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Loss Prevention

Cargo Theft is On the Rise

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Goods rolling down the highway don’t always make it to their retail destination. In fact, loads of merchandise are stolen nearly 20 times a week, according to two organizations that track cargo theft on the nation’s highways and byways.

Global logistics security solutions provider FreightWatch International recorded “899 cargo theft incidents with an average value of $471,200 per incident,” says senior director of intelligence Dan Burges. That adds up to $423.6 million in direct losses via large-scale cargo theft events; it does not include indirect costs like lost or damaged trailers and tractors, increased insurance rates or additional security, nor does it take into account “the vast array of small-scale losses such as dock pilferage, shrinkage, employee theft and the like,” Burges says.

Additionally, “We know there are ample [unreported] thefts which we don’t find out about,” he says.

Cargo theft information clearinghouse CargoNet reports there were 1,035 theft incidents last year, up nearly 50 percent from 2009 (the first year it began collecting such data). Value of the goods stolen in these thefts was estimated to be in excess of $400 million, roughly matching FreightWatch’s estimate. But as Maurizio Scrofani, CargoNet’s president, notes, “That is a difficult number to solidly communicate. The FBI states the problem as being between $15 billion and $30 billion.”

Scrofani attributes the wide variance in theft estimates to insufficient information sharing, fragmentation of databases and staffing demands. “We are well aware that we are scratching the surface,” Scrofani says. “As multiple industries continue to communicate and work in a collaborative fashion, we should see an uptick in reporting based on communications alone.”

Theft follows unemployment
In its 2010 United States Cargo Theft Report, CargoNet parent Verisk Analytics tied theft directly to the national economy, specifically the rate of unemployment. The moving three-month average of cargo theft “shows that thefts traveled in the same direction as unemployment, with a one-month variance.”

Another, perhaps more relevant, correlation detected by Verisk Analytics was “a strong relationship between cargo thefts and the retail cycle, which primarily runs from February 1st to January 31st.”

The monthly averages show cargo theft incidents increased during April, May and June, then crested in July, one month earlier than the peak of retail sales, according to the CargoNet report. In the fall, there was a significant increase in freight theft during September and October, anticipating the retail holiday selling period between Thanksgiving and Christmas.

Toward the end of the retail sales cycle, cargo theft incidents correspond to sales patterns in terms of both the decline after Christmas and the climb past the beginning of the retail sales calendar from February forward, with an increase (for Easter) in March, the report notes.

Regional concentrations
Cargo theft is not equally distributed around the country, but is concentrated in regions that are points of entry for goods manufactured overseas. California leads the way in number of theft incidents, followed by Texas and the Northeast. The number in the New York/New Jersey metropolitan area “supports the conclusion that cargo theft is more likely to happen in economically developed commerce areas,” according to the CargoNet report.

FreightWatch found a somewhat different pattern. “The most prolific cargo theft gangs in the U.S. originate in south Florida,” Burges says, adding that they “account for a substantial portion of cargo theft in the U.S.” Beyond the regions surrounding obvious points of entry, “local cargo theft gangs are also known to operate in the Dallas-Fort Worth area, Atlanta, central Ohio and Illinois,” he says.

Cargo theft is probably under-recorded and under-reported for a number of reasons, primarily because when thieves are caught in the act, local law enforcement agencies typically charge them with vehicle theft, possession of stolen merchandise or other familiar routine offenses.

Adding to the under-reporting and under-recording, Burges notes, is fact that “some companies self-insure their product, know recovery is unlikely and simply write off the loss as a cost of doing business.”

“Poor reporting remains a major impediment,” Scrofani wrote in the preface to CargoNet’s 2010 theft report. “We believe that the single most important factor in deterring cargo theft is better information sharing — within companies, between companies and with law enforcement.”

Market-driven crime
Criminals steal what consumers want to buy, Burges says, making cargo theft “a market-driven crime. … If a consumer is willing to shop around for a better deal on something — such as an expensive TV — then that is the ideal target for cargo criminals.”

Televisions are the most commonly stolen item, Burges says, and electronics (19 percent) trails only food and beverage (21 percent) among retail categories in the FreightWatch database.
By way of comparison, CargoNet found consumer electronics (17 percent) were the most commonly stolen commodity, followed by prepared foodstuffs and beverages (13 percent).

Drilling deeper into the data, CargoNet found that the “most-targeted commodity does not necessarily suffer the highest aggregate loss in terms of dollar value.” In 2009, the “dollar value of pharmaceuticals stolen was greater” than that of electronics, even though pharmaceuticals were involved in only 3 percent of theft incidents.

Moving targets, at least where merchandise-laden semis are involved, apparently are easier to hit than stationary targets like warehouses and distribution centers. “We see an average of 30 to 40 warehouse burglaries each year, compared to more than 850 tractor-trailer thefts in 2010,” Burges says. “It’s important to note that most cargo theft gangs specialize in cargo theft and largely stay away from other crimes. As such, not many recorded thefts are the result of street gangs or your traditional mafia-type criminal groups.”

Targeting larger truckloads
In the current economic environment, many businesses are pushing to reduce expenses, increase productivity and operate more efficiently. Unfortunately, this can lead to heavier per-incident losses.

As shippers and manufacturers with sustainability initiatives in place seek to reduce packaging around merchandise, more items can be fitted into standard trailers. “Think of being able to have a shipment that held 200 TVs now able to hold 300-400 within the same 53-ft. trailer,” Scrofani says.

The trucking industry is currently lobbying for legislation that would allow trucks to carry larger loads in bigger and longer vehicles in order to better compete with railroads. One unintended consequence would be making their trucks even more lucrative targets for thieves.

While still relatively low, the number of multi-trailer theft incidents grew dramatically between 2009 and 2010, “showing that criminals are attempting to gain more product and payoff for each job they attempt,” Scrofani says.

In summarizing the cargo theft dynamics across the country, Scrofani made three general observations:
• Incidents are more likely to occur in highly-populated areas where thieves can quickly enter the local market and offload the stolen cargo immediately;

• The U.S. Department of Transportation has determined that an average truckload of cargo travels within a 206-mile radius outside container ports, and thieves tend to strike within this radius;

• Cargo theft is more likely to happen in high cargo concentration areas such as California, the Northeast, Florida and Texas; and the number of theft incidents decreases as cargo flows inland along interstate thoroughfares.