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Scott Cornell is transportation lead and crime and theft specialist at Travelers. has more than 25 years of experience in the transportation industry. He helped create Travelers' Special Investigative Group, the insurance industry's first and only dedicated cargo theft unit, and is the vice chair of the Transported Asset Protection Association (TAPA Americas) board, leading its law enforcement committee.
David Maloney, Editorial Director, DC Velocity 00:00
How serious is the problem of cargo theft? Ports continue to see record volumes. And a new type of insurance for truck fleets.
Pull up a chair and join us as the editors of DC Velocity discuss these stories, as well as news and supply chain trends, on this week's Logistics Matters podcast. Hi, I'm Dave Maloney. I'm the group editorial director at DC Velocity. Welcome.
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As usual, our DC Velocity senior editors Ben Ames and Victoria Kickham will be along to provide their insight into the top stories of this week. But to begin today, cargo theft is on the rise, with goods stolen both from distribution centers and while they are in transit. So how serious is the problem, and what can you do to proactively prevent cargo theft? To answer those questions, I spoke this week to Scott Cornell, transportation lead and crime and theft specialist at Travelers. Here is our conversation.
Joining me now is Scott Cornell, the transportation lead and crime and theft specialist at Travelers. Welcome, Scott. Good to have you with us on Logistics Matters.
Scott Cornell, Transportation Lead and Crime and Theft Specialist, Travelers 01:39
Thanks for having us today.
David Maloney, Editorial Director, DC Velocity 01:41
Travelers has a special investigative unit. Can you talk about the kind of work that you do there?
Scott Cornell, Transportation Lead and Crime and Theft Specialist, Travelers 01:47
Well, I lead transportation, and we have a Special investigations group. I used to be with that team. Our unit, the special investigations group, is unique to Travelers. It is a group of cargo-theft investigators on call 24/7, 365 for our clients in order to respond when they have a cargo theft and help them recover whatever has been stolen. We started that unit in 2005. It's been tremendously successful. We started really tracking their impact somewhere around 2011, and just since that time, they've recovered over $65 million in stolen goods for our clients.
David Maloney, Editorial Director, DC Velocity 02:29
That's quite a bit. What's the typical rate of recovery for stolen goods? Is that something that you have a figure for?
Scott Cornell, Transportation Lead and Crime and Theft Specialist, Travelers 02:35
There's really not a definitive number out there in the industry. I remember some law enforcement teams back, you know, sometime between probably 2007, 2011 used to track their recovery number when they were dedicated to cargo theft. I haven't seen any industry numbers out there that provide an average recovery rate anymore.
David Maloney, Editorial Director, DC Velocity 02:58
So let's start at the basics. How big of a problem is cargo theft within the supply chain industry?
Scott Cornell, Transportation Lead and Crime and Theft Specialist, Travelers 03:04
It's a significant problem, and quite often, you can see it addressed as the number-two cause of loss out there. And I think that depends on what you're doing, where you're doing it, and what time of year you're doing, right, to be clear on that. In 2020, we saw significant increases. Year-to-date in 2020, cargo theft was up roughly 16%, according to CargoNet, and they had taken in 1,676 reported incidents in that year. So that was, that marked the first time in several years that CargoNet had seen and reported a significant increase in cargo theft over several years where the trend had been downward. In 2021, we're still seeing higher numbers than we had in 2019, but not quite as what we had—not quite to the level of what we had in 2020. So, it's come down some, but it's not coming down all the way, and one of the things we've been saying lately is "Don't get comfortable yet." So, it's a significant impact on the supply chain, and it's something that I think there's a pretty good amount of awareness out there on, and we're seeing more people take notice of.
David Maloney, Editorial Director, DC Velocity 04:20
So, when we're talking about cargo theft, is it products that are stolen off of trucks, or are they being stolen within warehouses or other facilities, or somewhere else in transit?
