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Cliff Holste

Supply Chain Digest
Material Handling Editor

Logistics News - Sorting It Out

Cliff Holste is Supply Chain Digest's Material Handling Editor. With more than 30 years experience in designing and implementing material handling and order picking systems in distribution, Holste has worked with dozens of large and smaller companies to improve distribution performance.

September 27, 2017

Sorting It Out: Protecting the Supply Chain Against 4 Common Security Threats

Maintaining Security Awareness is Essential


Retailers in America lost billions of dollars in 2016, largely due to shoplifting, employee theft and other types of inventory “shrink, according to new data compiled by the National Retail Federation (NRF) and the University of Florida. The survey shows that inventory shrink grew to $48.9 billion in 2016 from $45.2 billion the year prior. The increases in losses were found to be largely due to the result of flat or declining retail security budgets.

“While Retailers are proactive in combating criminal activity in their stores they acknowledge that they still have a lot of work left to do,” NRF Vice President of Loss Prevention Bob Moraca said. “The job is made much more difficult when loss prevention experts can’t get the money they need to beef up their staffs and resources. Retail executives need to realize that money spent on preventing losses is money that improves the bottom line.”

Nearly half (48.8 percent) of retailers surveyed said they saw an increase in inventory shrink, while nearly 17 percent said it remained flat.

Holste Says...

A well-coordinated and effective effort protecting our supply chains is a cost that service providers must bear in an effort to protect their customers from escalating non-value-added cost.

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Shoplifting accounted for the most losses, averaging $798.48 per incident, up $377 from 2015. The increase came, in part, due to states raising the threshold for felony crimes meaning that only larger thefts are reported. Retailers also allocated smaller budgets for loss prevention. In other words, their security staffs were minimal and not able to combat thefts, the survey said.

Employee theft, the next biggest loss, increased to $1,922.80, up nearly $700 from 2015. Additionally, for the first time in the survey, retailers were asked about return fraud, in which they reported an average loss of $1,766.27. 

“When criminals steal from retailers, consumers pay higher prices, the safety of innocent employees can be compromised and shoppers looking for popular merchandise often cannot find it. Retailers need to continue to invest in new technologies to prevent and prosecute these crimes,” said Richard Hollinger, a veteran University of Florida criminology professor and the lead author of the report. 

Retailers have struggled recently as consumers’ shopping habits continue to shift toward online platforms. Children’s apparel retailer Gymboree filed for Chapter 11 earlier this year, while apparel maker Bebe closed all of its brick-and-mortar stores in May (though it is returning online). Sears, JCPenney and Macy’s have also cut physical store locations in recent months. 

The NRF and University of Florida polled 83 loss prevention executives between March 29 and May 1 2017 for the survey. 

No doubt security concerns have become a serious issue for logistics companies. This is especially true for companies with a global reach as they must also pay close attention to the security of their supply chain as the frequency of cyber attacks abroad and domestically is increasing. 

The logistics security issue is broad in scope affecting both small and large companies as well as consumers who ultimately bear the cost. According to industry experts, a properly deployed security plan must address and protect the company against four common threats: theft, terrorism, piracy and physical disaster. 

A comprehensive plan would include the following:

  • Credentialing all personnel involved in the supply chain
  • Trading partner security extending to both suppliers and customers
  • Employee security awareness
  • Screening cargo contents
  • Security of inventory while in-transit through use of tamper-proof containers, seals and locks
  • Tracking of inventory while in-transit through use of technology enablers such as a global positioning system (GPS) and RFID
  • Security of items while stored in a facility
  • Information security
  • Disaster planning and emergency response
  • Adherence to national and international standards

Supply chain security starts with an organization’s developing a security awareness culture. Most security experts recommend that employees at all levels should be educated on potential threats to the supply chain and provided the means to counter these threats. Conversely, organizations should solicit input from employees on vulnerabilities they see. Periodic security inspections should be conducted to ensure all within an organization are in compliance with security measures. 

Another important point is that a supply chain security plan should not adversely affect movement of materials through the supply chain. Coordination of all agencies within the supply chain is a must and all links in the chain must be part of the security plan. Companies must share information such as cargo movement schedules and manifests, yet protect this information from access by the wrong people.  

Adoption of Appropriate Information Technology 

IT, including GPS, can be a real enabler by providing accurate real-time information on movement of materials and the integrity of shipments at various venues. It can also reduce the need for an army of surveillance personnel. 

There are several sources logistics companies can search for supply chain security initiatives and standards including:

  • U.S. Customs Service and Department of Homeland Security Container Security Initiative (CSI)The International Organization for Standardization (ISO) as it relates to supply chain security standards
  • Private firm pilot initiatives monitoring container movement and integrity with RFID and GPS technology.
    • Why cybersecurity is a top concern for industry professionals
    • The growing number of complex and sophisticated cyber-attacks
    • How to combat cybersecurity flaws with the right skills and technology

The security of your supply chain is only as strong as the weakest link, so it's time to ensure there's a new sheriff in town that can grapple with these new hacks and threats. Learn how you can protect your supply chain today!

Final Thoughts

While there are no easy answers or quick-fixes to security issues, vulnerability awareness is at the very lease a starting point. A well-coordinated and effective effort protecting our supply chains is a cost that service providers must bear in an effort to protect their customers from escalating non-value-added cost.

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