Developments

july 2011

Cargo Theft: A Heavy load on the Supply Chain

$30 Billion Problem Continues to Grow
1

How the Supply Chain Fought Cargo Theft in 2010, www.thomasnet.com, February 8, 2011. Inside Cargo Theft: A Growing, Multi-Billion-Dollar Problem, www.fbi.gov, November 12, 2010.

Its twilight at a popular truck stop in a small town in Tennessee. A trucker pulls his big rig to a stop after a long day behind the wheel. In the secure container of his 18-wheeler is $10 million worth of drugs destined for the Memphis warehouse of a medical supply wholesaler. As hes done dozens of times before, the trucker fills his tank and goes inside for a quick shower and a cup of coffee. When he comes out, his truck is gone, and a chain reaction that threatens the nations drug supply is under way.
No, this isnt the opening scene in an Ian Fleming conspiracy thriller. Its the story of an actual crime one of many cargo thefts pulled off every day across America. Cargo theft in the U.S. rose 4.1 percent in 2010, with 899 reported incidents, the highest on record.1 And while the total numbers arent known because many companies dont report cargo crimes, direct losses worldwide are estimated at up to $30 billion per year.2

Add in the impact of higher prices to consumers, loss of state and local sales tax revenue, insurance claims, lost time and productivity and the risk of physical and emotional harm to employees, and the costs of cargo theft are staggering.

Cargo Theft basics

Cargo is defined as any commercial shipment moving via trucks, planes, railcars, ships, etc. from its point of origin to its final destination. If merchandise is stolen anywhere in between, for example, on the highway, at a truck stop, at a storage facility, in a warehouse, at a terminal or on a wharf, its considered cargo theft. About 63 percent of all freight in the U.S. moves in trucks easy prey for thieves who roam the interstates targeting containers filled with cosmetics, designer clothes, electronics and the top prize, pharmaceuticals. Cargo criminals exploit the weak links in the trucking supply chain, such as truckers who dont always follow the rules on where they park and when they stop for
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robots: Productive workers in the warehouse

Integration with Warehouse Management Systems Is a Key Component
In our last issue of Developments, we examined the impact warehouse management systems (WMS) are having on distribution centers and the movement of goods from one place to another. In this article, we follow technology advances that are once again changing the warehouse forever: robotics.
Looking around a typical American home or office, its hard to find anything that didnt pass through a warehouse or distribution center on the way to its destination. Basic warehouse functions havent changed much over the years; items still go through receiving, sorting, storage, picking, packing and shipping. Warehouse automation, however, is dramatically changing the way these functions are performed. Warehouse automation is on the rise, driven by competitive pressure for improved cycle times and accuracy, and by top management directives to reduce costs. In a 2010 survey by the Aberdeen Group, nearly half the respondents reported warehouse cost increases relative to revenue year-over-year. 37 percent said they would invest in warehouse technologies to curb the upward trend in labor and operating expenses. Among the front-runners in warehouse technology advancements are warehouse management systems and robotics systems. Robotics systems are making a name for themselves in warehouses across industries including retail, automotive, e-fulfillment, food and beverage, pharmaceuticals, publishing and third-party logistics (3PL). They are best suited for companies with a high number of SKUs and a lot of mediumto slow-moving product.

worth the Price of Admission

The investment in robotics is not small; in 2008, the Aberdeen Group estimated it would take at least a million dollars to implement a quality system. The compelling benefits, however, go beyond higher productivity, increased accuracy and labor cost savings: ost robots are energy efficient; plus, the entire robot M zone can be operated with almost no lighting. obots are more flexible than humans in adapting R to changes in product types and order volume. ecause mobile robots do all the walking, employees B experience less fatigue. orkers in robotic environments report less mental W fatigue, stress and frustration from conforming to their peers pace of work. mployee safety improves because workers dont walk, E theyre in control of their own work and they enjoy a quieter environment. At the current rate of WMS and robotic system adoption, it is easy to imagine a future where fully automated, computer controlled distribution centers will hum with robots busily unloading pallets, retrieving products from storage and taking them to shipping.

