What is going on?
Recently, there has been substantial coverage of the hijacking of goods trains by thieves on Los Angeles (LA) goods lines (McFarland & Mossburg 2022). Images of damaged or discarded shipments from distributors to consumers (end users) strewn across the train tracks are common, as are photos of railway police trying to apprehend individuals and small groups running along the tracks.
Reportedly, these criminals either force entry to stationary or slow-moving goods trains, ransacking any items which appear to be of value. Since they have been doing this for a while now, one must presume they have learned what more expensive packages look like (e.g. branded shipping boxes, specific logos) and are likely selected over lower value items (see my previous article here). Additionally, media reporting also stated that larger, harder to move goods are discarded on the train tracks over smaller items easily transported by a single human trying to flee the scene quickly. This activity is a form of Cargo Theft.
What is cargo theft?
The prevention of cargo theft is a core pillar of any supply chain security program, ensuring goods are not stolen in transit either from the factor to a distributor (for larger or bulk shipments), or distribution centre to end user (as appears to be seen in this example).
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How does cargo theft impact brand integrity?
When cargo theft occurs in bulk, there is a real risk the diverted product is moved into grey markets (gray markets) or alternately that stolen product is infiltrated into legitimate supply chains, and then on-sold to end users (see Sugden 2009). An example of the scenario that occurs here is where an authorised distributor is approached by a purported ‘wholesaler’ to purchase legitimate (non-counterfeit) stock at a discount to prices set by the manufacturer or standard wholesale prices.
In this scenario, distributors may knowingly or unknowingly purchase stolen but non-counterfeit product and then sell this to end users, with three potential business impacts:
- The manufacturer is disadvantaged through erosion of their profit margins,
- A ‘legitimate market’ is created for the stolen goods through poor purchasing controls by the distributor, and,
- Potential future revenue leakage and brand damage to the manufacturer through services and warranty fraud, if a customer who purchased the non-counterfeit good from an authorised distributor makes a claim.
Cargo Theft Typologies
According to the latest BSI Survey on Supply Chain Risks (2020), there are four primary cargo theft typologies (note the report does not define each typology, I have added my own definitions here)
- Hijacking – where the vehicle (truck, train, plane, ship) carrying the goods is stopped and control is taken of the entire vehicle. Typically, vehicles are typically taken to a third location controlled by the hijackers for unloading and disposal. Hijackers may be working in collusion with trusted insiders (e.g. drivers or warehouse staff).
- Theft from a vehicle – whereas hijacking involves the whole vehicle, this typology involves stealing selected goods from the vehicle (e.g. specific boxes), and is what we see in the LAX examples.
- ‘Slash and grab’ – when cargo is transported in soft skinned trucks, the vinyl or canvas covers can be slashed and any items to hand quickly stolen.
- Other – undefined typologies, presumably including theft by employees or third parties as well as fraud (e.g. claims of shipments being damaged as cover for theft).
According to BSI, cargo theft primarily occurs in six geographical locations:
- In-transit – whilst the vehicle is moving (e.g. slowed due to traffic congestion, stopped at traffic lights or an accident)
- Rest areas – trucks carrying high value cargo without two drivers are at risk when the driver stops for a break or sleep
- Warehouse – there are at least two risks here:
- Theft from warehouse by criminals (e.g. breaking & entering) with no insider involvement
- Inventory theft or fraud by trusted insiders (e.g. employees)
- Unsecure roadside parking – where a loaded vehicle is parked either at the point of origin or destination
- Freight facility – where multiple trucks / trains are unloaded in a single location
- Other locations – these are not defined
How do the proceeds of cargo thefts end up in grey markets?
We sometimes see high value goods, such as stolen motor vehicles, being exported from the jurisdiction where the theft occurred (e.g. the USA) to an overseas jurisdiction where the product is in high demand and where criminals can obtain substantial profit margin on the sale of the stolen goods.
It might also be common to see sales of consumer products being sold online (either individually or in bulk) by either a business or individual seller or sold to authorised or unauthorised distributors [an ‘authorised distributor’ is defined as one which has a signed distribution agreement with the manufacturer or Intellectual Property Rights (IPR) owner and is conducting their business operations in the geographic area(s) stated in the agreement].
In the case of the LA activity, the stolen goods seem to be packages shipped from distributors which are stolen before delivery to the consumer (end user), rather than bulk shipments (e.g. multiple copies of the same product). These stolen goods can also be sold online, in person through social networks or street corners, or local flea markets.
What can be done to help mitigate this type of cargo theft?
There are three main strategies that can be employed to mitigate the types of risks seen in Los Angeles, as follows:
- Physical Security (including use of tamper evident seals) – appropriate (i.e. risk-based) physical security should be part of any Supply Chain Security program. This may be the responsibility of the logistics provider (i.e. a third party) or the manufacturer. Most shipments are covered by insurance against theft or damage, but this may be subject to exclusions.
- Market Surveillance – a robust market surveillance program is essential for the protection of your products, IPRs and ongoing brand integrity. This involves using Open Source Intelligence (OSINT) techniques to monitor physical and online markets (e.g. flea markets, online market places like eBay and Gumtree) as well as social media for sales of your products, monitoring pricing (pricing surveillance), conducting test purchases (to determine the origin of the product for diversion and grey market purposes), and identification of sellers to determine whether they are authorised or unauthorised.
- This data should be added to a Graph database to facilitate Social Network Analysis and other intelligence analysis and investigative methods which might help to identify the criminal value chain and map organised crime groups involved in this activity.
- Collection and analysis of incident data – in my previous post on product fraud and security risk assessments, I discussed the importance of capturing current and historical incident data for analysis. The sorts of questions you need to ask of your data here includes whether there are any common themes or trends and whether any specific products are at higher risk than others (e.g. those which are more valuable or CRAVED by thieves).
Whilst cargo theft is a risk, there are controls and other measures which can be implemented to mitigate it. Proper planning is essential, as is the use of security risk analysis to identify where effort (and budget) should be allocated, and the use of intelligence methods to continuously monitor the market and those actors (individuals, legal entities) involved in it. Ideally, any incidents are either prevented, detected or disrupted before a loss is incurred, but in some cases formal investigation may be required.
- ASIS International (2014). Supply Chain Risk Management Standard: A compilation of best practices, ANSI / ASIS SCRM.1-2014, www.asisonline.org
- BSI (2020). Global Cargo Theft Trends – 2019 in BSI Supply Chain Risk Insights 2020, www.bsigroup.com
- Curwell, Paul. (2021). Product security risk assessments for tangible goods, 19 December 2021, https://forewarnedblog.com/2021/12/19/product-security-risk-assessments-for-tangible-goods/
- Clarke, Ronald V., and John E. Eck. 2016. Crime Analysis for Problem Solvers in 60 Small Steps. Washington, DC: Office of Community Oriented Policing Services. https://cops.usdoj.gov/RIC/ric.php?page=detail&id=COPS-W0047
- ISO 28000:2007 Specification for security management systems for the supply chain, International Standards Organisation, https://www.iso.org/standard/44641.html
- McFarland, M. and Mossburg, C. (2022). Thieves in LA are looting freight trains filled with packages from UPS, FedEx and Amazon, CNN, 15 January 2022, https://amp.cnn.com/cnn/2022/01/14/economy/la-freight-railroad-theft/index.html
- Sugden, D. (2009). Gray Markets: prevention, detection and litigation, Oxford University Press, Oxford & New York.
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