Suhas Balakrishna & Bimal Subhakumar

10/07/2020

Cargo Theft: The Billion Dollar Supply Chain Disruptor

Cargo theft has been prevalent globally for ages as pirate attacks on merchant vessels at sea or the plundering of horse-driven wagons by robbers to the more sophisticated attacks on modern vehicles. The intent and execution have remained the same over the years: intercept and steal goods from the vehicle while on-route to the destination. However, prevalent across all other modes of transport, cargo theft on the road comprises a sizeable amount and demands attention. Modern cargo theft uses advanced technologies such as frequency jammers and EMP interferences to obstruct existing security measures.

The dynamics of Cargo Theft

A study done by the Supply Chain Risk Industry Partnership says approximately $20-30 billion worth of goods are stolen globally every year, with most incidents occurring on ground transportation and ships. Cargo theft is generally downplayed because the usual consensus is that the insurance provider covers the loss. Also, upon a cargo theft reporting, the insurance provider's premium generally increases. For this reason, some thefts are left unreported, and the statistics may not reflect the reality or gravity of the situation.

Cargo Theft by Numbers
Exhibit 1 | Source: https://scripartnership.com/wp-content/uploads/2019/05/2018_annual_us.pdf

The study further shows the decreasing number of cargo thefts from 2014 to 2018 (See Exhibit 1). The research also indicates that each theft's average value has reduced by close to 50% in the last five years. However, this picture is not inclusive, as important data related to unreported cases is missing. Analysis of the reported incidents yields a few patterns and potentially an opportunity to mitigate the risk of theft. Cargo theft is most prominent during certain days of the year, months, or weeks, and certain kinds of goods attract more theft attempts than others. In the US, California, Texas, Florida, Illinois, and Georgia recorded the highest cargo theft rates compared to others.

Cargo Theft by Days
Exhibit 2 | Source: https://scripartnership.com/wp-content/uploads/2019/05/2018_annual_us.pdf

The study also delves into cargo theft trends to show that it is common during specific periods. For instance, Tuesdays and Thursdays are relatively safer to move shipments. (See exhibit 2) Similarly, prominent holidays in the US, like Labor Day, Thanksgiving, Christmas, and Fourth of July, witness an increased number of cargo theft instances. The trend shows that the latter half of the year experiences more cargo thefts than the rest of the year. Additionally, weekends are when cargo is left unattended and is ideal for thieves to take due advantage. Data from Sensitech states that there is a spike of 50% cargo theft cases if freight trucks are left unattended for longer durations. The holiday season also sees a hike on the e-commerce shipment movement, contributing to increased cargo theft cases.

Cargo Theft by Product categories
Exhibit 3 | Source: https://scripartnership.com/wp-content/uploads/2019/05/2018_annual_us.pdf

The nature of the goods also plays a part in the disappearance of cargo across the world. The most popular goods on the list belong to the miscellaneous category, followed by food and drinks, home and garden, and electronics, while apparel, auto-parts, building, and industrial parts are the least stolen goods. (See Exhibit 3). Electronic goods attract more cargo theft instances than others as there is a great demand for the latest technology. Additionally, these goods have high resale value and are easier to distribute into consumer networks illegally. Food and beverage thefts are also quite common. However, the commodity value is comparatively lesser; load values lost are not large enough to trigger panic, and tracking these items is quite challenging due to weak tracking IDs.

Reasons for Cargo Theft 

Holiday thefts: Most thefts happen over the weekends and holidays as the cargo remains unguarded in trailers at the yards, warehouses, and ports.

Cyberattacks: Despite the protective measures, modern cargo thieves have access to superior technology and real-time information about the cargo's movement and location. Thieves may orchestrate cyber-attacks to access shipment documentation to create fake documents for pickups with illegal carriers that steal the load.

Internal assistance: Instances of cargo theft from trailers parked in yards require elaborate planning and resources. The perpetrators may have insider information about the actual cargo status, which allows them to identify the loopholes in the system and exploit them. Lack of housekeeping and ignorance to safeguard the cargo might sometimes leave an easy opening for cargo theft.