working Together
A warehouse management system is complex software that streamlines order processing and manages inventory, storage locations and workforces. Robotics systems incorporate software and hardware to physically pick, pack, palletize and ship products. Typically, when robotics software is integrated into an enterprise system, the primary interface point is the WMS. Robotics systems have been used in manufacturing for years. Applications are continually being developed for the distribution environment, with four main types of robots leading the way: stationary articulated robots are used primarily for palletizing and depalletizing. They are able to meet the challenges of receiving/replenishment and order fulfillment/ shipping using built-to-order pallets in various sizes consisting of multiple stock keeping units (SKUs). They are also fast and accurate, avoid product damage and offer the highest shipping density and pallet load stability. gantry robots are bridge-like structures that move horizontally back and forth along overhead tracks that can span large areas in the warehouse. They are particularly useful for high-SKU, high-rate case and layer picking applications. robotic arms ride on a track between rows of pallet racking and reach into the racking to pick product identified by bar code scanning. The back and forth, horizontal movement of the base unit, the vertical movement of the carriage system on the mast and the flexibility of the telescopic arm provide a high degree of maneuverability. Mobile robots are more advanced forms of automated guided vehicles (Agvs), which are guided by markers, floor wires, vision or lasers. Mobile robots replace human travel with robotic travel and free skilled warehouse workers from pulling carts, delivering palletized loads and positioning supplies.

Language of Robotics

Lgv (laser guided vehicle): Physically moves goods and links machines in the warehouse. Also known as Agv (automated guided vehicle). robot palletizing system: flexible robot applications that pick goods from the production line and palletize them. wMs (warehouse management system): The brain of a warehouse automation system that keeps track of system performance, inventory and data tracking of goods. wrapping machines: A specialized robot application that wraps the finished pallet with plastic film.

Robotics Going Mainstream: Improve Warehouse Productivity and Safety, Aberdeen Group, September, 2010. Scalability, Flexibibility, Portability: Zappos Rewrites the Rules for Warehouse Design, Aberdeen Group, May, 2008.

robotics systems incorporate software and hardware to physically pick, pack, palletize and ship products.

Did you ever wonder how the massive components needed to build a nuclear reactor made their way to the middle of a Kansas prairie? or how a 14-foot whale shark got from the Indian ocean to an aquarium in Atlanta, georgia? As with other cargo that is oversized, overweight, overdimensional, fragile, hazardous or otherwise hard to handle, these special shipments were most likely transported by a project logistics provider.
Project logistics providers manage every aspect of moving special cargo from one place to another. Because their customers are usually in heavy industries such as power generation, energy, manufacturing, petrochemical, mining, bulk material handling, engineering and construction, the items they ship are quite unique and can require everything from police escorts to roads and bridges built especially for them. These and other common project logistics challenges, including extreme time pressures, security constraints, very long distances, changing customs regulations and hard-toreach locations, are typically beyond the scope of traditional freight forwarders. Kuehne + Nagel Inc., a global third-party logistics (3PL) provider and IDI tenant, knows the issues well. Logistics used to be all about warehousing, transporting and handling product at the least cost, says Adrian Hawkins, Vice President, Projects. Project logistics, however, goes against that old mindset of putting savings first. Project logistics can require years of planning for billion-dollar projects, and shippers cant take logistics or monetary shortcuts.1 Major project logistics providers such as Kuehne + Nagel work with clients to map out every detail of a job. They often start with an initial feasibility study and dont stop until the cargo is safely delivered to its destination. They coordinate with authorities, supervise loading and unloading, arrange labor and equipment and take care of a thousand other tasks all the while keeping the client up to date on their shipments status.

A Critical Choice
Choosing a project logistics partner requires a different level of due diligence than choosing a conventional shipping company. Referrals are a great source, as is the Project Professionals Group, whose members provide fully integrated logistics management solutions. Other selection tips from the experts are: Look for companies with financial stability, proper insurance and experience handling special cargo projects. Your relationship could span many months and you want to make sure your partner will be there for the long haul. If possible, find a niche player who specializes in your industry or has experience transporting items similar to yours. Just because a company has a well-known name doesnt mean they have the expertise you need. Interview at least three companies to discuss project details, understand their business style and ask for references. Again, this is a long-term partnership and a high degree of comfort and trust on both sides will help ensure it goes smoothly. Check references carefully. Ask for details about communication, project management, schedules, budget management and quality control.

All in a Days Work

Project logistics is not for the faint of heart. These firms are routinely presented with overwhelming challenges requiring special expertise, experience and the creativity to solve unexpected problems. here are some examples of what project logistics can accomplish: iant chemical G reactors and towers were transported to a building site on a temporary road made of aluminum panels laid across farmers fields. n immense highA voltage transformer weighing 255 tons and standing 30 feet tall was shipped across the Atlantic on an ocean carrier.

A 115-ton gas tank was moved across the country using a floating crane, a river barge and a police-escorted truck.

