How US$100 Billion in Supply Chain Goods Disappear Each Year

February 27, 2024
By Melanie Stern

Amassing the number of goods flowing within supply chains can be perplexing — an estimated US$22 trillion in the global trade market. In this vastness, waste remains.

Adhesive manufacturing company Avery Dennison reported, “Eight percent of stock is discarded as ‘waste’ annually, due to expiry or overproduction, equating to $163 billion of goods.”

Theft is another harbinger of lost goods. Verisk company CargoNet, a logistics and freight forwarding ERP software solutions provider, reported 2023 incidents of theft increased more than 57 percent year-to-year, with stolen goods leading to nearly $130 million in recorded losses. As cargo theft reporting is not mandatory, CargoNet stated that the actual amount of loss is likely higher.

Processes and technologies that provide end to end visibility and transparency are only part of the solution. Without proper context and recourse capabilities, issues can fester.

Awareness Is First

Achieving the principles of visibility may differ from business to business, as its definition is often misconstrued, misunderstood and misused, says Richie Daigle, enterprise account executive at Boston-based Tive, a real-time supply chain visibility solutions provider for shipping, logistics and retail enterprises. He refers to visibility within supply chains as an “overused word with too many definitions,” and adds that a more suitable word might be “awareness.”

Daigle suggests supply management professionals regularly audit the level of visibility or awareness across their entire supply chain. “Increased awareness in the transportation sector can lead to quicker actions taken, making the difference between freight’s partial or full on-time arrival,” he says, adding that technologies are only as strong as their weakest link.

Dissecting the primary links within a supply chain include identifying the source(s) of information, the software engaged making the information easily digestible and the people designated to determine how to use the information and take immediate action. “A customer may use our trackers for 24/7 monitoring and in conjunction with a freight security company, when additional services are warranted,” Daigle says.

By using reliable trackers, freight can be monitored in real-time at every moment — essential to temperature-sensitive and biomedical materials or goods that carry a heightened security risk. With the recent existential increase in cargo theft, successful shipping and delivery cannot be left to chance.

Real-Time Action, Instead

Awareness brings the benefits of knowledge, assisting in go-to decision-making toward cargo loss mitigation before theft occurs. Daigle cites the importance of having a “real-time action plan” when supply chain integrity falls through the security cracks and a breach occurs.

“Data provides the details and insights needed to identify and help solve the problems shaping supply chain environments, but the type of goods and the associated circumstances involved dictate different recommended points for remediation,” he says.

For cargo, Daigle says receiving alerts when freight enters, exits or stops within specific geofenced areas can deliver the first indication that a load is being targeted. For example, “real time awareness of when and where doors to a trailer are opened can be the first domino in a chain of events leading to recovered stolen freight,” he says.

Shipments coming from extensive distances or requiring longer lead times can increase supply chain risks in theft and instability from geopolitical stressors. The Red Sea crisis is pushing the total length of carrier hauls higher, Daigle says: “Intermediaries and shippers have to scramble and sort out new routes for moving freight, posing an even greater challenge to cold chain as longer than expected transit raises the chance of compromising cargo on temperature-sensitive excursions.” He cautions that when winter sets in and the seas get dangerous, routing freight around Africa will not be an option.

Raising awareness may not always be enough to change the uncontrollable inevitable, but it can empower people to enable risk aversion and real-time action within minutes, avoiding freight disruption, he says.

Evading Hackers and Thieves

Multinational supply chains are especially vulnerable to cyber intrusion, as perpetrators often originate these crimes overseas. “Freight theft is expected to get worse as the year continues,” Daigle says. “January 2024 numbers were far greater than the stats from 12 months earlier and today’s numbers are changing quickly making supply chains, their systems, and their risks a moving target.”

Cyber criminals follow the development of Nextgen security technologies increasing their ability to penetrate new systems, no matter the complexity. According to Tive, myriad industry experts, such as pharma and consumer electronics, agree that every shipment load must include a GPS tracking device to help ensure awareness, though more in-depth protocol is advisable.

“Companies that move an assortment of freight should consider building a visibility tech stack, interweaving various visibility technologies together identifying redundancies that bring about reliance and efficiencies,” he says.

Visibility technologies can be varied and applied to different freight according to their associated level of sensitivity or value. A tracking app may be adequate when tracking the driver of a specific shipment. In other instances, Daigle recommends the use of an Internet of Things (IoT) device programmed with redundancies to track locations and sensors that follow conditions such as temperature, light and shock.

“A good visibility tech stack can match the right visibility tech to the freight type and use APIs and webhooks to visualize all shipments in one system,” he says. The recommended steps to begin the process: (1) audit systems and processes to locate common weak links, including ineffective security standard operating procedures (SOPs), (2) engage motor carrier (MC) number checks before booking freight and (3) deploy GPS-enabled devices for tracking high value and sensitive loads.

“Basic warehouse security methodology should include, at minimum, up-to-date SOPs put into practice, having copies of every driver’s license, and verifying MC numbers and license numbers before freight moves,” Daigle says.

Recycling and Reuse

Lost goods can impact the health, safety and welfare of intended and unintended consumers. Product found damaged or misappropriated due to theft can generate environmental hazards, food scarcity, health risks and added costs to businesses.

Well-intentioned initiatives toward putting these products to use can fall flat due to regulation and time constraints. As one might imagine, the regulations around pharma can be prohibitive, “requiring entire loads be discarded immediately in response to any notable temperature excursion or damage,” Daigle says.

Damaged food may be rejected by grocery stores, he says, but there is an ecosystem of secondary and tertiary markets developed to repurpose such products while discarding what is unused.

As billions of dollars in essential goods continue to disappear, finding and securing them requires a commitment to resolve, awareness and the people to maneuver change.

(Photo credit: Getty Images/Holydude)

About the Author

Melanie Stern

About the Author

Melanie Stern is Manager, Communications at Institute for Supply Management®.