Stolen Before It Hits the Store

It’s a $5 trillion industry that is working hard to adopt high-level measures such as digital transformation, data analytics, and promotional strategies. But the consumer packaged industry—the one that supplies all the goods that retailers sell, from shoes to tools—has a little-noticed problem that’s getting troublingly worse: cargo theft

Last week, a U.S. Senate Judiciary Committee hearing revealed a number of alarming statistics—among them, that supply-chain theft costs companies $35 billion annually, and is up 27% year-over-year. One senator cited a single train robbery that netted thieves a half million dollars. “Individually, some crimes can seem like petty theft, but collectively, they impact the supply chain and impact worker morale and safety,” says Dave Rossi, president of the Global Industrial Market practice at Korn Ferry. The average so-called “strategic theft” now costs companies over $200,000, and this kind of crime has increased by 1500% since early 2021, according to testimony at the hearing.

Cargo theft is as old as crime, because on the continuum of robbery strategies, bulk stealing is both lucrative and fairly safe: An inside guy offers access, and—boom—heist accomplished. A century ago, gangs were known for heisting trucks of alcohol or leather shoes; today’s theft has matured into a fairly sophisticated operation, fueled by the uneven digitization of transport networks. For example, the internet allows criminals to create fake carriers and make fraudulent pickups, all while tracking inventories from unfinished materials (not lucrative) to finished goods (lucrative). At the same time, many transportation companies still use old-school low-security systems. For instance, the paperwork truckers present to make pickups can be forged.

Once stolen, monetization is easier than ever before. “With the internet, they can sell anything nowadays,” says retail expert Craig Rowley, senior client partner at Korn Ferry. A consumer typically doesn’t realize that the shoes they purchased online were stolen goods (the seller doesn’t mention that they have an inventory of $500,000 worth of shoes). Purchasers are looking for deals online because of the growing costs to logistics suppliers of additional security and manpower. “It’s putting more demands on the supply chain at a time when demands and labor costs are already high,” says Rossi.

The surge in theft comes at a precarious moment for the victims of these crimes: consumer product companies. Ongoing inflation concerns have made customers hyper-attuned to costs. “They’re aware of price per package, price per ounce, and price per serving,” says Torrey Foster, vice chairman for consumer markets at Korn Ferry, noting that brands’ popular image is under siege and consumer sentiment could turn. Companies are understandably weary of publicizing their supply-chain theft incidents.

While retailers are not on the hook for losses—they pay only for the products they receive—they are secondary victims who face suddenly empty shelves. If an order of $500,000 worth of shoes doesn’t arrive, the retailer, who typically places orders three months in advance, is out of luck. Meanwhile, the shoe company scrambles to find factories that can run extra shifts, as well as to locate and ship raw materials. “If retailers are really desperate, they can have manufacturers air ship items,” says Rowley. But this is expensive, easily four times the cost of ground shipping.

At the Senate Judiciary Committee hearing, leaders of supply-chain transportation firms described feeling on their own as they battle cargo theft, especially after police categorize these thefts as instances of vandalism, which allows patterns of heists to go unseen. Companies urged law enforcement to supply additional resources. A bipartisan bill, the Combating Organized Retail Crime Act, was reintroduced in April, with strong support from everyone from trucking companies to the National Retail Federation.

Experts expect public attention to cargo theft to help stanch the robberies, but also to make hiring more difficult. For a typical long-haul truck driver, it’s a sky-high responsibility to transport two million dollars’ worth of inventory through overnight stops. “If we have public figures talking about theft, that’s going to imply a level of risk for the employee, making it even harder to staff,” says Rossi.

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