Retail supply chain theft - dealing with freight losses

Cleaned transcript

Introduction: the scale of freight crime

COLIN:

Hello and welcome to the ECR Retail Loss Sell More and Lose Less podcast series. My name is Colin Peacock. I’ve worked in the retail and FMCG business for more than 40 years, working on the dark side of retail, on retail loss at every point in the supply chain.

When we ask retailers just how much of their unknown loss problem freight crime accounts for, we’ve got numbers of 6% to 10%, maybe an average of 8%. Eight percent of unknown loss being attributed to freight crime.

We think that self-checkouts might be about 20% to 30%, but 8% is still going to be significant. A significant number of euros and dollars. And it’s perhaps not surprising when you consider how much freight is in transit at any one time. We had one retailer recently share that they have $200 million worth of freight on the road every day. So it’s hard to believe that’s not vulnerable to some sort of loss.

Professor Emmeline has done some research in this area, and I’m looking forward to her sharing some of that research and some of the work that we’ve been picking up with retailers in our working group meetings and interviews. So, Emmeline, over to you.

Tobacco theft and jump-up crime

EMMELINE:

Hi, Colin. It’s great to be with you. And what an interesting working group we had this week on freight crime. They talked about on the road but also on the rails as well, which is often overlooked. As you say, the huge sums of value of cargo and items being moved around. The price to solve this issue is huge.

Now last year I produced a report looking at tobacco theft specifically, and one of the key modus operandi or tactics that offenders were using was to target in-transit deliveries of tobacco. If people aren’t familiar with jump-up theft or rollovers, I would encourage you to have a look online at some of the video footage. It’s like watching a James Bond movie. People targeting moving vehicles on the highways, drilling them open, taking the goods, often without the driver even being aware that the theft has occurred.

Plugging one gap opens another

Now what’s interesting is that these types of crime have largely been tackled. We’re beginning to understand some of the practical steps that businesses could take to deter that type of criminality and just make it so much harder for those criminals to steal high-value goods.

But as ever with any crime type, you plug one issue and then another vulnerability opens up. That’s what the working group really focused on: these new and emerging threats and how to begin to tackle them.

The agency driver threat

We talked about the challenges of driver recruitment. Is this generating a new vulnerability? Because with agency drivers we’re seeing an infiltration of offenders now taking up these jobs, often with the intention to steal. Or they realise there’s an opportunity once they’ve got one of these contract driving roles and then they begin to steal. As you say, a small amount often, which can make it really challenging for the business to actually identify when the product went missing. There are lots of vulnerabilities around that delivery process.

Low sanctions and hidden severity

COLIN:

In your research you pointed out, this was UK-specific, but perhaps it’s also relevant around the rest of the world, that the sanctions here are relatively low if you’re careful and not violent. Is that something you picked up on?

EMMELINE:

Definitely. The more organised, more professional offenders know not to use violence, not to use weapons, because that’s what will elevate the crime type in the eyes of law enforcement. So they’re very careful, very measured in the way that they commit this crime.

The way it’s recorded in England and Wales obfuscates the severity of the crime. For example, £70,000 worth of Lego or tobacco has been taken from a lorry, but it’s recorded as theft from the vehicle. That would also include somebody snatching a mobile phone from an open car door. So it’s almost hidden in terms of its severity.

I think that’s where there’s a real education piece for law enforcement to collaborate more with industry to understand the scale of these issues.

COLIN:

That could be the same in other countries, as you point out.

A mismatch between scale and resources

What was really fascinating for me, just listening to retailers, is how some have actually allocated good resources against this, commensurate with this being 8% of the shrink problem, whereas others are really just not allocating resources. What are your theories as to why we have this divergence in approach? You’d think the threat would be consistent across retailers.

EMMELINE:

Absolutely. There’s been so much emphasis on bricks and mortar, on external theft, that this has almost been overlooked. It’s almost crept up in some ways, just the scale of the problem.

You’re absolutely right. It was very difficult for people on the call to put a figure on this. But when they were pushed to really nail it down, the percentages they were attributing in terms of losses were huge. And then they’d talk about the level of resources they had within the business or the level of attention they could garner, and it was minimal in comparison.

There’s a real disproportionate allocation of resource to tackle this. But we heard from one retailer who had begun to resolve, almost eliminate, one type, that rollover, jump-up theft, and were saving to the tune of tens of millions of pounds for the business. So there’s a real ROI here to invest in those teams.

