Term Paper on "Theft Resistant Logistics Systems"

Term Paper 9 pages (3199 words) Sources: 1+

[EXCERPT] . . . .

Theft Resistant Logistics Systems

One of the most difficult and complex issues confronting business today is how to stop the theft of products while they are in transit. There are many reasons that stopping cargo theft is a difficult and complex issue. The first reason is that it is difficult to quantify the amount of loss caused by cargo theft. One of the main reasons that cargo theft is difficult to quantify is because it is reported under a variety of different names, depending on what type of theft is involved. Another reason that cargo theft resists quantification is that some of the methods of theft involve changing manifests and order forms, making it difficult to determine how much of each product has been stolen. Another reason that stopping cargo theft presents such a complex problem is that cargo theft can occur at any time while the product is in transit. Because of the many opportunities presented during the transit of most items, it is difficult to determine when and where items are being stolen. Furthermore, cargo transit is perpetrated by employees involved in the logistics system and external offenders. Internal offenders can make it extremely difficult, if not impossible, to identify where in the system items have gone missing. External offenders present their own difficulties because of the variety of people involved in external offenses. External offenders range from individual thieves to complex organized crime syndicates. An additional complexity is that "the modus operandi" of cargo thefts "can involve hold-ups, theft from freight yards, theft from containers, theft off trucks, or documentary fraud" (Mayhew, 2001, p. 1). Because there are so many opportunities for theft, solving the issue of theft in logistic systems cannot be accomplished by implementing a single solution, instead it requires a multi-faceted approach. Finally, because of the nature of logistic systems and cargo transit, it can take extended time periods for a company to discover theft, which makes it more likely that the thieves will have disposed of the stolen items and reduces the likelihood of recovery (Mayhew, 2001, p. 2).

Furthermore, theft in logistics systems is a major problem. "Worldwide, cargo theft losses total $30 billion a year, according to the International Chamber of Commerce" (Chubb Group). While cargo theft occurs across the board, there are some products that are more vulnerable to theft: those that are highly valuable for their size, are easily transportable, and are easily sold at a high profit (Chubb Group). For example, trucks bearing cigarettes are vulnerable to theft because increased taxes on cigarettes have made their black-market sale especially lucrative. Computer hardware and name-brand goods are also considered attractive by thieves, and are particularly vulnerable to theft in transit (Chubb Group). Furthermore, businesses suffer more than direct losses when they are the victims of in-transit theft, such as "lost sales, missed shipments, customer ill well, and the implementation of theft deterrents," which have been approximated at costing roughly four times the amount of the missing merchandise (Chubb Group). Therefore, cargo theft may be costing businesses approximately $150 billion per year.

Of course, the aggregate cost to business, while impressive, is not the driving force behind loss prevention. Instead, it is the thefts from individual businesses that drive companies to implement strict loss-prevention strategies. These strategies can literally mean the difference between success in business and bankruptcy. For example, a Dan Bolger relates a story of a retailer, who previously had sales exceeding ten million dollars, "whose business failed due to inventory thefts exceeding one million dollars" (Bolger, 2002). The retailer had failed to implement the systems and operations procedures necessary to prevent cargo-theft, despite recommendations to do so (Bolger, 2002). The reasons a company might fail to comply with security recommendations are usually related to money; some companies may not want to reduce profits by implementing proper security measures, others may simply not have the finances to implement some of the more expensive security measures. However, as the example above demonstrates, a thriving business can fail solely as a result of cargo theft. It is because of the threat to individual businesses that businesses of all sizes need to take steps to reduce theft in logistics systems.

Despite the difficulties facing companies who are plagued by cargo theft, there are certain measures that companies can take to reduce the risk of theft during transit. One of the first things that a company can do is to provide secure freight yards and warehouses. The next thing a company can do is to make sure that its products are package in such a way that the risk of theft is minimized. In addition, companies can shore up their documentary systems to make sure that the items intended to be shipped are the items that actually reach the destination. Because companies cannot always control who is involved in the actual transport of the freight, including loading and unloading, companies also have to make sure to restrict and document who is entering their storage facilities and limit outsider access to storage areas. Finally, companies can take steps to prevent theft while products are in transit.

Although providing secure freight yards and warehouses seems like a simple first step in reducing the incidence of cargo theft, in reality it can be the most difficult area to secure because of the fact that so much of the theft is carried out by employees. A company is faced with the problem of creating an environment where employees have the freedom to access facilities in order to work, but do not have the freedom of movement that would permit them to steal from the company. One of the most basic things that a company can do is to make sure that storage facilities are well lit; this can include making sure that warehouses have plenty of natural and artificial light. In fact, proper lighting may be the best way to reduce theft; "by not adequately lighting your place of business you could give a would-be intruder one of the basic requirements- time" (Horovitz). By providing proper lighting, a business makes it more difficult for a thief to hide and greatly reduces for opportunity for theft. Merely providing lighting is not sufficient; indoor and outdoor lighting should be structured in such a way as to "prevent dark corners or hidden storage racks" (Mayhew, 2001, p. 3). Another way that a company can reduce or prevent theft is by storing cargo in a manner that makes it more difficult to remove. Loose cargo can be placed in an area of heightened security and additional security measures can be implemented for expensive cargo, for example, safes or cages (Mayhew, 2001, p. 3). In addition, containers can "be stored with doors facing each other so that cargo is difficult to remove" (Mayhew, 2001, p. 3). Any points of ingress and egress, such as doors, windows, and loading docks, should be monitored. Exterior doors should be locked when not in use, sturdily constructed, and equipped with dead-bolt locks and peepholes (Horovitz). Companies should make sure that their perimeter fencing is secure. Alternatives to chain-link fencing should be explored, as ports in the Far East and Northern Europe use mesh fencing that is constructed of tougher material and has a tighter weave than chain link, which makes it more difficult to breach the fence barrier by climbing or cutting (Hoaglund, 2003, p. 41). Finally, a company can use security and surveillance systems to track the movements of employees and visitors within freight storage areas.

At first glance, product packaging may not seem like it would have a dramatic effect on the loss by cargo theft. However, proper packaging can have a significant reduction on the number of successful theft attempts. First, packaging materials should not identify the type of material being transported. Packaging should be well-constructed and able to "stand up to the normal rigors of handling and transit" (Chubb Group). A company should use seals and barrier-type locks on trailers and containers, which cannot be removed without using a special tool, and "place impenetrable metal plates under boxes on pallets to reduce entry from underneath" (Chubb Group). In fact, the use of seals may be one of the most forward-thinking areas of cargo protection. Universeal USA has developed an electronic seal which doubles as a tracking device and an alarm. When:

vehicle or container is declared missing or stolen, a red-alert message in the system will activate an alarm as soon as the seal goes through an antenna site. Within two minutes, the authorities (customs or police) are notified by fax of the location and direction of the vehicle. The seal will also emit a continuous radio alarm that is easily picked up by mobile units using hand readers (Clark).

Use of this type of seal would not only reduce tampering with containers, but aid in the tracking of thieves and the recovery of property.

Finally, companies should introduce tamper-evident measures, which will reveal if tampering has occurred (Chubb Group).

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