Scott Cornell, Transportation Lead and Crime and Theft Specialist, Travelers 04:31
We talk about two types of cargo theft. We use two categories: One that we call straight theft and one that we call strategic theft. Straight theft is the most common form of cargo theft out there, and that's when the bad guys physically go out and they steal the cargo where it's at, usually taking an entire or a full truckload, sometime—quite often—doing what we call pilferage. Pilferage is the number-one type of straight theft, and that's where they just open the rear doors of the trailer, take a few boxes, maybe a pallet, maybe two pallets, and off they go, and it's significantly harder to investigate because you're not able to track a trailer or a tractor, or, you know, the truck in general. But the more significant impact is when they steal the full trailer load. And that's most often taken either at a truck stop or a parking lot. And then warehouse comes in after that.
David Maloney, Editorial Director, DC Velocity 05:32
Is this an organized type of theft? Is it organized crime that's involved in it? Is it people seeing an opportunity and taking advantage of it?
Scott Cornell, Transportation Lead and Crime and Theft Specialist, Travelers 05:41
It is organized in the true sense of the fact that they are very organized in what they do, but it's probably not, you know, the the most common picture of what people have when when someone uses the term organized crime. They are smaller groups. They tend to be very organized, very knowledgeable about the transportation industry as a whole. They know where freight moves, how it moves, who's moving it. They do a lot of old-school, boots-on-the-ground homework to figure that out, including surveillance on distribution centers, watching what trucks pull in and out, following some of those loads away from those distribution centers. We've seen that significantly. Recently, in California, and Southern California, we've seen a rash of electronic loads targeted over the last, I'd say, six months, and that's the most common M.O. that we're seeing, is those loads are being followed away from distribution centers where they've set up surveillance. So, the groups are organized, they tend to be smaller, and they tend to be regional, meaning, you know, they're, they're operating in California and the surrounding states and they're based in that area and they're—or they're operating out of Florida. And we see groups from Florida will go, you know, pretty far north sometimes. Or they're operating out of the Chicago area, and they'll move a little bit south of Illinois. But they tend to be pretty regional.
David Maloney, Editorial Director, DC Velocity 07:11
But you mentioned that they're regional. Is that because of the geography of where they're at, or just the volume of cargo that moves through those places. For example, are most of the thefts in rural areas, where they're more difficult to track, or is it just the—as I said, the fact that there's just more freight moving in those markets, or around the around the border areas?
Scott Cornell, Transportation Lead and Crime and Theft Specialist, Travelers 07:30
It's probably a little bit of both, but I would say, more so the latter, which is that's where the freight is, and that's where the freight's moving. If you look at the states that are, that lead in cargo theft—California, Texas, Florida, Georgia, New Jersey, Illinois; we've seen some good, significant activity in the Memphis area as well—most of those states have certain things in common. They have a port. In Illinois, you have an inland port with the rail yards, right? But the other ones I mentioned, have large ports, they have dense population, they have the economies, and there's, so there's a lot of freight moving in those areas, and a lot of freight stored in those areas. So, it's easier for them to operate in those regions. They don't have to go far, they don't have to get into those central or upper Midwest states. Now, that's not to say that they don't operate in those states and that we don't see thefts in those states, but the concentration is in those states that we just mentioned.
David Maloney, Editorial Director, DC Velocity 08:30
You mentioned earlier in the conversation about electronics. Are there specific types of products that these theives will go after?
Scott Cornell, Transportation Lead and Crime and Theft Specialist, Travelers 08:37
Roughly 2010, we saw food and beverage take the number-one spot, which was a significant change, and that was also partially generated due to the economic downturn that we experienced in 2008. Prior to 2008, electronics was most frequently the number-one stolen commodity. As we talk about this particular question, the one thing I always say the golden rule is, cargo thieves will steal what they know they can sell. So, roughly 2010 we saw food and beverage take that number-one spot, and, as I mentioned, it had a lot to do with the economics at that time, and it held that spot until 2020. One of the reasons that it held that spot was because, in targeting that commodity, they realized that that's a great commodity for them to steal. It's very hard to trace. The evidence disappears, it's consumed or it goes bad. It's, you know, there's no barcode on a piece of frozen chicken, we always say, things like that. Go forward to 2020, again, we see some significant economic impact and we saw a shift to home goods. And when you really think about it, what we were seeing was a lot of people remodeling their homes, changing their homes, building at home offices, things like that. So, they start to target those commodities. Electronics has recently taken over that number-two spot, and food and beverages slipped into that number-three spot. Long term, I think we'll see food and beverage come back to that number-one spot, but I think for at least a short time, we're going to see those home goods and electronics get hit right now.
