Managing Supply Chain Risk Takes a Collaborative Effort

Aug. 19, 2014
With a mixture of technology, joint business initiatives and law enforcement partners, retailers battle cargo thieves

Consumers have little concept of the security and technology involved in bringing retail goods safely to market.  Every day, cargo thieves are targeting freight worth anywhere from hundreds of thousands to millions of dollars, ranging from food and drinks, electronics, and home and garden products to metals, building and industrial materials, clothing and shoes, auto parts, alcohol and tobacco, pharmaceuticals, and personal care items.

As cargo theft rings become increasingly organized and sophisticated, logistics firms are enlisting the help of loss prevention and risk professionals in the ongoing battle to keep the supply chain safe.  Compounding the challenges of external risk factors, industry regulations no longer allow for a “one size fits all” approach to securing products. Traditional means of securing property may not meet the requirements of domestic regulating authorities like U.S. Customs and Border Protection (CBP) and international regulating authorities such as the World Customs Organization (WCO).

Influencing Trends

Customs-Trade Partnership Against Terrorism (C-TPAT), Partners in Protection (PIP), and EU Authorized Economic Operator (AEO) are among the increasing number of country-specific, joint government-business initiatives designed to strengthen the impact of supply chain and border security efforts worldwide.  For instance, C-TPAT certification ensures additional security policies and procedures are implemented and followed in an effort to ensure the overall integrity of the supply chain process.  With the C-TPAT certification, organizations can speed up the flow of business and maximize the efficiencies of the supply chain process. Today’s loss prevention professionals must stay informed as regulatory requirements continue to evolve, so new policies are implemented in compliance with the latest developments.

Besides compliance, price point is another factor heavily influencing the logistics market. In what is often a procurement-driven vendor selection process, the choice of vendor may be strictly price-driven. But business development teams in the logistics industry are becoming more creative with non-price point factors to increase their likelihood of acquiring new business through value-added offerings.  Trends emerging outside the scope of the “normal” business model include blanket insurance policies at no additional cost.

What this means to the customer is if there is any loss or damage during the supply chain process, the vendor assumes 100 percent of the liability and cost of replacement for the products being moved.  Under this model, loss prevention teams are reevaluating their risk assessment models and implementing additional security measures.

Historically, the largest concern facing many supply chain managers has been securing the products in their warehouses against threats ranging from deceptive pick-up, driver theft, facility robbery, and facility burglary.  Today, these threats may be the simplest, most easily mitigated concerns among the host of challenges faced within the entire supply chain.  The contained warehouse environment allows for control of the majority of variables that could compromise security.  Securing products in a facility can be accomplished fairly easily through theft risk reduction strategies, including use of high-value security cages, trailer seals, and other physical barriers, coupled with access control screening procedures.

In a recent interview, the vice president of global security for one of the world’s largest logistics companies expressed confidence that his organization has a good handle on internal shrink or loss, based on strategic application of the various electronic and physical security mechanisms available for securing logistical hubs. The greatest challenge his organization faces on a daily basis, he says, is when the product leaves the property. 

Indeed, data from recent cargo theft studies confirms that product is most vulnerable when in transit.  Those looking to disrupt the supply chain process realize there is less risk of detection while the shipments are in transit than when they are in warehouses with physical barriers and electronic detection mechanisms in place. Although historically, a large percentage of loss in transit has been due to internal collusion, that percentage appears to be decreasing as more sophisticated external cargo theft rings become increasingly prevalent.

Technology Trends in Asset Protection

As a result of the high risk exposure of cargo in transit, loss prevention professionals are implementing solutions to remain a step ahead of criminals and effectively secure assets that are outside of fences or other physical barriers. Emerging trends include both covert and overt tracking of high-dollar shipments.  Covert tracking is accomplished through the installation of a GPS device somewhere hidden in the load.  This device can be as simple as a cell phone or may be a more elaborate embedded tracking device. The GPS device and signal are monitored and tracked by a third party monitoring station or a proprietary security operations center.  If the shipment veers outside of the predetermined geo-fencing route, or the drivers stop for an extended period of time, an alert is instantly relayed to the monitoring entity for immediate action.

The monitoring aspect of covert tracking can be active or inactive.  With active monitoring, security operations center personnel are able to visually track the progress of the shipment along the preordained route while maintaining continuous communication with the drivers.  With inactive monitoring, certain thresholds or check points are established, and if the shipment does not reach those points within the allotted time period, alerts are sent to the monitoring station.  The pitfall with either approach is that the window of opportunity needed to steal or corrupt a shipment is so small that by the time authorities are alerted to a problem and get a response team to the location, the shipment may have already been lost or compromised.

Overt tracking is just that – overt or obvious.  The most common method of overt tracking is to install a GPS tracking device and inform the drivers the device has been installed and will be actively monitored.  Additional overt security measures include utilizing a third party to actively escort the shipment in either a marked or unmarked vehicle. Vehicle escorts can either lead or follow the shipments from their point of origin to their final destination.  Throughout the escort process, the escort team is in constant communication with both the shipment drivers as well as the monitoring station.

Although this approach is the most labor-intensive and costly, it has also proven to be the most successful means of ensuring product safely reaches its final destination.  With active monitoring, there is no “down time” from when the issue is detected to when the response team arrives, because the response team is already there.

The use of overt monitoring and tracking is becoming more and more prevalent, particularly for electronics or other high-dollar freight that is easily moved once illegally acquired. By conducting both a risk assessment and a cost analysis, loss prevention professionals can determine whether implementing overt monitoring and tracking makes sense in terms of risk management and return on investment. 

Private/Public Partnerships

More and more law enforcement officials and private security professionals are focusing on the cargo theft problem in a concerted effort to reduce the external influences of organized crime in the supply chain process.  In addition to the National Cargo Theft Task Force, most state and major metropolitan police departments now have their own internal cargo theft task forces or divisions.  Law enforcement groups work hand in hand with the private sector logistics loss prevention professionals to share information, technology, and best practices.  They also conduct round table exercises and have routinely scheduled meetings as well as an annual conference to ensure that both the public and private sectors remain current in the technology and resources available.

The challenges associated with securing the supply chain and supply chain process cannot be resolved by one person or one group.  Solutions are only possible through a collaborative effort between local, state, and federal law enforcement as well as the supply chain management teams and their third party security vendors, including both electronic security vendors and physical security vendors from the private sector.

About the Author

Marty Passmore, CPP, Vice President of Operations and Business Development, Gulf and Central Regions for U.S. Security Associates, Inc. Passmore has been a Certified Protection Professional since 2005 and is an active member of ASIS International. He has served as the ASIS Central Texas Chapter Chair for two years. He earned his bachelor’s degree in criminal justice from Texas State University and holds a master’s degree in criminal justice from Almeda College and University.