The Supply Side: Retail cargo theft escalated 57% in 2023

With retailers working to reduce theft in stores, the problem continues to grow in the supply chain as cargo thefts escalated 57% last year, according to CargoNet, a subsidiary of data analytics firm Verisk. The problem involves theft from containers, parked trucks and hijacked trucks.

CargoNet maintains a database of incidents and works with members to recover stolen items. It estimates the value of stolen goods at nearly $130 million among those reported incidents, but the number is likely much higher because reporting is not mandatory. The number of reported thefts per month is around 220, up from around 100 in 2014, according to CargoNet.

There was a 41% increase in theft incidents in the first 20 weeks of 2023. CargoNet said thefts increased 68% year over year in the fourth quarter.

Between Dec. 23, 2023, and Jan. 2, 2024, CargoNet reported 205 U.S. cargo theft incidents at truck stops, parking lots and warehouse distribution centers such as cross docking stations.

California and Texas tied with the highest number of thefts at 37 each, and Georgia was second with 23 thefts. Thieves went after household goods, food and beverages and electronics in that order during the weekly evaluation. CargoNet estimates the average loss per theft at $121,472, with a cumulative total loss of $7.53 million for that week.

The geographic areas with the most significant theft frequency last year were Seattle, the area down to Portland, Ore., up and down California, and across Arizona. Other hot spots of theft include Denver and Boulder, Colo., and nearly the entire state of Texas, with the Dallas and Houston metros having the most cases. Also, Oklahoma City, central to eastern Arkansas, all of Louisiana, Alabama, Tennessee, Mississippi, Missouri, and Illinois, with each state east of there, were deemed hot spots of theft last year. CargoNet reports that major inland logistics hubs like Louisville, Ky., Atlanta and Dallas are among the most impacted.

Typically, the most significant losses for cargo theft occur in the second and third quarters, when retailers get back-to-school and holiday shipments. CargoNet reports that $44 million was lost in the second quarter of last year, with $31.1 million of theft in the third quarter of 2023.

Uber Freight has spoken out on the rise of cargo freight and fraud in the supply chain.

“Fraud is ever present in the supply chain right now,” Chris McLoughlin, compliance director at Uber Freight, said in a FreightWaves blog post on Nov. 23. “Everybody is exposed to this. No single supply chain mode is being attacked; it’s everybody.”

McLoughlin said Uber Freight has in-house specialists devoted to preventing fraud, recovering stolen cargo and solving digital fraud cases. He said layers of protection can be found in strategic partnerships, which is a solution for smaller suppliers. The key is understanding that everyone is in this together.

“You have to understand that there is not one silver bullet that will protect you,” McLoughlin said. “It takes multiple processes and layers of control to insulate your supply chain.”

He said Uber Freight has more than 20 distinct, independent security processes related to carrier vetting, management and monitoring running in the background at all times.

In November, the California Highway Patrol recovered $9.5 million of stolen cargo in Los Angeles County meant for retail stores. Many of the pallets of stolen goods were uncovered in warehouses where they are typically kept until they are transferred to a fence, which then finds buyers for the items.

Brand Elverston is an asset protection consultant who spent 22 years at Walmart and now consults with retailers and suppliers regarding loss prevention. His latest effort is to understand how retailers and suppliers reconcile their invoices when a load has been lost.

He said carriers can have all the satellite tracking and smart locks they want on their trailers, but that does not explain missing products at the retailer’s pallet level or item level downstream.

When a trailer is robbed in transit or transferred to a thief presenting phony paperwork, the carrier should file a police report and a loss claim with insurers once the theft is discovered.

But unless the invoice is adjusted with the retailer, Elverston said there would not be a correct reconciliation between the business partners.

“If Procter & Gamble loses a pallet of eyeliner en route from China and it ends up on the ocean floor, then the shipment will be short when it gets to the retailer’s distribution center,” he said. “The product is scanned at the pallet level into the warehouse and then transported out to the stores. But, there are no item level counts when the store receives the shipment. Only random counts are made for inbound freight at stores. The missing product will likely not be noticed until the store reconciles the point of sales data with the purchase invoice.”

The shortage is defined as “shrink,” but the store can’t sell what it never received. The typical reaction from retailers would be to file claim deductions against their invoice payments to their suppliers for the shipment shortage. Elverston said that until brands can figure out a way to adjust invoices to retailers when thefts occur in the supply chain the number of shortage claim deductions will continue to rise.

Boyd Evert, CEO of Bentonville-based HRG, has seen numerous deductions relating to order shortfalls as his firm helps suppliers fight and recover claim deductions with retailers. His firm can leverage analytics and look for patterns among the drivers and warehouses, geography and carrier incidents. Evert cited instances where clients experienced cargo theft of electronics and baby formula.

Jon Allen, CEO of Rogers-based Woodridge Retail Group, said the problem is growing, and any category that can easily be fenced and then resold on marketplaces is in play. His clients have previously worked with Harvest Revenue Group to recover claim deductions from retailers relating to product shortages. Allen said a significant claim deduction could sink a smaller supplier who has been a victim of theft. He said third-party consolidators, carriers, retailers, manufacturers and law enforcement must work together on the growing problem.

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Firebend.