David Maloney, Editorial Director, DC Velocity 10:20
Sure. So, bottom line, what can supply chain professionals do to better safeguard their supply chains and make them less vulnerable to cargo theft?
Scott Cornell, Transportation Lead and Crime and Theft Specialist, Travelers 10:30
We always talk about a layered approach with our clients. That same team that we use to investigate or respond when our clients have a cargo theft incident works with our clients proactively to teach them how not to have cargo theft in the first place. And when we do that, we work with them on a layered approach. And that first layer is processing procedures, raising awareness with your drivers, with your staff. I would tell you that the average driver is well aware of this as an issue, but keeping them up to date and current on what's going on is critical. And then teaching them good procedures: park in secure areas, well-lit areas; try not to stage the loads; try not to stage the trailer that's not connected to the tractor. You know, if you're going to stage the load, stage them in the home office lot or the secured lot. When picking up the load, use a red-zone policy, as one example, where the driver is rested, fueled, and all personal needs taken care of before they pick up the load, so that they can pick up and then drive the first 200 to 250 miles without making a stop, which can discourage that issue that we talked about earlier: being followed. And then enhancing that with the second layer, which would be the use of really good high-quality locking devices. High-security rear door locks; kingpin locks, if the trailers not married to the tractor; air cuff locks if the tractor is married to the trailer. And then, the third layer, we talk about technology. Do you want to have covert tracking? How do you want to use that? Are you going to put it in the trailer? Are you going to put it in the cargo itself—or both, to have some redundancy? So, it's a layered approach and really, we feel that if you don't take that layered approach and you don't use all three layers, that none of them really work well on their own.
David Maloney, Editorial Director, DC Velocity 12:24
Right. Some very good advice there. We've been talking to Scott Cornell, transportation lead and crime [and] theft specialist at Travelers, about cargo theft. Scott, thanks very much for being with us today.
Scott Cornell, Transportation Lead and Crime and Theft Specialist, Travelers 12:36
Thank you for having us, David. We really appreciate the time.
David Maloney, Editorial Director, DC Velocity 12:40
Now let's take a look at some of the other supply chain news from the week. We've reported on just how busy U.S. ports are right now, and, Victoria, you wrote about some of the latest statistics of just how much volume ports moved in July. What can you tell us?
Victoria Kickham, Senior Editor, DC Velocity 12:55
That's right, Dave. Yeah, so U.S. ports continued their busy pace in July, with port officials on both coasts reporting strong cargo volume for the month, and continued strong demand as peak shipping season gets underway. Just a couple of examples: the Port of Virginia and Georgia Ports Authority both posted record volume during the month and said that August levels are continuing strong. Both ports are also in the process of ongoing infrastructure updates to help handle the higher volumes, and those improvements are pretty much across the board. They include dredging, rail improvements, equipment upgrades, and the like. On the West Coast, volume continued at a strong clip at the Port of Los Angeles. Cargo volume there was up 4% year over year in July, and it actually marked the port's twelfth straight month of growth following the accelerating consumer momentum that began last summer. It wasn't all rosy news, however. Officials at the Port of L.A. pointed to continued falling export levels. Loaded exports were actually down almost 28% in July, and in a press conference Port of L.A. executive director Gene Seroka said exports have been down 29 of the last 33 months in Los Angeles. He said the situation is spurring many in the industry to work on a national export policy. I'm not sure how that will take shape, but it's certainly something we'll watch. Also, officials at the Port of Oakland said overall volume in July slowed. It dipped about three and a half percent year over year. Exports were down there, as well. I think it was about 4%. The good news there is, though, officials in Oakland said they expect growth to resume as peak shipping season gets fully underway.
David Maloney, Editorial Director, DC Velocity 14:36
Victoria ,what caused the slowdown in Oakland? Are there any other concerns on the horizon?
