases, these slowdowns resulted in stationary trains, creating ripe opportunities for local cargo thieves, as opposed to organized crime groups who often travel across state lines to do a job.
“We're also seeing the proliferation of double loading and cross-docking, almost as a standard practice,” says Ramon. In response to the driver and equipment shortages, some carriers will try and condense the number of trips they take, but charge two different companies for the same cross-country trip. If, for instance, a company pays to fill an entire truck with its product and only ends up filling half the space, the carrier may use the second half of the space for another company’s cargo, but charge both companies the full price of the load.
Lastly, Ramon says, companies have started to see thefts where rivets on the back of a trailer are replaced with nuts and bolts, so that the seal can be removed and reattached later, allowing the cargo to be accessed undetected, unless additional measures are in place.
The Role of Organized Crime
One of the reasons cargo theft remains so prevalent today is the existence of organized theft groups, which can continue to function despite one of the members being incarcerated. “That’s what they get up every day to do, to go and find and steal cargo to sell, to make a living,” says Cannon. “That’s why you see repeat offenders.”
Just as law enforcement strategizes how it’s going to address certain crimes, Cannon argues, these organized groups will sit down, create a plan and decide how to execute it. They’ll identify what they’re going to steal, where they’re going to steal it from, how they’re going to do it, and what to do if the plan is interrupted by law enforcement. “They’re very organized, and they’re very good at what they do.”
One of the biggest security threats to businesses is the inside job. “They could be a dispatcher, a dock worker, a truck driver; they could be anywhere in the supply chain,” says Cannon.
Some go so far as to apply for jobs and work at certain shipping locations, just to be able to identify what the cargo is and how it will be transported, as well as to collect trailer numbers, tag numbers and other information that could help their associates outside the shipping facility.
“In some cases,” Ramon adds, “we have actually seen trailers marked as they leave the origin, often with a piece of tape, paint, or by using a finger to draw on the dust that accumulates on a trailer.” These markers signal to accomplices that they should follow a certain truck.
The challenge, says Cannon, is that it can be hard to identify where exactly the leak is within the supply chain. As such, it’s crucial to properly vet your new employees as well as the supply chain partners you’re doing business with, from the trucking company to the brokers. “Don’t rely on the information they give you,” says Cannon. “Do your own independent research and verify exactly whom you’re talking to and whom they’ve worked for.”
Equally important, says Ramon, is that supply chain partners are doing the same due diligence with their own employees and partners. “You’re only as strong as your weakest link,” he says. For instance, many distribution centers and warehouses will go to temp agencies to fill positions in their warehouse. If that temp agency is taking shortcuts in the vetting process, the warehouse or DC, by proxy, will be exposed.
“Same thing with carriers,” says Ramon. “If the carrier that you're directly dealing with is reputable and trustworthy and has treated you right your entire relationship, that's great. But if they're going to be double brokering it or triple brokering it, are those carriers that they're then brokering it out to going to practice the same level of care and due diligence?”
The True Cost of Cargo Theft
Often the cost of a theft can be hard to nail down, especially if you consider the nonmonetary loss. The latter, unfortunately, is too often overlooked by the members of upper management who underestimate the importance of proactive theft management.
The hard cost can differ between industries. “Depending on what industry you’re in,” says Ramon, “there may be a broader recall involved. For example, in pharmaceuticals, if you're not able to recover that one shipment, they have to destroy everything that was in that lot or batch number, which may be another five or six full trailer loads.”
Beyond the numbers, of course, is also reputational and brand damage. “Brand damage is also a very real cost,” Ramon adds. “One way your brand may suffer is if the loss of your product on shelves leaves an opening for counterfeit goods to make it into the market, creating a lower quality threshold that could impact your brand reputation. “There are so many factors to consider in what a cargo theft might cost your organization, that really, the cost of prevention seems very low in comparison.”
Unfortunately, this case can still be hard to make to short-sighted executives. “Security tends to be a reactive mindset, especially for the C-suite,” says Ramon. “Conversely, when security is then put in place and is working, they think, ‘We haven't suffered a loss in X amount of time, we probably don't need the security anymore.’ But that’s not how it works.”
How to Mitigate Risk
The best answer, according to Cannon and Ramon, is to take steps in advance to predict the most likely exposures and put measures in place to prevent the theft from happening in the first place.
One way to do this is to keep track of theft trends, especially within specific groups. In one case, says Cannon, when a member of a theft crew had been incarcerated and released, his unique MO started showing up in his usual area of operation. Law enforcement was able to put out a bulletin, warning companies of certain behaviors to look out for, and how they should respond if they identify them.
Another way to mitigate risk is to understand how theft groups are using technology and counteract their efforts by using their own weapon. In the case of GPS jammers, carriers can set up technology to block their effects. GPS jammers prevent accurate vehicle tracking by sending radio signals with the same frequency as the GPS device, effectively concealing a truck’s real location. This leaves members of the theft group free to commit the crime, while gaining valuable lead time before law enforcement becomes aware of the event.
Fortunately, there’s a way to prevent this from happening. “Probably the best way to mitigate the risk of jammers is to use multiple devices in multiple locations,” says Ramon. If you place a device in various areas of a vehicle, the GPS won’t jam. “If you put it in the front, it's not going to jam the ones in the back. If you put it in the back, it's not going to jam the ones in the front,” says Cannon. Even better, you can conceal devices throughout the vehicle. “We can embed covert devices inside the cargo. Some of them can be near the surface, some of them can be deeply embedded inside a box.”
The best way to lower the risk of repeat thefts is to avoid the first hit. If, for instance, you’re shipping highly desirable merchandise, thefts will likely ramp up after you’ve already been targeted. “The company may notice one or maybe two pilferages that are small- to medium-scale. But if thieves can determine any kind of a weakness, any kind of a pattern, they will exploit that,” says Ramon.
While it may not seem like cargo theft will impact your business, if it does, the cost can be serious and ongoing. To protect your business and get ahead of others who may be underestimating the risk, learn where you might be most exposed, avoid crimes of opportunity and develop strategies to protect your workers, your product and your bottom line.
Resource Link: www.over-haul.com
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