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December 20, 2011

Piracy on the Freeways

You read a lot these days about piracy on the high seas; but, you read relatively little about what could be considered piracy on the freeways. Earlier this year, with food prices on the rise, the New York Times reported that, "a gang of thieves stole six tractor-trailer loads of tomatoes and a truck full of cucumbers from Florida growers. They also stole a truckload of frozen meat. The total value of the illegal haul: about $300,000." ["Price of Tomatoes Has a Lot to Do With These Thefts," by William Neuman, 14 April 2011] Neuman continued:

"Industry and insurance company officials said it appeared to add a new wrinkle to a nationwide surge in cargo theft. In the case of the stolen tomatoes, the thieves seemed deeply versed in the ways of trucking companies and the produce industry. Transportation company executives and a law enforcement official said the criminals appeared to have set up a bogus trucking company with the intention of stealing loads of produce and other goods."

It's an interesting article and worth reading in its entirety. Commenting on the article, supply chain analyst Adrian Gonzalez wrote, "No doubt, this was an inside job, perpetrated by people with knowledge and connections in the produce industry. Tomatoes are perishable goods, so there had to be buyers ready to take these stolen shipments." ["Stolen Tomatoes Raise Serious Transportation Questions," Logistics Viewpoints, 25 May 2011] He continued:

"Simply put, these thieves gamed the system…and transportation brokers were easy victims. I’m just left with a lot of questions:

  • What does this incident say about the security of our transportation networks?
  • Is checking federal registration and insurance coverage enough due diligence when selecting a carrier, especially a carrier that’s been in business for only a month?
  • Should shippers also bear some responsibility here? How does this impact the way shippers select brokers and how they align their objectives and work together?
  • What will happen when capacity constraints worsen? Will shippers and brokers fail to 'walk the talk' and loosen their standards in order to move a load?

"It's the last question that concerns me the most, and based on past experience, I'm afraid that failing to 'walk the talk' is the likely outcome. ... I also remember attending a conference in 2004, during the height of the capacity crunch, and a transportation executive from a very large manufacturer, in response to a question about their transportation strategy, half-jokingly said, 'Our strategy? In this environment, we don't care who shows up, as long as they have a truck.' Maybe the times have changed. Or maybe not."

In an attempt to change things, "a new global security standard to protect high-value consumer goods traveling on international roads has been launched by the Transported Asset Protection Association (TAPA)." ["New Trucking Security Requirements to Combat Organized Crime on International Highways," TAPA press release, SupplyChainBrain, 22 November 2011] The release states:

"Cargo crime levels ... are estimated to cost in excess of $10bn per annum. ... Cargo crime is one of the biggest supply chain challenges for manufacturers of high-value, high-risk products and their logistics service providers. In the European Union alone, the cost to businesses is estimated at €8.2 billion a year and is still growing while in the Americas, estimates for losses range from $3bn to $5bn per annum. Globally, some 85 percent of all major cargo thefts occur during road transportation so the need for a robust and consistent trucking standard is critical."

The fact that "85 percent of all major cargo thefts occur during road transportation" should cause a lot of people to sit up and take notice. The release continues:

"The updated and enhanced Trucking Security Requirements 2012 (TSR) replaces the 2008 version and takes effect Jan. 1, 2012. TSR has proven to be extremely effective for TAPA members in helping to eradicate what is a growing problem for manufacturers and global supply chain service providers. Organized criminals target what they regard as vulnerable cargo loads as they move on roads in all parts of the world. In one of the most recent incidents, a truck driver lost his life in a violent criminal attack. The mounting cost of losses and insurance claims is also impacting product prices for consumers."

Combating trucking piracy is, in its own way, just as difficult as combating maritime piracy. The release continues:

"The Association previously took similar action in 2001 when it launched its original Freight Security Requirements (FSR) to protect warehouse operations from attacks by criminals. Today, FSR is recognized as the world’s leading standard for securing freight centres. Having significantly reduced incidents involving warehouses, TAPA has since seen a dramatic increase in road-based crime. In a joint statement, TAPA's regional chairmen, said: 'The world of cargo crime is no longer about an opportunist individual snatching a product from a box in a warehouse. Today, we are dealing with gangs of organized criminals that are often armed and prepared to go to any lengths as we saw as recently as September with the murder of a driver during a hijack of his vehicle in the Philippines. Vehicles are attacked whilst being parked up overnight, at motorway service stations and even while moving and, in some countries, this may start with truck drivers being stopped by what turn out to be authentic-looking but bogus law enforcement officers."

Although trucking companies, along with their clients and employees, are first-order victims, as TAPA notes, eventually so are consumers. That is why efforts like TAPA's should be supported. The release explains some of what is involved in its new initiative:

“The new and enhanced TAPA Truck Security Requirements, which includes mandatory certification, supports the users and providers of trucking services, providing a common standard of security measures and taking into account the different ways these services are provided globally. When adopted, TSR is a mandatory standard and adherence to it is validated and auditable by a TAPA-approved and trained independent auditor. We believe that TSR certification will result in TAPA members globally seeing a continued reduction in crime involving vehicles, similar to the significant decline in losses from warehouse attacks witnessed by members that have FSR certified facilities."

