Supply Chain
Cargo Theft and Its Impact on the Retail Community C
By Maurizio P. Scrofani, CCSP, LPC Maurizio is a well-known supply-chain asset protection professional with over twenty years’ experience in retail. He currently works for a well-known national department store chain. The views and information in this column are his own and do not necessarily reflect the views of his current employer. Maurizio can be reached at maurizio@mpsconsultants.com or via LinkedIn.
therefore, its effect on the economy cannot be underestimated. Jared Palmer explained in his article in Inbound Logistics magazine, when companies report cases of trucks being hijacked, insurance premiums are raised the following year because the trucking company may not cover the entire loss even with coverage based on their deductible. Getting a similar shipment for the retailers affected may not be possible, which can negatively affect the retailer’s target of meeting their customers’ demands and vendors’ “first to market” commitments.
argo theft often is thought of as a silent and victimless crime despite the fact that it accounts for losses of billions of dollars annually in the United States. The most common incidences of cargo theft involve gangs who steal high-value commodities from loaded trailers. Substantial loses can also occur from facility burglaries. Cargo theft has a great impact to the economy of the US, which carries the world’s largest national economy making roughly 17 to 22 percent of the world’s gross domestic product (GDP) according to EconomyWatch.com. An insight into the impact of cargo theft on the retail community is crucial in determination of its economic significance to the US at large. In any business the mechanics of its supply chain helps the various management groups in keeping track of the flow of goods from one point to another. Therefore, if the supply chain loses control or has a substantial disruption, a chain of instability is created. This disruption influences not only the business areas, but also indirectly large portions of the economy. Cargo theft has notable downstream costs that exceed the value of the goods stolen. While it is difficult to quantify these costs, they are estimated through varied methods that are passed to the consumer through increased registration prices. The most dominant impact may be in a revision of EOQ (economic order quantity), which can “pull” or “push” mutual supply chains between raw material suppliers and end shippers. In addition, as astutely noted by Dan Burgess in his book Cargo Theft, Loss, Prevention, and Supply Chain Security, “Loss of market share presents multiple issues for manufacturers, including the loss of customers, increased sales for competitors, and additional costs to the manufacturer to win back customer loyalty.” When such cases occur, the prices for goods increase, and the extra amount that each consumer has to pay to get the product accounts for the loss caused by theft.
Cargo theft may have been perceived in the past as a trucking industry problem or one that resides at the desk of an insurance claim adjuster. But clearly today in the retail industry, it is an “us” problem that needs all hands on deck and all stakeholders to be “all in.” If a truck transporting goods has been hijacked, for example, the trucking company pays for the stolen products and the loss. Covering the entire loss could be impossible because of the deductible policy. Rates for future shipments for the same product will be raised to cover the loss incurred, and other additional costs passed to the retailers (shippers) who will pass them to their customers. Both the manufacturing company and the retailers will have to pay an extra amount to cover the loss incurred by the shipment company to obtain a similar product. In inflicting financial damages to shippers, consumers, manufacturers, and carriers, cargo theft has had the highest impact. The most critical impact to any company is its image, awareness, and other relationships. When cases of theft happen, the stolen product is reintroduced traditionally via
Impact on Insurance and Brand
Insurance companies are highly motivated stakeholders in the retail industry and play a major role in cargo security. Cargo theft is often perceived as an insurance problem;
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