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Global Cargo Theft Risk by Country. Source: Freight Watch Int'l

Global Cargo Theft Risk by Country. Source: Freight Watch Int’l

Cargo theft is on the rise and thieves are becoming more sophisticated. Cargo theft can happen at any time to just about any shipment. The National Cargo Security Council (NCSC) estimates that the global financial impact of cargo loss exceeds $50 billion annually. Freight Watch International reports Mexico, Brazil, South Africa, the United States and Russia are the countries most at risk for cargo theft globally.

For the third  consecutive year,  Food/Drinks was the  product type most  often stolen.

In the United States cargo is stolen three times a day. The most popular commodities are food, metals and electronics. The states with the highest incidents of theft are California, Florida and Texas (Source Freight Watch). Don’t worry – there are ways to prevent cargo theft.  At AirCargo 2014 John Tabor, president of All States Locate, offered these great tips:

  •  Don’t ship merchandise over the weekend. Thieves will take cargo then because they know that employees won’t notice the cargo gone until Monday.
  • Know the trends of where theft happens and what thieves steal. Food and drinks, especially seafood, are the most stolen items in the U.S. That is partly because thieves can get rid of stolen food in any bodega in any city.
  • Fictitious pickups are on the rise. Analyze which rest stops on a particular route have been hit by thieves, and tell drivers not to stop at those rest stops. “If you keep the tractor-trailer moving, it can’t be stolen,” Tabor said.
  • Lock tractor-trailers. Sixty-five percent in the U.S. don’t have locks. Give a self-assessment to truck carriers about their security – and then visit them to see their security operations.
  • Always get documentation, which will be needed in court if freight is stolen.
  • Because criminal background checks only look at whatever county the person lives in now, look at the details of at their background checks. Make sure the property value of an employee’s residence fits with his salary.
  • When building a cargo facility, ensure there is only one entrance/exit. Have five cameras in order to see every angle of a truck, especially the top in case of damage.
  • Make sure the cargo facility has a generator. Thieves know that during a blackout or bad weather, police will be too busy to reach a cargo facility quickly. “You have to prepare for the worst,” Tabor said.
  • Give guards a Segway, a personal, battery-powered vehicle. That way, guards tour the facility more and are less likely to fall asleep. “Try to think outside the box,” Tabor said.
  • Turn on the facility’s lights. “You’ll never lose a load – you’ll make up for the electric bill,” Tabor said.
  • When a truck comes to pick up cargo at a facility, ask for the driver’s ID and fingerprint. People can’t fake a print.
  • Use a recognizable trailer, not just a white one, so people and policemen can better recognize the truck if it’s stolen. For example, Tabor mentioned using an orange trailer.
  • Thieves always cut the GPS when stealing a truck, so hide the device.
  • In U.S. Mid-Atlantic states, thieves have started cutting holes in warehouse doors because there are no alarm sensors there. Tabor predicted that this practice will spread to other states. 

Read more at: Air Cargo World

Incorporating  these measures into your security cargo program will protect your shipments and lower the risks of theft. Cargo theft is costly and results in supply chain interruptions, increased insurance rates, additional expenses for replacement shipments and lost revenue due to lost business. Inbound Logistics recommends you know your economic consequence of loss. Below are steps and examples to guide you in calculating and determining your Expected Value of Loss (EV).

STEP 1. PROBABILITY OF LOSS

A good starting point is shipment and compromised load statistics from a single year. Figure your total number of loads compromised during a 12-month period, then divide that number by the number of total shipments during that same 12-month period.

For example, if you had 100,000 shipments, and 2,300 loads were compromised, this equals a 2.3 percent probability that a load was compromised.

To get a better picture geographically of where your cargo losses are occurring, conduct a regional analysis based on your supply chain routes. In general, shipments through Baltimore, Portland and Canada are safer than product shipped through Miami, Southern California or Mexico.

If your company keeps good records, then you know where your hot spots are and you can run the formula for each trade lane or corridor.

STEP 2. ECONOMIC CONSEQUENCES OF LOSS

If the typical value of your load is $250,000, and you have a 2.3-percent probability of compromise, then you are losing $5,750 for every load that leaves your dock. If your insurance does not cover this loss, or if you did not make some claims, you will need to add that number into the equation as well. Even if your insurance covers that amount, you still need to figure the other economic repercussions of cargo loss.

Look at your numbers for the following items using the same time period for determining the probability of loss: 

    • Higher insurance costs due to higher claim loss experience
    • Expedited freight charges for replacement cargo
    • Additional manufacturing costs for replacement cargo
    • Lost revenues from cancelled deliveries
    • Costs for additional sales calls
    • Incremental criminal investigation costs

Not all will apply, and you may have additional expenditures resulting from cargo crime. You need to add these numbers together, and divide by the number of loads you had in the given time period.

For example, if your additional costs resulting from cargo crime come to $800,000, divide that number by the number of loads (100,000) and you reach $8 as your economic consequence of loss.

STEP 3. CALCULATING YOUR EV

Now, we have all of the data to complete the formula. Our example yields the following:

Example: 100,000 loads with 2,300 compromises for a compromise probability rate of 2.3 percent, an annual economic consequence of $800,000 for the 100,000 shipments, and a per- load loss of $8.

Theoretically, with your Economic Value of Loss at $18.40, you will stay ahead of the game if you spend less than this amount on security for each load. And since that number assumes worse case scenario, a more moderate approach may be adequate.

If you spend an amount close to your prior year’s economic consequences, however—about $8 per load in the above example—you would at least break even, but only if crime levels stayed exactly the same.

Unfortunately, worldwide cargo crime levels multiply each year, so using the prior year’s probability of loss numbers could be misleading because your risk continues to increase. Your probability of loss may have been 2.3 percent last year, but may now be as high as 5.2 percent.

Predicting the coming year’s crime level is difficult, but if you at least gather data from the prior year, and use the EV formula, you’ll have a good base of knowledge. At least you will know your minimum cargo security requirement and this is a good start in keeping your cargo safe.

Read more at: Inbound Logistics

 

As always, if you have any questions about cargo insurance, please feel free to contact us

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