In a joint statement, TAPA's regional chairmen stated:

"We are very grateful to the companies that supported this initiative by committing employees' time to work on this critical project. It is very much an investment in the greater good and an opportunity to change some of the ways companies do business with each other to further protect the supply chain."

The release concludes by stating:

"TAPA members, when supported by TAPA security standards, incur significantly lower theft loss levels than the industry average. Through participation in TAPA and the many opportunities for sharing crime intelligence, training, networking and its close co-operation with regulatory bodies and international law enforcement agencies, TAPA members learn to identify and understand security risks and how they can best be mitigated. TAPA’s 2010 Financial Benchmark report indicates that losses incurred by non-members are three times higher than for TAPA members."

Although TAPA is naturally trying to promote membership in its association, its research does support the common sense conclusion that more can be accomplished when organizations, even competitive ones, cooperate for the common good. Future cooperation will be essential because, as Jim Tierney reports, cargo theft is now more organized and is here to stay. ["Cargo Theft a Growing Part of Organized Retail Crime," Multichannel Merchant, 17 August 2011] He writes:

"Cargo theft among organized crime groups will likely increase in the future according to Joe LaRocca, senior asset protection adviser for the National Retail Federation. As retailers, mall security and law enforcement professionals continue to clamp down on store theft and fraud, 'we can expect criminals to take the path of least resistance,' LaRocca says. 'Cargo, if the opportunity exists, remains a lucrative and vulnerable target.'"

It is that vulnerability that TAPA is trying to address. Retailers are as interested in cargo theft as carriers. According to Tierney, "half of the 129 retailers surveyed this year by the NRF said they were victims of cargo theft in the past year. The majority (57.4%) of these organized retail cargo thefts occurs between the distribution center and the store." He continues:

"According to the FBI, cargo is any commercial shipment moving via trucks, planes, rail cars, ships, etc., from point of origin to final destination. If merchandise is stolen at any point in between—highway, truck stop, storage facility, warehouse, terminal, wharf, etc.—then it's considered cargo theft, LaRocca adds. In a cargo theft case, the victim can be a manufacturer, shipping company or retailer. Stolen goods have a significant financial loss, and affect not only store inventory levels but the customer experience as well, LaRocca says. And in most cases, 'these thefts have a significant impact on local and state tax revenue as well.' Victims work with local law enforcement agencies and the FBI if interstate nexus, or connection, is achieved, LaRocca adds. If the case has an international nexus, federal law enforcement will work with their legal contacts overseas and other international law enforcement partners."

While TAPA is addressing what its members can do, Tierney rhetorically asks, "What can retailers do to combat cargo theft?" He answers his question this way:

"Manufacturers and retailers should select a reputable firm to transport goods, LaRocca advises. 'Keep details of the shipment, especially highly desirable goods, on a need to know basis. In advance of the shipment, identify the quantity and timeline for delivery.' Retailers have been working with manufacturers and law enforcement to address cargo theft incidents and many companies are now sharing information, LaRocca says. Advancements in technology can provide quick identification of suspect goods and GPS tracking of shipments worldwide. Last year the FBI added Cargo Theft to the Uniform Crime Report, which elevates the awareness of the issue and begins the process of determining the losses and scope of the problem, LaRocca says."

As the TAPA noted, cargo thefts can result in serious injury or death. According to Tierney, "more than 10% of these crimes included some level of violence such as physical assault and/or battery." He continues:

"The safety of employees and service providers is a top priority, LaRocca says. 'Many companies develop policies and train employees to avoid placing themselves at risk. The financial losses, potential customer service issues and brand impact pale in comparison to the severity of these incidents when someone is injured.'"

An interesting report by the Supply Chain Information Sharing and Analysis Center provides a lot of data about where and when cargo thefts take place. In an article about the report, the staff at SupplyChainBrain writes, "In tracking cargo theft activity by state as reported to the Supply Chain Information Sharing and Analysis Center, in the second quarter of 2011 we see California moving back to its spot at the top and New Jersey dropping to second followed by Georgia." ["California Still the Top State for Theft from Cargo Trucks," 13 July 2011] The article continues:

"Texas fell back in the number of incidents and that could be the result of some major indictments against a group of Florida transplants and local gang members made by law enforcement in the Dallas area. Last year, California had by far reported the most cargo theft activity in North America, holding the top spot the entire year. Texas, New Jersey, Georgia, Illinois, Pennsylvania and Tennessee had each appeared as one of the top reporting states for the past year and remain in the top eight."

If this is a topic that interests you, I recommend your reading the Supply Chain Information Sharing and Analysis Center report. I suspect that supply chain security will be a topic of increased interest in the years to come.

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