By Erik Hoffer

In the most personal sense, getting your possessions back after a theft is of real importance. The memories, the attachment, the sense of closure and the reversal of the personal violation make recovery the most important factor in the tragedy. This is debatable however in a corporate sense. Recovery of items such as computers, pharmaceuticals, specialized machinery, and time dated items such as clothing, explosives or cosmetics is less than favorable.

For example if a theft of a container of non prescription drugs combined with personal health care items was taken on 1/1/01 the investigation, claim application and reporting mechanism would basically begin a few days thereafter. The shipping company would soon receive routing information, values, contents, carrier documentation and like information and then their investigator would begin his project. He would notify the appropriate police and federal authorities, he would call his insurance company and get an assigned claim, and he would interface with his logistic department or outside source and coordinate the project. This all takes time. The typical assembly of data, reporting and coordination cycle takes weeks, if in fact this person has the appropriate time to begin this project immediately. These responsibilities are frequently divided up among risk departments, security, logistic and outsourced groups which are tasked with other jobs and often fail to respond immediately to the incident. The collection of data is by far the most time consuming and cumbersome endeavor of the survey. Tracking the cargo especially in intermodal moves is difficult. Chain of custody data rarely is easy to come by and the time it takes to collect that data can be week. By the 3rd or 4th weeks after the initial claim the investigator has assembled his work sheet and begins to travel to the last point of recorded custody. His time is now consumed with interviews, copying documentation, checking signatures, evaluating the practices of the carriers and handlers of the cargo and interfacing with local law enforcement. As any investigator will tell you, local law enforcement in cargo theft situations is less than responsive to your requests for help. Property crimes in the US rank right near parking violations and j-walking. Exceptions for explosives, crimes of violence and the like are dismissed as extra work and rarely produce results. The occasional recovery of an empty trailer and tractor make the papers, but these recoveries are fortuitous and typically happen by luck rather than by design. Data collected, the investigator begins tracing and doing interviews with sites handling the cargo. Availability of personnel is difficult at best and his costs of travel begin to mount. Other claims are building up on his desk back at the office and he is constantly reminded of priorities and organizational responsibilities. In the weeks that follow, the original client has received a replacement shipment. The company has disrupted their manufacturing and warehouse operations to replace the lost lots and the reshipping and rebilling processes are completed. The investigator has a line on a possible gang operating in one of the intermediate terminals of the carrier. He has singled out a person and he has a lead on the cargo. The interview yields a give up and results in three arrests and a 25 percent recovery of the truckload of products. Because the fence was filling orders, he had broken down many of the pallets and repacked some of the products to meet demands of his clients. He had removed some labels that would have assisted investigators in tracing items and he sold 75 percent of the cargo locally. These goods made the streets quickly and were sold competitively by reputable companies at deep discounts. The manufacturer certainly was not aware of these sales partially due to his size and market share but also due to the fact that he has a tolerance for 2 percent shrinks on an annual basis. This tolerance makes thefts such as this disappear on the balance sheet and are no real cause for alarm. In the mean time the arrested thieves are released on bond and are free to return to the work force. The reporting mechanism for people such as this s rarely in force and they are quick to find other work in a competing carrier to reorganize and get back to business. The investigator returns to his home office to begin the process again. His expenses now total to $7500 for the 3 weeks of road work and he has successfully recovered 25% of the cargo. The recovered materials are collected, repacked and palletized and moved to a storage warehouse where they will remain for some time as physical evidence. The report of the recovery is shared with the insurance carrier who promptly updates his records deducting the value of the goods from the claim settlement proposal. The goods were originally shipped at a contract rate which was negotiated by the traffic department. The rate and valuation were done at a cost base far below retail or wholesale value. The goods were therefore classified as below their rightful value. The recovery gave the goods back to them to resell but such a sale is difficult to do at the original price. The client, if you recall, had already gotten his shipment and the goods now need be released from impound and then repacked, re-inventoried and resold, if possible, from stock. The goods now have to be evaluated for quality assurance; defacing, possible tampering, contamination, and the vast array of problems that can ensue from misappropriate storage, handling or shipping. The goods now have at least tripled in cost, but reduced by more than half in real value. The net result is that they may have to be destroyed, but only after significant resources are put into their evaluation and reconditioning. The basis for the recovery and associated expense has a truly negative impact on the bottom line of the company. If the goods had been completely lost, insurance payment made less deductible, the company would be ahead of the game. Now with the recovery, which is incumbent on any security department to do, the company has gone deep in the hole financially speaking. The nature of theft control is most often misunderstood. Had the company researched the costs of loss vs. the costs of preventing the loss in the first place they would find that the value of prevention is miniscule by comparison. The fact that recovery after theft with many products can never be deemed financially sound speaks to the fact that most corporate logistics department does not understand the process. By seeking out proven methods of containment, setting shipping standards, creating appropriate documentation for carriage, assigning liability parameters to carriers and their agents and by protecting goods physically one can save money in the long run. Many organizations exist to aid shippers in accomplishing these tasks. Groups such as TAPA the Technology Asset Protection Association recommend best practices in shipping and help you to do carrier audits. The TCPC or Transportation Consumer Protection Counsel Help develop appropriate shipping documentation and to assess threats and liabilities of goods out of their control. Finally the basic understanding o the true costs of theft losses, help decision makers create more secure shipping environments. The costs of loss for items stolen in the supply chain include the following items: remanufacturing, disruption of normal business activities, human resources dedicated administration of the loss, claims, client relationships, reselling, investigation, increased insurance costs, loss of markets and sales controls, liability due to misuse, misrepresentation, tampering, loss of trucks and trailers in addition to cargo, dissatisfied clients, unavailability of goods, venue for seeding counterfeits and or diverted gods into these shipments and many more. The costs of protection are dwarfed by these real expenses. The negative however is that protection must be consistent. It must be used throughout the operation since theft can happen any where at any time, based of course on the vulnerability and desirability of the goods. The cost of prevention needs to be compared to the costs of loss to make a decision. The tolerance level of loss acceptance plays a significant role in this decision process. Either way the decision to protect ones interest should always focus on what is best for the business. Protection costs rarely are out of the reach of any manufacturer from the lowest cost to the highest cost item. Protection techniques at times have no real cost as they are protocol of documentation based. These items should never be omitted from any company’s logistics procedures. How can deterrent type proactive technologies address cost savings when they are extraneous costs of products, rarely define in the cost of goods equation. The costs of protection can be both as simple as process controls and as complex as using tamper evident devices on goods, containers or rail cars. Once a deterrent is put in place it sends a message to the delivery carrier that some degree of scrutiny will be given to insure te integrity of the load he is to deliver. It also tells pick up drivers and carrier agents that the company is proactive in security and that theexpectation is made to include them in this endeavor. The risk established by putting carriers, shipper agensts and manuactiring personnel on notice is imeasureable in deterring theft. By establishing a clear auditable chain of custody handler of cargo recognize their risk of getting caught and find easier targts of opportunity. This condition permeates throughout the logistic chain and causes each handler to recognize the risk of getting caught if he attempts t steal. Risk creates a more secure environment for goods and facilitates the cargo protecting itself while out of your care ad control. By deterring theft you create wealth. By reducing the propencity for loss you create profits, based again on the understand that inherent business risks of losses do ext all of the time. By understanding that lost or stolen goods adversely affct your ability to be profitable, you actually create profits by reducing loss.