The headlines seem ripped from a yet-to-be-produced HBO crime caper: Millions of stolen goods found in warehouses across the country. While there’s no movie yet, the issue is hitting companies in the pocketbook: In 2023, cargo theft incidents were up 57% compared to the previous year, according to data from CargoNet, a Verisk company.
That amounted to almost $130 million in stolen goods, per the theft prevention company, but the true total is likely much higher since reporting isn’t mandatory. And that’s part of the trouble for CFOs: It’s hard to know exactly how much money is being lost to cargo theft.
People may write loss off to organized retail crime, inventory mismanagement, or other slight discrepancies, “and it’s because they don’t know where things went missing,” Danny Ramon, intelligence and response manager for Overhaul, told CFO Brew. “They don’t actually have granular visibility into their supply chain.”
Any time truckloads of goods and millions of dollars are being stolen, it’s likely a CFO issue. And that’s why finance chiefs need a quick historical primer on cargo theft before they can really address the issue.
Canary in the supply chain. It wasn’t always like this. Once upon a time, cargo theft was easier to track, in Ramon’s telling.
People started paying closer attention to cargo theft around the early aughts, Ramon explained, when cargo theft of pharmaceutical products took the spotlight. In 2010, cargo thieves stole $60 million of pharmaceuticals from an Eli Lilly warehouse in Connecticut, marking the largest theft in the state's history, per the FBI.
“That’s when it started becoming a real industry cooperative effort to share information and best practices,” he said. “Ever since then, the pharmaceutical industry has very much been the canary in the coal mine for cargo theft and supply chain security trends, because they are the least risk tolerant and the most willing to spend on proactive security.”
History lessons. Understanding the history of cargo theft is crucial, because our current moment is very much a product of the times.
Keith Lewis, vice president of operations at CargoNet, who has worked for nearly 20 years in third party logistics, notes that “as generations change, as we change as people, so do the methods of all types of crime. We have different generations that are more up on technology, and that’s what’s attacking our supply chain now.”
That changes the speed of theft, too. “As fast as the supply chain is moving, as fast as we’re moving loads, that’s how fast they can steal it,” he said.
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Now, bad actors might create “a fraudulent carrier, like starting a business and getting all the necessary licensing and paperwork done with the sole intent of stealing cargo, or they will buy old defunct, inactive MC numbers, USDOT numbers and reactivate those,” Ramon explained.
“What worries me,” Ramon noted, in reference to the new technological sophistication of cargo theft, “is how scalable it is.”
New demand Historical changes have also impacted which goods are in demand, Lewis and Ramon point out. While high value goods, like pharmaceuticals, tobacco and electronics, were once popular targets for cargo thieves, the incentives have switched in recent years.
“The bad guys got smarter, and they started stealing things that stay off the federal government’s radar,” Lewis said.
That’s led to a shift, where “low value, low risk commodities” like food and beverage items have become better targets, since they’re always “in high demand by the consumer,” he noted.
And given the technological prowess of some cargo thieves, Ramon pointed out that “they can react to market trends in an instant,” adding that during the pandemic cargo thieves “shifted almost instantly whenever there was a retail purchasing restriction on anything from toilet paper to paper towels to eggs, when eggs had that massive price hike.”
The future of theft. So, where’s all this heading in 2024?
Well, for starters, it’s not going away. “We’ve seen the beginning of geographic spread,” Ramon noted, citing rural areas in Kentucky as seeing an uptick where cargo theft was more common in metro areas.
That risk-reward calculus is something CFOs should keep in mind as they analyze their own supply chains. “Don’t be the low-hanging fruit,” Ramond said. “These cargo thieves do and always will operate on a risk-versus-reward calculation.”
His advice for CFOs: “Accurate data is of paramount importance, knowing where your losses are occurring, where your leakage is occurring,” he said, adding that “good solutions are tailored to individual supply chains.”
And Lewis stressed that CFOs need to realize cargo theft prevention “is a team sport.” He continued: “The industry has got to come together and recognize this problem, and it’s not going to be solved by one of the spokes on the wheel.”