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New opportunities for crime in the e-tail supply chain
The UK home delivery market was predicted to grow by around 80% between 2000 and 2005 with much of this growth fuelled by the expansion of online shopping. As the relative importance of distribution to the home was set to increase, greater attention had to be paid to the risk of theft in the related delivery channels. Mail order companies and parcel carriers have long experience of delivering to the home and typically deploy a range of established security measures. In the previous few years, however, a new generation of ‘etailers’ and ‘e-fulfilment companies’ had entered the market, some of whom were offering radically different ‘solutions’ to the problem of delivering to the home, particularly when there was no-one present (i.e. unattended delivery). This study examined the incidence of theft in existing home delivery channels, assessed the security risks associated with the new forms of ‘e-ulfilment’ and reviewed measures that companies can take to reduce the level of ‘shrinkage’ in the supply chain.
No general data were available on the level of theft in home delivery channels. Although companies record stock losses, it was difficult to determine how much was actually stolen and at which point in the supply chain. In the absence of this information, it was not possible to compare the risk of theft in home delivery and conventional retail channels. It was likely that the latter risk was significantly lower, particularly as shop-lifting by the public accounted for around 52% of the theft in shop-based retailing. The corresponding ‘consumer’ crime in the home delivery channel is fraudulent denial of receiving the goods, which, by comparison, was quite a rare occurrence.
The study traces the incidence of theft along existing home delivery channels extending from the point at which the customer’s order penetrates the supply chain. Of the seven stages in most home distribution operations, the most vulnerable appeared to be the order picking and vehicle loading operations at warehouses, where rogue employees were by far the main culprits, and local van deliveries, on which it is primarily outsiders who steal products, often taking advantage of drivers carelessly leaving their vehicles unlocked.
The two most critical determinants of security on the last link in the home delivery channel were whether there is anyone at home to receive the goods and what methods of unattended delivery (if any) are employed. Unattended deliveries were classified into five categories: unsecured (’doorstepping’), home access systems, reception box solutions, use of collection points and local collection and delivery services. Each of these options was outlined and their security risks assessed. These options differ in the balance that they strike between security, cost and convenience. Few companies subjected the trade-off between these three criteria to detailed analysis. There was widespread evidence of companies sacrificing security to increase the productivity of the delivery operation and / or increase customer convenience. More rigorous analysis of these trade-offs was required, particularly in the evaluation of the new fulfilment methods. Trials were underway to assess the effectiveness of these methods. Their practical application was still too limited and recent to make a realistic evaluation of the crime risks.
The report outlined six ways in which the risk of theft in home delivery channels could be reduced. The main technologies to be exploited were the tracking of vehicles, using both GPS and GSM, and the tracking and tracing of products and packages using RFID or ‘smart labels’. Very few vehicles engaged in home delivery operations had tracking devices on-board. As thefts of and from trunk vehicles were very rare, tracking was considered to yield only very minor security benefits at the upper levels of the supply chain. The security gains would be much greater at the local delivery level, though were still not regarded as being large enough to justify the necessary investment. Companies had already achieved substantial reductions in loss rates through the use of bar-coding. Within parcel and mail order operations scanning was generally confined to packages, making it possible for staff to steal individual products from within these packages. Tagging of individual products, ideally at the points of production or packaging, would significantly improve security. Given the rate at which the unit price of RFID tags was falling, this was likely to be a medium to long term development.
The proliferation of track and trace systems was making the home delivery supply chain much more ‘transparent’ and furnishing security staff with huge amounts of data on which they can perform ‘crime pattern analysis’. New CPA software was being developed to help reveal patterns in the occurrence of theft and detect criminal behaviour among employees and customers. Tighter vetting of employees, more rigorous proof of delivery (POD) systems, possibly involving the use of handheld electronic devices, and greater use of anonymous packaging could also significantly enhance the level of security.
The study concluded with a series of recommendations for government, companies and trade associations. It exhorted government, inter alia, to collect more data on the level and nature of theft in home delivery channels, make it easier for companies to check the criminal records of job applicants and review the law relating to the transfer of liability for goods distributed directly to the home. It also recommended the development of a series of industry-led initiatives to enable companies to benchmark their security operations, establish best practice in this field and provide guidance, particularly to new entrants to the home delivery market, on minimum standards of crime-prevention and how they could be attained.
New systems of unattended delivery, particularly involving the use of home reception boxes, should be subjected to ‘burglary’ tests and certification schemes used to approve those meeting specified security standards. Companies involved in the physical distribution of goods to the home were encouraged to:
conduct more thorough analyses of the trade-offs between security, distribution costs and customer convenience
make greater use of anonymous packaging
rationalise packaging to ensure that smaller parcels can fit through letter boxes and be distributed through the postal network
assess the security benefits and overall cost-effectiveness of replacing barcodes with RFID tags
tighten proof-of-delivery (POD) systems within home delivery channels
make greater use of ‘crime pattern analysis’ to disaggregate stock losses by activity, route, location, employee and customer improve the security of small vans through the use of ‘slam door’ locks, alarm systems, vehicle tracking and electronic driver identification systems.
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