The Shippers Guide to Project Logistics Cindy H. Dubin, www.inboundlogistics.com, December 2010.

cargo theft: a heavy load on the supply chain from front page IDI: A Case for Security

With security being such a high priority, warehouse tenants often look to their real estate development or property management partners for help, says Jeff Lanaghan, Vice President of Leasing and Development in IDIs Chicago office. We recognize many of our tenants have high security needs, especially if they handle pharmaceuticals, electronics or other items targeted by criminals. Special security measures IDI put in place for an electronics and appliance retailer in Illinois include:
paved trailer storage area to A create a separate, controlled access point for trucks. This allows the tenant to operate as a separate entity within the multi-tenant building. ecurity fencing around the S entire truck court with a sliding gate and intercom to control access. To meet city standards, ornamental iron fencing with outward bending tines was used. ecurity lighting and cameras S throughout the truck court to enhance nighttime visibility. n access corridor to bring A employees from the side of the building to the office, where they must go through metal detectors before entering or leaving the facility. This allows the office area to be placed along the docks without giving up dock positions for parking stalls. ffice area glass tinted to O limit visibility into the building. umerous interior areas N fenced off to prevent employees from accessing merchandise. ard readers to limit access C to certain areas for high clearance employees. ll fire exit and access A doors wired and alarmed to notify if opened.

fuel.3 Lack of coordination across local county jurisdictions makes cargo theft a low-risk venture for crooks who are just passing through. Despite the drama of a stolen or hijacked big rig, cargo is actually at its greatest risk when its being loaded and unloaded. During this particularly chaotic time, getting the truck away from the dock often trumps security. The most common scheme involves a truck driver and a warehouse employee working together to sidestep security measures and cover up where and when a theft occurred.

Putting the brakes on Cargo Theft

In a recent survey by FreightWatch International, a global logistics security solutions provider, 81 percent of respondents rated cargo theft as the supply chains top concern over the next five years.4 Prevention, as with any crime, is the key. In the warehouse, locks on doors and windows, security cages, cameras and security seals on packages are obvious solutions, but experts say it takes a comprehensive plan to thwart todays thieves. Many believe a high percentage of cargo thefts involve inside information or complicity,4 which makes employee screening and background checks absolute musts. Just as important is carefully screening transportation partners and intermediaries. Once goods leave your premises, these companies are responsible for them until they reach their destination. Management visibility in the warehouse, a security-aware culture and periodic security audits will let potential criminals know you take theft prevention seriously. The more theyre watched, the less likely they are to strike.

Security due diligence is also critical once your valuable merchandise is on the road. Prepare your drivers with antitheft/anti-hijacking training and a communication plan that includes time intervals and distress code words. Keep in mind that thieves often follow departing trucks and pounce when they stop, so pay attention to shipment routing and dont let drivers stop in the red zone (the first 200 miles or four hours from their starting point) or known hot spots.5 Take advantage of vehicle and shipment tracking, vehicle immobilization and advanced truck security seals. Ask your supply chain partners to agree to a protocol and inspection process to ensure your cargo has not been compromised before one party accepts it from another.

risks Down the road

According to the Federal Bureau of Investigation (FBI), cargo theft is often a gateway crime that turns into a case involving organized crime, public corruption, health care fraud, insurance fraud, drug trafficking, money laundering or possibly even terrorism.6 With so much at stake, increased awareness and more stringent prevention techniques are vital to supply chain safety and effectiveness.

Cargo Theft: The New Highway Robbery, www.businessweek.com, May 26, 2011. Survey: Cargo Theft Top Concern For Supply Chain Risk, www.ccjdigital.com, June 2, 2011. 7 Steps to Prevent Cargo Theft, www.industryweek.com, December 1, 2008. Inside Cargo Theft: A Growing, Multi-Billion-Dollar Problem, www.fbi.gov, November 12, 2010.

In This Issue
CArgO TheFT: A heAvy LOAD On The suPPLy ChAIn Direct losses from cargo theft are estimated at up to $30 billion per year worldwide. Find out when cargo is at its greatest risk and what measures can be put into place to prevent it. rObOTs: PrODuCTIve wOrkers In The wArehOuse Warehouse automation is on the rise, driven by competitive pressure for improved cycle times and accuracy, and to reduce costs. What types of robots are currently leading the way in the distribution environment and could your company benefit from this new technology? sPeCIAL hAnDLIng requIreD Did you ever wonder how a 14-foot whale shark got from the Indian Ocean to an aquarium in Atlanta, Georgia? Like other cargo that is oversized, fragile or hazardous, this special shipment was most likely transported by a project logistics provider. Take a look at some examples of what these providers can accomplish.

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