Victoria Kickham, Senior Editor, DC Velocity 14:41
Yeah. As we've been talking about these last few months, accelerating volume is combining with a host of other factors to cause congestion at ports around the world, and that's leading to delays and contributing to supply chain bottlenecks in many areas. Officials in Oakland said this was a big reason for the dip in volume in July.. Essentially, they'd seen record cargo volume through the port in the first half of the year, and that led to some backups and delays, and those delays, they say, caused some shipping lines to omit some voyages to Oakland. But again, as I say, they're confident those levels will increase as peak shipping season really gets underway here. Looking ahead, the concern is really the need to keep volume flowing through the ports, and officials on both coasts pointed to, you know, infrastructure improvements, as I mentioned earlier, and also to new technology tools as key ways that they're addressing that issue. Another issue that's come up—not specifically in these reports, but it's the issue of labor. That's a big concern. We've talked a lot about the need for employees throughout the supply chain, and the ports are no exception. So, there are a lot of factors affecting this issue.
David Maloney, Editorial Director, DC Velocity 15:49
Yeah, definitely. And we'll continue to track all of that. Thanks, Victoria.
Victoria Kickham, Senior Editor, DC Velocity 15:54
You're welcome.
David Maloney, Editorial Director, DC Velocity 15:55
And Ben, you wrote this week about a new kind of truck fleet insurance. What did you find out?
Ben Ames, Senior News Editor, DC Velocity 16:01
Yeah, I did. We often talk more about technology or business angles than about financing in the magazine, here, but this week, we learned about a startup company that says it has an approach that could help truck fleets save some significant money on one of their rising expenses, which is insurance. Although the trucking sector, as we've reported, has very tight capacity right now, and can therefore charge high prices to shippers, it's still not a very high-margin business. Those profits can get easily eaten up by variables like diesel fuel prices and rising salaries for drivers, since there's an ongoing driver shortage, and for insurance, as we say. In recent years, that's gotten more attention, because some insurance fees have risen steeply because of something the industry calls nuclear verdicts. And those are very large court verdicts against trucking fleets, you know, following the punitive decision by a judge or a jury in cases where maybe an 18-wheeler has an accident with a civilian or a passenger vehicle, say. And in response, of course, the insurance companies have increased their rates to account of something like that. However, this week, Daimler Trucks North America said it is investing in a commercial auto-insurance technology startup that's focused on the trucking sector. This is a three-year-old firm in Chicago called High Definition Vehicle Insurance, and Daimler's backing, [together] with other venture capital, was about $32 million, so pretty significant.
David Maloney, Editorial Director, DC Velocity 17:35
Ben, how is that new firm's approach different from other insurance providers?
Ben Ames, Senior News Editor, DC Velocity 17:40
Right, there are plenty of options out there, of course, but High Definition Vehicle Insurance plans to set its rates based on real-time driver behavior, and they collect that through telematic devices. So, instead of charging an annual fee on a blanket basis, it uses what it calls dynamically priced trucking insurance coverage. And that's related to a bigger trend of collecting more and more data from points throughout the supply chain that we've covered, and more specifically, to the advent, a couple years ago, with the federal mandate for electronic logging devices, or ELDs, in trucks. Those are used specifically to track drivers' hours behind the wheel, but many experts, when the mandate began, said the data could be used in all sorts of new ways. So, this looks like it might be one of those. Daimler said that what they call that quote, unique approach to insurance, brings fleets a new range of technology, data, and service. Right now that new insurance company's product is available just in seven states: Illinois, Indiana, Minnesota, Ohio, Tennessee, Georgia, and Texas, but it said that with the new funding, it plans to expand those to a bigger list. So, we'll see if the approach can maybe help fleets manage those rising costs.
David Maloney, Editorial Director, DC Velocity 18:55
Yeah, certainly will be interesting to follow. Thanks, Ben. We encourage listeners to go to DCVelocity.com for more on these and other supply chain stories. And check out the podcast Notes section for some direct links on the topics that we discussed today. Thanks, Ben and Victoria, for sharing highlights from the news this week.
Ben Ames, Senior News Editor, DC Velocity 19:15
Thanks. Glad to be here.
Victoria Kickham, Senior Editor, DC Velocity 19:16
Yes, glad to be here, Dave. Thank you.
David Maloney, Editorial Director, DC Velocity 19:19
And again, our thanks to Scott Cornell of Travelers for being our guest. We encourage your comment on this topic and our other stories. You can email us at podcast@dcvelocity com.
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