Internet Opens Up Huge Market for Stolen Goods, While Video Cameras Hardly Help, Barry Brandman Says

Theft in distribution is a growing threat in the US, security expert Barry Brandman of Danbee Investigations said during a very interesting presentation last week at the annual Warehouse Education and Research Council (WERC) conference in Ft. Worth.

One recent change fueling the increase: the internet, which now provides a global marketplace where pilfered goods can be sold virtually anonymously, especially on auction sites, Brandman says, whereas in the past stolen merchandise mostly had to be sold locally.

Supply Chain Digest Says... Brandman concluded by noting that some companies seem to think DC theft is only an issue for high value items such as electronics and pharmaceuticals. But they are wrong. What do you say? Click here to send us your comments Click here to see reader feedback

That also means once goods make it outside the DC, the chances of recovering it - or even tracking the source - are very low, Brandman said.

There are a number of different theft scenarios, Brandman said, including individual employees stealing goods on their own, the very common scenario of employees working inside a DC colluding with drivers to steal, and drivers stealing from customers during deliveries.

Brandman cited a recent survey that found 40% of delivery drivers said they had been propositioned about joining in some kind of theft activity - a high number from which certainly some number said Yes.

Very high percentages of distribution companies have some countermeasures such as guards, alarms and video surveillance. But these tools are ineffective, Brandman said. Guards have a limited impact, and alarms are also limited and studies have found they don’t operate correctly a high percentage of the time.

But video may in the end be the most overrated tool, Brandman said, because such systems generate hundreds of hours of video every week - and who had the time or resources to view all that? No one, Brandman says, and employees know that.

Relative to collusion, Brandman cited a recent example in which a second shift supervisor conspired with order pickers to select extra cases that were then loaded on a truck, with a driver also part of the scheme. Text messages were sent by the DC employees relative to what extra cases were on the vehicle.

Brandman offered other interesting examples. In one case, a driver was caught on film in a major city exchanging the stolen goods from the truck on to another vehicle right in the open, even as police drove right by. Brandman said this exchange was performed on the driver’s route, just a few blocks from his last delivery, so that nothing would look amiss from GPS tracking and so-called geo-fencing systems.

Another driver sold some $200,000 of merchandise over a period of time, at a heavy discount to their retail value, so that the value of the goods was probably around $800,000, Brandman said. That is pretty big time.

Brandman also noted that in the case of drivers shorting goods delivered to customers, often in collusion with someone in receiving at the customer, it is possible that the customer could send the shipper an invoice for the value of all the goods that were not delivered.

Brandman also noted what he calls the 10-80-10 rule. 10% of employees are honest and won't steal. 10% are bad guys actively looking for opportunities, and the vast preponderance - 80% - are not inclined to theft but can turn as circumstances develop.

For example, Brandman cited one example where 2-3 DC workers were aware that another employee and a driver were committing theft. When this went on for months and management was doing nothing, so those other employees began to wonder why they shouldn't get on this high money gravy train, and they indeed went over to the dark side.

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Brandman also said that often employees aware of the theft are paid to ignore the activity and keep quiet. The bad 10% in fact often recruit from the middle 80% to help in their schemes, and certainly sometimes financial circumstances or other factors lead an employee that wasn’t inclined to steal to eventually join the activity over time.

What Can Companies Do?

There are no easy answered, Brandman said. A detailed security audit is a good place to start, and these need to involve more than the simple checklists that are often used. The audits should include a true analysis of processes, Brandman said.

Companies should also employ unannounced audits, Brandman said, and the results should be included in the performance reviews of DC managers.

Brandman said it is critical to have some kind of hotline where employees can privately and anonymously report illegal activity. That anonymity is key to getting many employees to call about the theft. There are third-party service companies that can maintain such hot lines for a company, Brandman said, and having the service managed by an outside company might be viewed as less risky to employees, increasing the number of tips.

A company should position such hot lines and other communication activities as promoting a "safe and secure" workplace, Brandman noted.

Human surveillance, including embedding fake employees into a DC, can also be effective if a distributor suspects theft activity is on-going, Brandman added. But if a company takes that step, the number of managers "in the know" about the surveillance should be kept as small as possible to limit intentional and especially unintentional leaks of the program. But Brandman cautioned that such covert surveillance programs usually don’t produce results overnight

"You need to have some patience," Brandman said.

Brandman concluded by noting that some companies seem to think DC theft is only an issue for high value items such as electronics and pharmaceuticals. But they are wrong.

"There is a market for everything," Brandman said, noting a case where low value industrial supplies were being systematically stolen.

Do you see DC theft levels increasing? What do you think of Brandman's observations and recommendations? What would you added? Let us know your thoughts at the Feedback section below or the link above to send an email.

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