For years, cargo and warehouse theft has largely been relegated to a footnote among law enforcement officials, who have tended to concentrate instead on losses suffered by homeowners and retailers. But federal, state, and local authorities today are beginning to pay increased attention to a problem that is more serious and widespread than most people realize. One indication is this note from an internal FBI report: "The theft of cargo has become so widespread that it constitutes a serious threat to the flow of commerce in the United States."

Just how serious is the problem? "Unfortunately, it is tremendously difficult to gather accurate data on losses," admits Edward V. Badolato, president of international transportation consulting firm CMS Inc. of Washington, D.C., and past chairman of the National Cargo Security Council (NCSC) (see sidebar below). "The major reason is that companies are reluctant to share information on their losses. Due to the competitive marketplace, they consider the information to be proprietary."

Despite that difficulty, the NCSC a few years ago developed an estimate for annual losses from cargo theft of $10 billion a year. The group recently increased its estimate to $12 billion, a figure that is accepted by the FBI and the Justice Department, according to Badolato.

Who are the culprits? Years ago, the thief was typically a lone employee who found theft from warehouses and distribution centers to be an easy and lucrative form of "wage enhancement." Today, such employees are still a problem, but the major threat is posed by national and international crime syndicates and gangs, which often operate from South America, Asia, and Eastern Europe. "Many of these have evolved from penny-ante crooks to multibillion dollar international operations," explains Badolato. "They use cargo crime as a common denominator in their various other illegal activities, such as drugs, money laundering, terrorism, and smuggling."

Although some of these gangs operate from the outside e.g., committing theft by breaking and entering the majority have found greater success by placing "shills" in logistics operations. "Often, the gangs arrange for these people to become employed in logistics companies via third-party employment agencies," says Barry Brandman, president of Danbee Investigations Corp. of Midland Park, N.J. "Within three or four months, they have been able to scope out the facility, identifying electronic protection, video coverage, guard coverage, internal controls, etc. The gangs can then exploit the weaknesses."

Approximately 80 percent of cargo thefts result from inside jobs, by employees either acting alone or as part of gangs. One reason this number is so high is that today's low unemployment often pressures employers into hiring people they might not have considered hiring a few years ago. "When law enforcement officials surveyed employees working in cargo operations at Miami International Airport, they found that about 60 percent of them had previous criminal records," notes Barry Tarnef, assistant vice president for commercial insurer Chubb & Son of Warren, N.J.

Almost any type of product is vulnerable to theft, but some are more attractive to criminals than others. Those, of course, are the ones that are the easiest to resell: home entertainment equipment, computers, office equipment, fragrances, and jewelry. "The more desirable the brand name, the more the product is at risk for theft," says Brandman. "While criminals can sell off-brand items for 10 to 15 percent of retail, they can usually sell name-brand products for 50 to 70 percent."

Regardless of the kind of products your company makes or distributes, there are several steps that every shipper can take to secure storage facilities and fend off both inside and outside cargo theft. Tarnef, Badolato, and Brandman suggest the following basic guidelines as a good place to start:

• Barriers. The storage facility should be completely surrounded by fencing that is at least eight feet high and has three or more strands of barbed wire. Fence posts should be secured in concrete, and fences should be properly anchored to the posts.

The number of entrances and exits should be limited and carefully controlled. There should be no openings, culverts, tunnels, or manholes leading inside the facility that permit access.

• Lighting. Outdoor lighting should be adequate for both the security and safety of cargo operations. Lights should be directed so they glare into the faces of potential intruders while at the same time providing low levels of light inside for effective guard patrolling. Primary power feeds into the storage facility should be underground or otherwise protected. There should also be a backup generator or alternative power source in case of an outage.
  
• Security equipment. All entrances, exits, and other vulnerable areas should be protected by surveillance cameras. The cameras should have a "pan/tilt" feature so they can view all vulnerable locations within the facility. They should also have a "zoom" feature so that drivers, their vehicles, and intruders can be clearly identified. There should be adequate light throughout the facility so that activity can be effectively captured on tape under all ambient conditions. Camera monitors should be under constant supervision by the storage facility management and/or security personnel. Security camera tapes should be labeled and retained under lock for at least 30 days.
  
• In addition to a camera system, shippers should install electronic key control, intrusion-detection, and access-control systems.
  
• Personnel. All employees of the storage facility should be thoroughly screened prior to employment. No employees should be allowed to park their personal vehicles near the cargo storage and staging areas. Access to certain areas within the facility should be limited to those who need to be there.
  
• Security guards. The facility should be protected "24/7" by qualified security personnel. These individuals, whether company employees or hired from a third-party provider, should go through the same screening process that company employees do.

Guards should be placed in locations where they can monitor operations within the facility but still be secure from attack. They should control vehicle entry and exit, check shipment documentation to ensure validity, require drivers to show personal identification, and periodically check the contents of outbound trucks.

They should also conduct roving patrols of the storage facility, including the fence line and trucks and trailers on the property. Such patrols should be staggered so that no pattern will be apparent to anyone. Guards should also have access to a reliable method of two-way communication and follow a predetermined check-in procedure with their supervisor or dispatcher.

Management should also check guards on a random basis to make sure they are properly performing their jobs.

• Law enforcement. There should be police and fire stations in close enough proximity to the storage facility that enforcement personnel can respond within minutes. Local police and fire department personnel should be made familiar with the facility layout and operation. It's a good idea to request that police include the facility and its environs in their normal patrolling.

"Investigate all losses, and know who to call if and when you experience a problem," urges Badolato. "You should have a close working relationship with local law enforcement."

Physical barriers, security equipment, and sound employment and security practices can indeed go a long way toward preventing cargo theft. Unfortunately, there may still be times when shippers will need to get professional help in ferreting out the source of inside losses.

Sometimes that may require going undercover. Danbee Investigations, for example, places trained undercover professional investigators inside distribution facilities as forklift drivers, dock workers, truckers, and clerical help to gather information on thieves' activities. "There are about three dozen different ways that thefts of this kind occur," says Brandman, "and our people are familiar with all of them."

The supervisors and managers of such operatives often don't know that they are undercover agents, a precaution that prevents their bosses from inadvertently "spilling the beans" to other employees. Another reason for such secrecy is that supervisors and managers are often involved in the thefts themselves, Brandman reports. In one case, his company's operatives assisted in the arrest of a vice president who had access to the computer where inventory was listed. "He was making the inventory 'disappear' by categorizing it as damaged, out of date, or never received," Brandman explains, "then he would steal it."

Danbee also provides toll-free hotlines, which employees can call to report illegal or suspicious activities among their coworkers. Employers offer rewards for tips that result in arrests. "Most clients authorize us to offer $2,500, but some authorize as much as $10,000," Brandman says. Offering rewards is well worth the money, he adds: "In 2000 alone, we recovered almost $2 million in logistics-related losses from theft as a result of hotline activity."

William Atkinson is a freelance writer specializing in ergonomics and occupational safety issues.

Editor's Note: For more information about preventing cargo theft, see "Hands off!" in the February 1999 issue of Logistics Management. For a detailed view of how and why organized crime is targeting the electronics industry for cargo thefts, see "Chip Heists" in the January 2001 issue of Electronic Business (www.eb-mag.com ).