But as you mentioned in the introduction, overwhelmingly the language is around speed, it’s not accuracy. So it’s about how do we begin to educate that you need speed and accuracy, because otherwise the losses are really significant.

Secure packaging and deterrence

COLIN:

We did hear one example. It might be ad hoc, but it was interesting that one of the retailers shared that when they have almost black totes that are very secure and very obvious and would be noticed if they did not arrive, the thieves did not touch those.

What could we do with AI technology or computer vision? I think we heard some pieces about that. What have you been hearing about the use of pallet recognition technologies? Is that something people are looking at?

EMMELINE:

Definitely. There’s a whole range of ways that this can deter offenders. Pallet recognition, checking accuracy. It doesn’t have to be timely and laborious anymore. We have the technology to support businesses in this respect.

But also really simple things like better locks. That’s a really key thing. Or the way that pallets are packaged, so that the more expensive items are at the back of the lorry, or they’re low down, or there’s anti-tamper or tamper-proof detectors. There are all these different mechanisms that can begin to support businesses in the supply chain.

GPS tracking and the arms race

One thing I thought was really interesting is the almost arms race. You see this with any sort of acquisitive crime. There were quite a lot of checks and balances being put in around GPS tracking, unscheduled stops that would begin to signify that a crime might have taken place. Sometimes this might just be 20 seconds, that’s all that’s needed, to pick up on a driver stopping or slowing down for too long. That was really interesting.

But what some of the people on the call talked about was how the drivers had become aware of these processes and were trying to manipulate them. It just tells me that we need to always stay one step ahead and think about how those bad actors are beginning to play the game to still be able to commit their crimes.

COLIN:

There’s a wonderful piece in one of the conversations around GPS trackers. We were looking at the GPS tracker and suddenly it moved in seemingly 20 seconds by about five miles. What was this? There are some patterns to be picked up.

Protecting vulnerable drivers

EMMELINE:

Just thinking it’s a glitch in the system, but actually maybe it’s been deliberately tampered with.

Now we’ve focused a lot on drivers being the culprits themselves, but drivers can also be incredibly vulnerable when they’re out on the road. Many of the people on the call talked about the fact that there just aren’t safe locations for them to do their scheduled stops. They’re sitting ducks sometimes. They don’t have the support or the security that they need.

I think that’s really a wake-up call for the industry to better protect vulnerable drivers and give them locations that are safe for their stops, where they’re not being targeted.

Cross-functional collaboration and data

COLIN:

To your point, there are some retailers who say, as a policy, we will not allow our drivers to do any overnight stops. But that comes at the cost of efficiency and practical implications in terms of distances.

I think it also calls out the need for loss prevention not to tackle this on their own. They need to engage others, to have a real cross-functional effort against this, backed up by data, backed up by data analytics with GPS and trackers. So we really get to see what’s going on. And then perhaps for some of the very high-value items, more secure routes that can be tracked more easily.

The Golden Quarter and rising pressure

EMMELINE:

Absolutely. As we enter into the Golden Quarter now, we’re going to see a huge amount of pressure on efficiencies, on speed, e-commerce really driving that people want goods delivered ever quicker to their doorsteps or into other locations. I think this is going to put a huge amount of pressure on these distribution systems. Now is the time to really focus on how to shut down those vulnerabilities.

COLIN:

As you said at the start about the emerging crisis in terms of lack of drivers. We’re going to be more picky, we’re going to be needing more contractors. And we know that’s another area where you need to be on your guard for fake contractors. I think we recently saw a documentary on television that featured some of these bogus contractors.

Emmeline, fantastic. Thank you so much for taking the time to share your thoughts on this problem of goods lost in transit, freight crime. Really grateful. We’ll keep on tracking this problem and see where there are some breakthroughs and updates. Maybe greater resources being allocated by retailers going forward. Thank you very much.

EMMELINE:

Lovely to see you. Thanks, Colin.

Outro

COLIN:

Well, that’s all we have time for this week. Thank you for joining us and thanks to all the ECR Retail Loss community for the sharing of their knowledge, their research, and latest learnings that ensure that we become truly a global platform for learning.

My name is Colin Peacock. This is the Sell More and Lose Less podcast. If you liked it, please subscribe so you automatically get all future episodes. And if you think your colleagues and friends might also like it, please ask them to follow ECR Retail Loss on LinkedIn and tune in to our next podcasts. If you didn’t like it, then let us know and we’ll try and fix it. Either way, see you next time. Thank you again.