Increasing incidents of missing and stolen merchandise
Loss prevention in the logistics industry is a continuous concern for many business owners, and it becomes even more pronounced during peak or holiday seasons. The increased volume of shipments and higher demand during these periods can create additional challenges for ensuring the security and efficiency of the supply chain.
CargoNet—a theft prevention and recovery network—analyzed historical crime data from the Tuesday before Thanksgiving to the Monday after Thanksgiving for the past five years. They found an average of 118 thefts in this analysis period, with an average stolen shipment value of $183,891 USD.
Inventory shrinkage is a problem that merchants face when recorded inventory is greater than the actual inventory, meaning that at some stage of transport, warehousing or distribution, inventory loss has occurred. This can be the result of employee or outside theft, vendor fraud, damage or human error. The industries that experience the greatest loss due to supply chain attacks include high-value consumer goods, food and beverage, household goods, electronics and vehicle parts and accessories.
As the logistics industry moves more data to electronic systems, thieves will have more opportunities to steal cargo if freight owners and logistics providers are not careful. However, a proactive approach to loss prevention can help businesses minimize cargo loss. This article will detail how you can minimize supply chain attacks and inefficiencies across the logistics journey—from warehouse to final delivery.
- What is loss prevention in logistics?
- What are the top targets for freight theft??
- Weak points in every supply chain and how to protect yourself against loss or theft
- Working with a loss prevention-focused logistics partner
What is loss prevention in logistics?
Loss prevention in logistics refers to strategies and measures implemented to reduce or eliminate various types of losses that can occur during various stages of the supply chain, including the transportation, storage and distribution of goods. These losses may include theft, damage, spoilage, inefficiencies, human error, invoice fraud, employee theft, cybersecurity breaches and other forms of waste. Effective loss prevention measures help businesses maintain profitability, customer satisfaction and overall operational efficiency.
The primary objectives of a proactive approach to supply chain risk management (SCRM) approach include, first and foremost, mitigating financial losses, but other benefits include reducing shrinkage, preserving product quality and improving visibility across channels.
This article will discuss loss prevention strategies in more detail including proper risk assessments, appropriate employee training and supply chain visibility. Before diving into prevention tactics, let’s first discuss the prime targets for cargo theft and the possible weak points in a supply chain.
High-value freight: Prime targets for theft
Every year, retailers and other businesses lose inventory worth billions of dollars due to theft, inventory obsolescence, fraud and employee errors. The industries that are targeted most, as mentioned above, include consumer goods like household goods and electronics, luxury apparel and accessories, food and beverage, vehicles and accessories, building materials and pharmaceuticals. In fact, electronic theft has been on the rise in the past few years. The high resale value of these products makes them attractive to thieves.
Aside from being in one of these industries, some factors might make your business more of a target to freight theft. These include the transportation of expensive goods, having weak links in your supply chain process and urgent deliveries, which may overshadow security measures and even the hour of the day that goods are transported.
Safeguarding your supply chain and preventing loss and theft
Fraud can happen at any stage throughout the supply chain and the costs can be astronomical for businesses. Not only is replacing stolen or damaged products expensive, but this reduces efficiency and requires more planning, procurement, time and administration. In order to prevent losses, it’s helpful to understand where a supply chain becomes vulnerable and how to protect against it.
Some things you can do include paying close attention to communication, staying on top of vendor processes and procedures and diligently managing your inventory. The following section describes the different stages of the supply chain process and where your business might encounter weaknesses, plus, how to protect yourself.
Supply chain weak points during transport
There are several ways that cargo theft can occur during transportation. Here, we detail these, and in the next section we dive into preventative measures.
- Fictitious pick-ups: This type of cargo theft can involve sophisticated and unconventional methods, including the use of fraud, deceptive information or document forgery. These thieves intended to trick shippers, brokers or carriers to hand over the truckload to them rather than to the legitimate carrier. This type of theft occurs more frequently in the busy hubs of major cities.
- Straight cargo theft: Sometimes referred to as opportunistic cargo threat, straight cargo theft happens when cargo is left unattended and thieves take goods directly from the truck. This type of theft often occurs at truck stops, parking lots, roadside parking, drop lots and other areas where cargo is left alone. This type of theft also occurs on long stretches of highway—thieves will track the cargo and when the driver stops, they carry out the theft. Trailers that lack security deterrents such as strong locks, cameras, alarm systems and more, are a likely target for thieves.
- In-transit damage: Sometimes goods are damaged in transport due to poor packaging, including too much void space, the wrong materials being used or misloaded trucks. According to Packaging Digest, “As much as 11% of unit loads arriving at a distribution centre have some level of case damage.” Damaged cargo can be costly and time consuming to businesses, especially when considering replacements, lost profits, lost time, added administrative costs and more.
- Work with a single-source partner to reduce hand-offs and cargo vulnerability during these exchanges.
- Ensure secure transport by working with a logistics partner with advanced security measures in place, for instance the Level 1 Trucking Security Requirements (TSR) certification from the Transported Asset Protection Association (TAPA)
- Use appropriate packaging materials and methods to protect goods during transportation and storage. Review our packaging guide for more helpful tips and ideas.
- Implement proper handling and loading procedures.
- Conduct regular equipment maintenance checks to ensure vehicles and other equipment are in good condition and secure.
- Consider working with an ID verification system and train delivery staff on performing ID verification.
