What You Need to Know About Supply Chain Theft

Supply chain theft is real. It’s costly. And it’s rampant. It can bring your business to its knees.

In today’s environment, supply chain theft is increasing.

In the U.S. supply chain theft costs business and consumers $35 billion per year. That’s based on reported theft, according to Transportation and Logistics International. And that’s a conservative estimate.

The truth is underreporting plagues the industry globally.  As a result, awareness of supply chain theft is low.

So, this Question and Answer blog post will address the basics of supply chain theft. More important, it covers what you can (and should) do about it.

Without further ado, let’s drill down into the basics.

Question #1: Why you should make theft prevention a priority?

Answer: Companies that aren’t aware of the risks are more prone to make themselves likely targets. More important, the impacts to companies can be catastrophic. Barry Brandman, President of Danbee Investigations calls supply chain theft an “economic cancer”.

Here’s why.

The cost of goods sold includes a margin to pay for theft. If theft is left unchecked, you will further increase your prices to make a profit. Additionally, fulfillment reliability will decline. The net result is that your brand will suffer, as customers look elsewhere for the same product.

Along with that growth and profits will suffer. When growth and profits decline, you’ll likely lose market share. Finally, the worst case scenario is to shut your business down.

If a cancer grows unchecked, it can destroy its host. Likewise, if cargo theft grows unchecked, it can also destroy your business.

Question #2: Why does theft occur?

Answer: The reasons are many and varied. Yet many businesses fail to put in place safeguards against theft. Risk averse criminals, meanwhile, look for the easiest way to strike. Moreover, the criminal justice system is lenient. The criminal justice system doesn’t have adequate penalties to prevent or deter supply chain theft. It has a risk-reward ratio that encourages criminal activity.

The rise of the internet is another reason for the increase in supply chain theft. Lax or non-existent cyber security make it easy for criminals to steal cargo.

Furthermore, supply chain theft flourishes because it’s a multi-billion dollar business. The enormous gains from supply chain theft act as a magnet, encouraging fraud and thievery.

Question #3: Where does supply chain theft occur?

Answer: Supply chain theft occurs at major logistics hubs and in transit. And most supply chain thefts occur in unsecured parking lots. According to FreightWatch,  Atlanta, Charleston, Chicago, Miami, NY/NJ, Southern California and Texas, all rank high for supply chain theft in the U.S.  Internationally, the UK, Holland, Russia, Sweden, Germany, France, and South Africa comprise over 92% of all cargo crimes. (S. Reedy, 2020). Supply chain theft is a worldwide problem ravaging businesses. No business is immune.

Question #4: When do cargo thefts occur?

Answer: According to FreightWatch about 50% of all cargo thefts occur over the weekends, between Friday and Sunday. And holiday weekends experience more thefts than non-holiday weekends. Merchandise targeted in order includes Food and Drink, Electronics, Home and Garden. (Note: in 2019, Food and Drink surpassed Electronics for the number one spot.)

Other categories include Miscellaneous, Building and Industrial, and Clothing and Shoes (7%). To a lesser extent, criminals gangs target Personal Care (5%), Pharmaceuticals (2%), and Tobacco (2%). (Stefan Reidy, Arviem.com, 2020)

You can minimize supply chain theft by knowing when you’re supply chain is most vulnerable.

Question #5: How can you prevent theft?

Answer: There are several steps you can take to prevent or deter supply chain theft. One is to conduct frequent, unannounced audits within your supply chain. One of the biggest threats is the “insider threat” posed by a company’s employees. Audits help deter and/or uncover “insider” criminal activity. To counter that you should conduct annual risk assessments. Annual audits should be part of an overall supply chain risk management plan (SCRM).

SCRM is a strategic plan, whereas supply chain theft would represent a sleeve in your SCRM. A second sleeve of your SCRM plan should address communication. Communication should highlight the value of vigilance in closing vulnerabilities. A third sleeve should address strict adherence to Generally Accepted Accounting Principles (GAAP). Complementing that, a fourth sleeve should include company policies and procedures. Lastly, a fifth sleeve should address technology to identify and prevent supply chain theft.

There are more things you can do. For example, supply chain visibility ranks high in stemming losses. You can work more closely with your supply chain partners. You and your partner should address supply chain theft at the strategic level. Meanwhile, your partner(s) should address supply chain theft at the tactical level. Prevention depends on your risk profile and your willingness to take on risk.

Given the size and scope of the problem, theft prevention requires diligent and deliberate planning.

Question #6: What are the trends regarding supply chain theft?

Answer: Supply chain theft is trending higher. We saw that with the Coronavirus outbreak, as thieves targeted urgently-needed medical supplies. One area where supply chain risks exist outside of the COVID-19 pandemic is in general cargo theft.

In particular, BSI Supply Chain Group reported an increase in thefts of various categories of goods globally:

  • Theft of consumer goods such as cleaning solutions have risen in Mexico;
  • Alcohol and tobacco thefts have increased in South America;
  • Food and beverage thefts continue to lead in Asia; and
  • Electronics remain a top target in Africa and across the Middle East. (as reported in Supply Chain Management Review)

With trends rising, it only makes sense to take preventive action.

Question #7:  Where can you get guidance for creating a risk mitigation plan?

Answer: You can find guidance in two reliable sources. C-TPAT offers a  Five Step Risk Assessment Guide.  If you’re unsure of how to get started, this is a useful resource. This represents a first step in addressing your supply chain vulnerabilities. If you already have a process in place, you can also use this guide to ensure your plan has no gaps.

Another helpful source is ISO 28001:2007. This standard provides guidance for international supply chains. It’s only 27 pages long and well-worth the read. Put these sources to work for you. There’s no need to reinvent theft prevention planning.

Is your business protected against supply chain theft?

Protecting yourself against supply chain theft is critical to your business. Therefore, you must be aware of the risks threatening your business. That knowledge informs what you can and should do to protect your company.

The maxim about being “penny wise” and “pound foolish” applies here.

Failure to prepare for these types of risks may result in your business shutting its doors.

On the flip side, preparing wisely will ensure your company survives the ravages of uncontrolled supply chain theft. Proper preparation can also lead to growth from increased market share.

Is your supply chain protected against supply chain theft? Do you have a sound supply chain risk management plan?

Let’s talk about your supply chain risks and challenges. Contact American Global Logistics to learn how we can help you control supply chain theft.