The following Supply Chain Matters guest posting is contributed by Rich Sherman, President, Gold & Domas Research. Rich and I have known each other for many years and I have come to appreciate his perspectives in supply chain operations and execution needs.
Is your supply chain vulnerable to cargo theft?
If you answered no, you may want to take another look. Are your products not worth stealing, or better still, are a financially rewarding offering within underground or illicit markets?
Estimates of annual cargo theft in the US alone range anywhere from an FBI estimate at $18-25 billion to the Department of Transportation’s $20-60 billion estimate. Unfortunately, 40-60% of incidents go unreported, hence the wide range of estimates. And, the bad guys are getting more sophisticated. The Wall Street Journal just this week reported (paid subscription may be required) on a well planned and executed burglary of more than $75 million in pharmaceuticals at a Lilly warehouse in Connecticut and the thieves were quite brazen in their methods to gain entry and make their getaway with the goods. The heist is one of, if not the largest, reported. In a recent visit to a food manufacturer, they shared with me that they have seen increased attempts by bad guys to steal from trailers parked in their yard even though it is fenced and secured.
Following a CSCMP luncheon a couple of weeks ago, I had the opportunity to visit Freightwatch International’s (FWI) command and control center here in Austin. FWI provides an array of custom security services to companies globally. They (and others) shared that the bad guys aren’t just targeting goods in transit anymore. There is a rise in warehouse and yard thefts to the point that the Transported Asset Protection Association (TAPA) estimates that 18% of theft losses are warehouse related. Cargo theft is not new; I remember the head of Gillette’s global logistics telling me about armored escorts for their shipments outside the US some 20 years ago. Of course, his best story was about the hijacking of a shipment of razor samples for the press conference announcing the disposable razor. The warehouse was less than 30 minutes from HQ; but, nevertheless the bad guys heisted it in transit.
In addition to the fact that most companies aren’t looking for the kind of publicity Lilly got this week, the cost of investigating and prosecuting cargo losses results in the low reporting of cargo theft. As a result, smart companies are investing in cargo theft prevention and rapid recovery of goods when an incident occurs. The good news is that technology is available to button up our supply chains. The bad news is that the bad guys have access to the technology as well. If you’re not investing at the rate the bad guys are, you’re at risk. So, the problem is the age old one of whether to close the barn door before or after the horses have run away? Can you afford to or not to?
The road map for successful supply chain risk management is available to do it. The Supply Chain Council has incorporated risk management factors and best practices into version 9 of the SCOR model. SCOR is a framework to rapidly configure your supply chain processes, practices, and metrics for a global end to end view of your supply chain including enabling technologies and benchmarking.
Having chaired and attended several telematics conferences over the past couple of years, I am amazed at the lack of attention paid by both vendors and customers to the total benefits and ROI of telematics (or informatics) technologies available. It is also surprising that there are so few end to end solutions available. The market is highly fragmented among GPS, monitoring devices, vehicle control, mobile resource management, security etc. As a result, many companies are having a hard time justifying the level of preventative security and risk management that’s available. Unless you take into consideration all of the benefits of end to end visibility into a comprehensive strategy and ROI, it is difficult for all but the larger companies to justify. And, a fragmented vendor landscape doesn’t help.
In my humble opinion, the vendor that starts putting all of these technologies together is going to be one of the “next big things.” For example, FreightWatch told me their clients are asking them more and more about using the data they are collecting for “logistics” purposes. Duh?
Supply chain visibility is one of the most sought after, least implemented of supply chain technologies. Yet, the infrastructure and technologies to achieve it are already in place. Companies simply need to subscribe to it. Unfortunately, no one is selling a subscription to the magazine… only the individual articles.
The industry needs an information consolidator and distributor that will provide a “smart supply network.” The pieces are in place and several companies are quietly assembling them to demonstrate the necessary ROI… increased security, lower carbon footprint, lower transportation costs, improved driver productivity, product tracking and in transit inventory management, merge in transit, consolidation, reduced warehousing, and overall higher return on invested capital (ROIC). If you want to mitigate risk while operating a high performance supply chain, look holistically at your supply network and the enabling technologies… the whole may just be greater than the sum of its parts.
Richard J. Sherman is President of Gold & Domas Research (GDR) and an internationally recognized writer, researcher, and speaker on trends and issues in supply chain management and related technologies. He was a founder in the development of the SCOR Model and other industry initiatives. GDR provides industry research and workshops, supply chain process consulting, and strategic advisory services to companies worldwide.