Organized retail crime (ORC) has been the buzzword in the retail loss prevention world for well over the past decade. During that time, companies have taken great measures to thwart would-be thieves by investing in hardened security devices, other technology, and payroll to combat the ever-growing problem. But while some of the moves have been successful, the lack of support from the criminal justice system has certainly negated most of those efforts—but that is someone else’s story to tell. I’m here to explain the very strong correlation between ORC and cargo theft.
I have been in the transportation industry for over twenty-five years, and over the years my main area of focus has been combating cargo theft. I have spoken on the topic around the country well over fifty times, and until recently, the main subject has been how to combat simple cargo theft (see chart 1).
However, a new form of theft has developed over the past two to three years that is bringing the transportation world to its knees: strategic cargo theft. Strategic cargo theft is defined as deceiving a party at various points within the supply chain to hand over their freight to thieves. This form of theft involves the manipulation of data, paperwork, and identities from a distance to gain access to freight under false pretenses. The thief never touches the property where the freight is stored, the trailer it is on, or the actual freight itself.
There has been a meteoric rise in this form of theft over the last two years, up almost 1,500 percent according to CargoNet.
Root Causes of Strategic Cargo Theft
There are three main causes of the proliferation of strategic theft that have led to the perfect storm of cargo theft we are dealing with now—all three derived from the COVID-19 crisis (see chart 2).
In the past, a retailer would contract with a dedicated trucking company to move their freight from a distribution center to their stores. That retailer knew the owners of the trucking company and would meet with them regularly. During those meetings, they would discuss rates for service, but more importantly, they would work out regular delivery schedules, in-transit expectations, and delivery procedures. Security of freight was a primary topic of discussion during those meetings. The distribution center shipping managers and the store delivery personnel would know the drivers who managed their freight.
In 2020—before the COVID-19 pandemic—the cost of moving an ocean freight container from China to the United States was roughly $1,400. At the end of 2021, the cost to move that exact same container of freight had skyrocketed to $20,600. During this time period, shipping managers were tasked with finding ways to lower expenses in their supply chains, and the easy target was their domestic trucking partners. Managers moved their freight to the brokerage world, advertising their shipping lanes to anyone who could access these online boards. That freight would then move with whoever replied with the cheapest option to go from the distribution location to the destination. Relationships disappeared, and all control over proper policy and procedure, as well as the identity of those responsible for moving the freight, were lost.
The second factor is the clear change in the shopping habits of consumers while in lockdown. Roughly 75 percent of consumers have changed their shopping behaviors, and online shopping is now the new norm, not only for consumers but for transportation executives looking for the best rates. There has been a significant reduction in the number of products in stores, and an entirely new link in the supply chain has emerged: final-mile delivery. Locations have quickly been added to fulfill the need for same or next‑day shipping, and the buildings and people who operate them are almost all new to the game. This has left that segment of the supply chain at risk while it still tries to build out its security infrastructure. The ‘just in time’ nature of replenishment to the consumer has taken away the time necessary to properly vet the providers that shippers are doing business with. It also makes it nearly impossible to pass down security expectations regarding the safe and secure movement of your freight.
The final factor is not new but certainly has been exacerbated by the pandemic: lack of arrests and prosecution. I have spoken about this problem for years; if a thief were to go into a bank unarmed and pass a note to the teller demanding their money, on average, they would net $4,800—not enough to buy the getaway car. However, if caught, they would face a mandatory minimum prison sentence of ten years.
At this point, it makes more sense for thieves to simply shoplift less than $950 of merchandise and face no prosecution. The smart thieves have quickly realized that post-COVID-19 police do not have the resources to stop them or have been advised to concentrate on different crimes.
The average loss of a cargo theft incident is roughly $220,000. Let’s take the case of Jose Maldonado, a prolific cargo thief based out of New Jersey who has been arrested over a dozen times for full trailer load thefts of merchandise totaling over $20,000,000. He was prosecuted in at least eight of those cases and served less than thirteen months in prison. The thefts occurred in the late 90’s and early 2000s, and there has been no substantive change in prosecutions that entire time. The only thing that has changed is that now a thief like Maldonado no longer has to risk getting caught because he can hide anonymously behind a computer screen and steal freight faster than ever before.
Setting Up the Scheme
Criminals will establish fake trucking and brokerage companies with the sole intention of stealing cargo. They go through the same process as a legitimate carrier in formation, registration, obtaining insurance, and operating authority. These companies then start completing legitimate jobs to establish a history of work performed. Once established, the thieves target high-value loads within their customer network to steal.
Another method for these criminals is purchasing an unused or old motor carrier (MC) and numbers to appear as a legitimate trucking company with a verifiable operating history. The Department of Transportation issues these unique MC numbers to all companies that operate commercial vehicles, and these numbers serve as a vital piece of information when a shipper is trying to vet out a carrier. An established history goes a long way in building a carrier’s reputation.
Thieves will also infiltrate a legitimate company’s staff—could be a driver, dispatcher, or dock worker—to gain access to load information. In some cases, the thieves will approach an unsuspecting employee and offer them money for information. Here are some specific examples of how these criminals steal cargo merchandise:
- Fictitious Pick-Ups. Thieves obtain information to pose as legitimate carriers and drivers, using altered paperwork, replicated uniforms, and vehicle logos to pick up legitimate shipments. The legitimate carrier has no knowledge that their identity is being used, and often, after the load is stolen, they will arrive to find that another driver has already picked up the load.
- Double Brokerage. Thieves who have already fraudulently obtained a shipment by impersonating a legitimate carrier “re-broker” the load to an unsuspecting legitimate carrier looking to move a load. This carrier assumes this is a legitimate transaction, follows all pick-up and delivery instructions, and drops the trailer off at the final destination—never knowing that the load was already stolen.
