The never-ending and often frustrating battle to reduce cargo theft in the United States has been joined.
On Jan. 31, an initiative called CargoNet was unveiled, promising a better mousetrap to combat a growing problem that costs American business anywhere from $2 billion to $30 billion a year. CargoNet is the brainchild of ISO/Verisk Analytics, a Jersey City, N.J.-based risk assessment specialist that says it brings enough strengths to the table to finally make a dent in cargo theft.
ISO boasts one of the world's largest databases of insurance claims, housing approximately 670 million claims records. ISO says its database receives over 50 million new claims a year and records 20 million annual searches by insurance companies and law enforcement. Virtually all cargo insurers are already ISO members, and large insurers like the Chubb Group, Allianz, and The Hanover Insurance Co. are charter members of CargoNet. The insurance industry and ISO are footing the bill for CargoNet's startup.
ISO says it enjoys a strong relationship with law enforcement through its ties with the National Insurance Crime Bureau, a non-profit organization that works with insurers and police departments to identify, detect, and prosecute insurance criminals. ISO adds that it has a proven track record in developing industry data-sharing solutions. This will be a key element in the success of CargoNet because shippers have historically been reluctant to share a great deal of data about stolen goods with insurers and law enforcement.
By merging these capabilities, CargoNet executives believe they will bring uniformity to the historically chaotic process of disseminating and sharing theft data among cargo owners, insurers, and law enforcement. "All of the information now exists, but because it's managed in a fragmented fashion, it gives thieves too much lead time," says Maurizio Scrofani, CargoNet's managing director.
LG Electronics USA, a unit of the Korean conglomerate that manufactures and distributes high-value electronics, is an avid supporter of CargoNet and is advising its carriers to get on board, according to Robert Auld, the division's manager of transportation/cargo security/C-TPAT. Auld says CargoNet's infrastructure will enable the timely and relevant exchange of data, but only to the levels that shippers are comfortable with. "We, like many shippers, are very careful about the information we share," he says.
Auld says cargo theft costs LG millions of dollars a year. The company doesn't produce in the United States but operates seven distribution centers in the country. The pressure points for theft, he says, are at the DCs and at customer locations where trailers are pilfered before they unload or are stolen while en route to the locations.
The problem got so bad, Auld says, that the company removed all signage at its buildings so as not to call attention to itself and attract potential thieves.
Billion dollar problem
Cargo theft runs the gamut from ordinary hoodlums stealing goods from a parked trailer at a truck stop to sophisticated, well-financed, and organized groups heisting entire trailer loads. The latter presents by far the biggest headache for the supply chain, experts say. Unless the goods can be recovered within 90 minutes after their theft, the chances of recovery are virtually nil because by then, the merchandise has been transferred to another vehicle or warehouse and goes undetected, according to experts.
In 2006, the FBI released data showing that as much as $30 billion worth of goods are stolen in the United States each year. The FBI estimates are still relied upon by those in the business of stopping or reducing cargo theft. Assuming a truck trailer is carrying $100,000 worth of goods, that high-end figure of $30 billion translates into 822 truckloads at risk each day, according to CargoNet estimates.
In 2009, 859 thefts of full truckloads were reported, up 12 percent from thefts reported in 2008, according to FreightWatch International, an Austin, Texas-based research and consulting firm. In its late January analysis, FreightWatch noted that cargo theft reporting remains "sporadic," indicating that the actual reported numbers may understate the problem.