Some potential cargo theft process solutions

Avoiding cargo thefts can range from implementing some best practices to upgrading IT infrastructure.

  • Simply avoiding cargo movement during holidays and weekends can help reduce cargo theft instances.
  • 60% thefts occur in full truck loads. Close inspection of vehicles or containers before leaving the shipper's facility can reduce the chances of a breakdown and, therefore, robbery in-transit. Add this inspection time in scheduling time if necessary.
  • An observed trend shows that cargo thefts mostly occur in the first five hours of the journey. Arriving for pickups with a full tank to avoid making refilling stops can help prevent such instances. Schedule the first stop fairly-far away during the planning, always picking a safe and more populous location.
  • During a rest stop, parking the trucks in a well-lit, heavily traveled area with security cameras is advisable. Check the load at every stop and monitor it frequently if you stop for an extended period.
  • Additional insurance in these risky routes can be purchased/considered, depending on the level of security the Shippers/carriers want to have on their cargo movement.
  • Maintaining secured storage of databases and limiting the number of people who access the shipment schedule and information internally can reduce the chances of leaks. Also, investing in cybersecurity solutions to protect cyber-attacks and ransomware or malware threats can secure the data.
  • Additionally, data storing on the cloud using service providers such as AWS and Azure can ensure high security for shippers and LSPs who do not want to invest large sums on developing storage solutions in-house.

Potential SAP Transportation Management and Technology Solutions

SAP S/4 HANA, Transportation Management (SAP TM) solutions are designed for transportation and logistics requirements across industries to reduce transportation costs and enhance logistics efficiency. SAP TM enables to manage all inbound and outbound domestic and international freight in the same environment and provides traceability and visibility of orders, shipments, items, and logistics processes. Some of the potential opportunities in SAP TM to handle cargo theft-related issues are:

  • A new factor that measures the risk involved for a given shipment can be used as a custom parameter in the SAP TM Planning/Optimizer run, potentially giving a safer solution. The risk factor must consider the geographical location, day of the week, nature of goods, calendar/holiday to plan the shipments.
  • For a safer transit trade-off might be necessary in terms of actual cost vs. a shipment timeline to be shipped on a safer day or time. Because of added constraints, shipment costs might increase but will guarantee the cargo movement's safety.
  • Setting up SAP TM Freight Agreements with predefined charge types or lines that reflect the additional cost incurred for a potentially risky shipment is advisable. This may have inputs in the form of extra insurance cost and later be billed to the customer. For example, in the latest SAP S/4 HANA 1909 release, there is a standard functionality to bill the TM calculated freight cost to the customer.
  • Investment in SAP GTT and other technologies such as IoT for greater visibility of shipments. With visibility and real-time tracking, identifying unusual activities during shipment and triggering the required response is possible.
  • Using the Novigo Smart Track App to validate the vehicle and driver information and verify any suspicious documents submitted before the cargo pickup can save goods worth millions.
  • Integrating image processing and AI with SAP system could identify a falsified document on uploading the document's image during the pickup event.
  • SAP's Blockchain technology helps monitor the smuggling of goods and other illegal cargo. It can display the information flow about milestones of a particular shipment based on the level of intricacy and information requested by the end-user.

Cargo theft is an existing menace in the supply chain industry with significant financial and business implications. It also hampers the timely delivery of goods and affects customer experience. With sophisticated cargo theft attacks, it is crucial to increase safety using both process and technology solutions. Shipment visibility solutions, advanced technology that prevent theft of databases, and identify falsified documents for pickup are the potential solutions. SAP's future IoT and Blockchain solutions and slight modifications to the TM module are also promising options. However, all these proposals are suggestive, and with further research and observations, more solutions can emerge to mitigate cargo theft risks.

Implementation partners like Novigo with extensive TM implementations can help the companies identify these business requirements and design solutions effectively. Novigo, with more than 50 successful global SAP TM on-premise implementations, is a leading consulting firm in SAP TM. Our consultants are well equipped to advise clients about the various aspects of cargo theft and are already working to understand local challenges, mitigate the risk of cargo theft, and help achieve safer shipment movement. Contact us to learn how we can help your organization protect against cargo theft.