Why Cargo Security Should Be On Every Business’ To-Do List

Cargo theft, a multibillion dollar industry, continues to threaten supply chain security around the world. It can occur while goods are stored or in transit — by train, truck, air or ocean. Regardless of how a company chooses to house or ship its products, it is vulnerable to both organized crime and opportunistic thieves. Therefore, protecting cargo, both at rest and on the move, should be a top priority for companies.

Cargo heists are often portrayed as exciting “exploits” in movies such as “The Italian Job” and “The Fast and the Furious.” In reality, they may result in the injury to or death of a driver or a warehouse security guard. And when goods are stolen, it can cause serious financial consequences for the company and its customers.

CargoNet, a theft prevention and recovery network, reported in 2011 there were 1,215 thefts across 40 states, a 17 percent increase over the number reported in 2010. The estimated cost of those cargo-related losses was $130 million. While cargo theft in the United States remains high, companies that ship products outside the country are also at risk. FreightWatch International, a logistics security services firm, said cargo theft in Mexico in 2011 rose 13 percent, representing a lower than normal increase. From 2006 to 2010, these crimes jumped between 20 percent and 40 percent annually.

Commodities that are targeted by thieves vary slightly from year to year. Historically, electronic and technology products have led in cargo theft numbers. But the popularity of commodities stolen can quickly change.

In the first quarter of 2012, theft involving metal, specifically copper, showed a 245 percent growth rate from the fourth quarter of 2011. While in 2010, the pharmaceutical industry took a surprise hit when the theft of drugs from a Connecticut warehouse resulted in a record-loss of $75 million.

There is evidence that once an industry is targeted and experiences a high number of thefts, it reacts by becoming educated on the risks and vulnerabilities associated with cargo storage and transportation. Its members also tend to adopt policies to ensure better supply chain management, effectively reducing the incident rate.

For example, pharma industry logistics and security professionals are now increasingly conscious of the risk of cargo theft and have implemented best practices and controls to mitigate it. FreightWatch reported that in 2011 there were only 36 pharmaceutical thefts compared to 49 in 2010.

Identifying Threats

How can companies identify the threat to their goods and build a layered defense to static and in-transit exposures? To insulate a company against the risks inherent in storing and transporting cargo, and to ensure end-to-end supply chain security, a risk manager should consider the following.

Cargo at rest is cargo at risk.Saturday and Sunday show the highest theft activity, and unsecured or minimally secured locations like drop lots, open parking areas and truck stops are ideal venues for theft — demonstrating that cargo is more vulnerable any time it is not moving.

As a good practice, plan schedules to avoid unnecessary travel over weekends and also so cargo arrives at its final destination during regular business hours. Plan the route with as few stops as possible, and require that the cargo is attended at all times either by personnel (drivers or security guards) and/or through tracking technology and remote monitoring. While some shipments may require specific description, keep the language on shipping documentation as generic as possible while still adhering to the necessary laws and regulations.

Do your due diligence. Most companies entrust their shipments to third-party carriers. Whether they are national firms or a local trucking company, it is a business imperative to thoroughly vet the entity that will have care, custody and control of your goods.

Ask tough questions: What’s their success rate of safely delivering cargo? Have they experienced any recent security breaches? What changes have they made following them? Do they subcontract work? If so, require them to receive approval before goods can be moved by another carrier.

Lastly, when preparing transportation contracts with a carrier, consider a Standards of Care clause that contains explicit language regarding expectations on how shipments will be handled and transported.

Add an additional layer of protection. Use tracking devices, overt and embedded, and other physical measures to augment security protocols along with route analysis tools that enable planning the safest, most secure route to ship the cargo. Devices can be programmed to alert someone when the shipment goes outside a prescribed area or if the shipment has been tampered with, allowing for quick response.

Despite having these and other resources in place to prevent cargo theft, thieves may still be successful in stealing goods. That’s why an effective layered approach includes insurance to help protect a company from the financial impact suffered when cargo is lost.

It is sometimes difficult for insureds to imagine that their company will be the victim of a cargo theft. The “it-won’t-happen-to-me mentality” is a natural one when something has yet to occur. But with the continued high levels of cargo theft, it is wise from a business and risk management perspective to prevent cargo from becoming a target. Customers must acknowledge this risk and take precautionary steps to reduce the threat — as long as the opportunity exists to steal, someone will seize upon it.