- Use drivers who know the security risks associated with straight theft and ensure they take measures to prevent it.
Theft and inefficiencies at the warehouse
Warehouse theft refers to stolen merchandise within a company’s warehouse by their own internal employees. Additionally, inventory losses can occur at the warehouse when employees are not paying close attention to the comings and goings of people or when staff are less vigilant about matching inventory to stock lists. Sometimes this happens during times of day when employees or drivers are more likely to be tired—for example, at the end of a long shift, or during closing time. During the lunch hour, theft can happen by outside parties because employees are not there to monitor warehouse activity of outsiders, or employees may even steal goods and take them to their car during the hour.
There are six signs of warehouse theft to look out for:
- When stock levels don’t match sales records
- When sales seem to dip when particular staff members are working
- When staff rumours suggest theft is happening
- When certain invoices disappear or only duplicates are available
- When certain team members refuse vacation time
- When stock is found near exits or loading bays
Internal 3PL theft can take many forms, from the use of your inventory to fulfil orders for other clients, to small- or large-scale theft of goods for resale. While some inventory can be missing due to human error during data entry, if you suspect that ongoing thievery is happening, consider ramping up security in the warehouse with security cameras or a third-party security guard.
- When hiring new warehouse staff, conduct background checks and implement security training and protocols for all staff to follow.
- Use inventory tracking systems and software to keep track of inventory, minimize stockouts and avoid overstocking.
- Implement just-in-time (J.I.T.) inventory practices to optimize storage space, minimize opportunities for theft and reduce handling.
- Use security devices such as locks and seals on equipment and vehicles, as well as on valuable merchandise.
- Vet third-party suppliers and vendors. Ensure you ask detailed questions about their security protocols and seek reviews or feedback from existing customers.
- Remain diligent in observing your warehouse management system and fulfilment reports to look for anything amiss.
- Ensure your warehouse has robust security technology in place such as CCTV and cybersecurity systems.
Weak points during distribution and last-mile logistics
Now that your trucks are secure and you’ve implemented measures to prevent large-scale cargo theft, it’s good to be aware that small-scale theft can occur too. This usually occurs in the last mile, such as when packages are stolen from doorsteps, especially around the holiday season. Sometimes smaller scale thefts occur through returns fraud, rerouting fraud and not-received claims. Having security measures in place will help your business differentiate between genuine claims and theft.
- Be suspicious of delivery delays and service failures.
- Require signatures for deliveries at residential addresses.
- In the case of package rerouting, ensure phone numbers and other important personal details match. It helps to follow up with suspicious requests, for instance, if the new address is in a different part of the country.
- Avoid blocking rerouting options as there are legitimate reasons for customers to do this, such as having a package sent to a workplace.
- Ensure that you have close communication with your shipping provider and customers so that you’re alerted to all rerouting requests. It helps if your customers have phone numbers, email addresses and security questions on file for extra protection and to be alerted of any rerouting requests.
- Use a protected data exchange platform and package tracking system.
Data breaches and cybersecurity threats along the way
Phishing emails and other malware can infect a company’s system and grant access to sensitive data. This may allow cargo thieves access to pickup and delivery information, which they can use to print out copies of paperwork to commit fictitious pick-ups. There are steps you can take to protect yourself from cybersecurity threats and data breaches, and for the sake of your customers’ private information, you should ensure you take these measures.
- Implement strong cybersecurity processes and procedures. Some tactics include using cybersecurity software from a trusted provider, training employees in safety and security measures, protecting computers and other electronic devices with passwords and 2-factor authentication, implementing firewall security and securing your Wi-Fi connection.
- Ensure employees use strong passwords and set company-wide password expiration dates.
- Train employees to recognize phishing attempts and remind them not to click on suspicious links, give out sensitive company, employee or customer information and avoid leaving anything sensitive or valuable unattended.
Diving deeper: Types of e-commerce fraud and how to prevent them
There are many different kinds of e-commerce fraud, but generally the term refers to any fraudulent activity that happens during an online transaction. Cyber criminals often use fraud to obtain sensitive information or financial gain by deceiving or stealing from online shoppers, and by tricking your website’s automated systems. We discuss 13 of the most common types of e-commerce fraud in this article, as well as preventative measures you can take.
A loss prevention-focused logistics partner is key to your supply chain and logistics success
Mitigating loss and prevention in the logistics industry involves implementing various strategies and best practices to minimize risks and protect the integrity of operations.
Through the implementation of effective loss prevention measures, businesses can safeguard their assets, streamline operations and guarantee an uninterrupted and secure flow of goods within the supply chain. Consequently, this can result in heightened customer satisfaction, minimized financial losses and an overall enhancement of business performance.
If you think your current supply chain logistics partner has weak links, it might be time to switch partners. Look for a shipping partner that can offer:
- Single-source logistics with minimal hand-offs
- Cross-border shipping services
- Last-mile and freight consolidation solutions
- Returns and reverse logistics management
- Full tracking visibility
- Adult Signature Required/Chain of signature capabilities
- Secure billing and account management
- Trucking Security Requirements Certification
Purolator is proud to say that all our trucks are Level 1 Trucking Security Requirements (TSR) certified by the Transported Asset Protection Association (TAPA). Additionally, we have a 95% on-time performance record and experience as a long-standing service provider in Canada and the U.S.