- Altering the Bill of Lading. After obtaining the legitimate identity of a carrier, thieves pick up a shipment and take it to an unauthorized location. There, they steal a portion of the freight and recreate the bill of lading (BOL) by scanning it and altering the piece count weight and seal number. Once delivered to the final location, the receiving crew counts the freight and signs the paperwork with no shortage. This shortage is not generally detected until weeks or months later when the shipper is looking to get paid or an accurate corporate inventory is taken.
- Hostage Loads. Thieves purchase or steal the identities of legitimate motor carriers and go on a broker’s load board to take possession of the loads. They then move them to an alternate location and call the shipper demanding money in return for the load. Even if the payment is made, the freight is often never returned. As I write this article, there is a situation involving an Illinois‑based company, Agility Express, that is in possession of over sixty hostage loads. At least twenty‑five different brokerage companies have come forward as victims in this elaborate scheme so far.
These types of thefts are now occurring across the country—no area is safe—but most thefts occur around large port cities and distribution hubs since that is where the bulk of the freight moves from once it enters the country. During my tenure in this industry, California has always topped the list of the states with the most cargo thefts (see chart 3).
Almost any trailer load of merchandise has value somewhere. However, there are certainly more desirable products to thieves food and beverage, electronics, apparel and accessories, and personal care items are just a few of the top targets. People often don’t understand why food and beverage tops the list, but there are two simple reasons: First, the merchandise typically does not have serial numbers, so it cannot be easily traced. Second, the product could essentially be sold anywhere. Today’s thieves almost always have the stolen product sold before the theft occurs. They receive a list of desirable merchandise from the buyer, and then they scan online load boards looking for that specific freight (see chart 4).
Problems for Prosecution
With strategic theft, the perpetrators can conduct their affairs completely via electronic communication, which affords them the ability to go undetected and unrecognized, making proper identification nearly impossible.
The theft can go undetected for much longer, allowing the participants and the actual freight to move almost anywhere. Because so many locations are involved in the theft, police struggle to ascertain who has the authority to investigate. Is it where the product was taken from originally? Where the computers or cellphones were used? Where the loss was detected? Where the merchandise was found?
In an average cargo theft, it would take a thief an entire day to steal one load from a driver or a warehouse and move that merchandise to a safe location. In a strategic theft, one person sitting at a computer can take dozens of loads in a day without ever touching a piece of freight or leaving their home. These thefts can be conducted by anyone, at any time, from anywhere in the world—without the thief ever having to expose themselves.
What Retailers Can Do
While all of this can be very discouraging, there are tools in your toolbox that can help mitigate these events.
Use dedicated, asset-based carriers to move your freight. An asset-based carrier is a company that owns its trucks and hires its own drivers. This allows you to clearly vet the company you will be doing business with. It also gives you the leverage contractually to lay out what security procedures you expect while your freight is in transit; this helps to create a clear level of liability in the event of a loss. A broker, on the other hand, acts as an intermediary of sorts between the shipper and thousands of drivers that are looking to move freight. While brokers are a necessary outlet for logisticians to help deal with the ebbs and flows of seasonal freight, having true partners you can control dramatically reduces your exposure to theft.
Insist on placing disposable GPS trackers inside your high-value loads. These cost-effective devices eliminate reverse logistics and device management while providing complete visibility of your freight, in real-time, from anywhere around the world. They also come with light sensors to notify you immediately if a trailer’s doors were opened anywhere but the final destination, alerting you instantly to a theft in progress. Temperature sensors provide live, accurate temperature readings so you can react to the conditions inside the trailer to prevent spoilage and the subsequent destruction of freight. If and when a theft were to occur, you could follow the load in real-time from your phone to assist law enforcement in finding its exact location.
Vet your carriers using services like Carrier Assure, Verified Carrier, and FreightValidate to help mitigate some levels of exposure. As you look at carriers online, be cautious of the following red flags: Federal Motor Carrier Safety Administration (FMCSA) fleet size does not match their application; the company’s fleet size does not match their revenue or miles; third-party software shows vehicle inspections in areas they do not operate; the carrier accepts loads in areas they do not operate; contact info you are provided does not match the FMCSA; emails do not match the company; or refusal to accept attempts to track the load.
Obtain proper identification from anyone taking a load from your facility. Copy their driver’s license and registration. Take pictures of the driver, tractor, trailer, license plates, and vehicle identification numbers (VIN). The fact that you do this will send thieves looking for an easier target.
Partner with companies like CargoNet that constantly provide both historical and real-time theft data so you can make more accurate decisions on where to move freight. Companies like CargoNet will also aid in theft response in the event of a loss.
Join industry groups like the Transported Asset Protection Organization (TAPA) or the International Supply Chain Protection Organization (ISCPO). The experts in these groups are constantly monitoring theft trends and sharing ideas on how to prevent losses from occurring.
Get to know your nearest cargo theft taskforce. It is imperative that you have the members of these groups’ cell numbers for immediate notification when an event occurs. I can also personally assist in this area, as I have built quite the Rolodex over the past two decades.
As of now, there is no silver bullet that will stop these thefts from occurring. But understanding the problem, training your staff, and installing protective measures will certainly act as a shield to help fend off these criminals.
John Tabor is president of 7Psolutions, a leader in the fight against ORC and retail shrinkage, utilizing GPS technologies in all aspects of the retail supply chain. John has over thirty years of experience in the loss prevention field, spending the last twenty-five years working in the transportation industry. John has sat on numerous supply chain security boards and is a regular speaker on the subject. John can be reached at sales@7pgps.com.
