Reprinted from TRANSPORTATION & DISTRIBUTION, February, 2003

Theft Prevention and More
DC operators and security specialists offer insights on how to improve security
and reduce losses.

Before the attacks on the World Trade Center and Pentagon, the overwhelming security issue was collusion theft. "One dishonest employee, in partnership with a dishonest truck driver, can divert one pallet at a time and no electronic security system can detect it," claims consultant Kenneth B. Ackerman, president, Ackerman Co."But post 9/11, people are worried about other things we never dreamed of. It's still so new none of us know how to deal with it."

In this new environment, the biggest change in procedures Ed Kitt has seen involves limiting facility access. The regional vice president-operations with DSC Logistics notes there's also been increased emphasis on understanding procedures for handling emergency issues, most notably powdery substances in trailers or on product which are out of the ordinary.

Wake Up to Reality
"9/11 was a wakeup signal," agrees Barry Brandman, president of Danbee Investigations, a company that does audits, consulting, and investigations. As security has expanded its role to protecting from acts of terrorism, sabotage, contamination, or smuggling, Brandman has seen a surge in the interest of top executives in what the firm is doing to protect assets and personnel. "Companies are upgrading prevention proactively," he reports, "and budgeting resources to do it. No company wants to be responsible for inadvertently aiding a hostile government or terrorist organization."

At DSC Logistics, security has been tightened within the operations that handle high valued products, says Michael Weinstock, vice president, regional operations with the third-party logistics provider. "We're using extra patrols, tighter employee supervision, and increased random searches to ensure accuracy of inventory. We have stricter procedures for tendering and receiving shipments and more stringent physical trailer inspections." Weinstock points out, within DSC and its customers, top management has made security a top priority.

With a greater priority on security, many firms are contracting with companies like Danbee Investigations to do vulnerability assessments—in-depth reviews of policies, procedures, manpower, and equipment used to protect assets.

In spite of the heightened awareness of management as to the importance of security, the greatest risk factor continues to be shrinkage of product, often from collusion. At DSC Logistics, cameras monitor dock areas, and there must be management presence on the floor at all times. "That visibility helps thwart collusion between fork-lift operations and truck drivers," says DSC's Kitt.

When Brandman's firm conducted an independent assessment of another third party's strengths and weaknesses, he found they were spending most of their budget on uniformed guard services which was ineffective at protecting from theft or collusion. "We revamped the guards' duties and supplemented with security technology. We made the guards more effective yet saved the company $300,000 per year," claims Brandman.

In an audit of another company, Brandman's team found high inventory shrinkage numbers compared to other companies in the same industry. He installed an anonymous hotline for employees to report illegal activity (using a code number so they can even be rewarded anonymously). Eventually, an honest employee reported observing three dock workers on his shift stealing portions of shipments during the run between buildings. They were subsequently caught in the act of transferring goods to a private van.

At the same company, covert camera equipment monitoring dock activity detected an employee illegally removing product when a department was dormant and the alarm system was turned off.

Benchmark Shrinkage
The old adage is: "Whatever gets measured is what gets managed." So clarity with respect to goals is essential to measuring their performance and achievement—inventory accuracy, order accuracy, on-time delivery, reducing inventory carry costs and so on. Thus the CIO needs to support not just operations but the measurement of operations. This requires the ability to capture, report and analyze this data so it is consistent across the enterprise.

Management had attributed all those losses to errors. Brandman, who works with many companies in many industries, has a feel for numbers that are unacceptable. In addition to identifying areas of weakness, "we bring in best practices," states Brandman. But seldom is that the end of the relationship.

"Once we do a vulnerability assessment and redesign an asset protection program, companies often ask us to come back later and do a compliance assessment," he adds. "As time goes by, employees tend to become less diligent in implementing safeguards or adhering to established procedures and policies." To uncover these lapses, his company depends on unannounced audits.

At Saddle Creek Corp., Ernie Harben, manager training and loss prevention, does his own unannounced security audits to ensure security policies and procedures get due attention. He'd better not find any lapses because the company has an open-door policy that allows customers to do the same unannounced audits.

To demonstrate the effectiveness of surprise visits, as one of Brandman's auditors compared goods on a customer's dock to orders being loaded, he found 20 extra cases of product with no legitimate explanation. He also found the policies and procedures to prevent such miscounts were not being followed. For example, when an employee left the company, policy dictated his/her access card be voided within 30 minutes whether returned or not. The auditor found there was often a three to four day gap before the card was voided, permitting potential unauthorized access.

While procedures had been diluted, no one was aware it was not working as designed. Brandman notes unannounced audits identify these security deficiencies. "In the normal course of business, the level of diligence is only as strong as how accountable people are to policies and procedures," he adds. "When top management is involved, it's easier to allocate budge to security processes. When high level executives commit to protection, it's easer to get everyone else involved. Some companies even tie loss numbers to the annual review process. You have to make it in the best interest of managers, financially, to support security policies and procedures. When you tie good loss scores to management's annual bonus, shrinkage numbers dramatically improve."

Let Technology Lend a Hand
Some companies are making use of the latest technology to improve security accountability."Technology allows us to time stamp all product transactions with a personal ownership fingerprint that enhances awareness and accountability within the operations environment," says Kevin Lacey, group general manager with DSC Logistics. "Our track-and-trace capability significantly closes the gap between a loss and awareness of that loss, thus accelerating investigation responsiveness. While the latter is purely a reactive device, the speed with which we do it acts to preempt improper behavior."

New technology tools also enhance the investigative process. For example, to make sure the right driver picks up a shipment, Brandman's team set up a procedure where the shipper requires carriers to submit information in advance electronically—driver name, estimated time of arrival, and a transaction number that only the trucking company and client have. If the driver doesn't have the transaction number, the shipper doesn't release the container. In addition, all drivers are directed to the shipping department where a digital video records their image. If there is a problem, the police have a clear photo of the driver.

In the warehouse, Brandman's state-of-the-art tools include digital video equipment. He claims these systems offer considerably better clarity of image than previous systems. Even better, they send the image directly to a computer so it can be accessed remotely. And the system can be event driven to limit the need for personnel sitting around watching images of an empty warehouse.

When a client with one of these systems came up six pallets short, the image clarity allowed them to count pallets for each shipment in the time periodand zero in on the short delivery. "We emailed images of the short order being delivered and signed for. With such accurate documentation, the trucking company credited the client for the missing pallets; the client banned the driver and fired the receiver who signed for the load," states Brandman.

Remote dial-up means Brandman's people can look at a client's video system from 3,000 miles away or companies can log on and view any of their facilities from their desktop or laptop.

Systems That Work
The first line of defense in a Saddle Creek facility is the photo identity card. No ID card, no admittance through doors that are electronically locked and automatically closed. Doors blocked open are a breach of policy and a serious no-no, notes Harben.

Most Saddle Creek warehouses have fenced and gated parking areas with strict rules for cargo and trailers allowed on the lots. Strategically placed barricades flow outbound traffic to the guard house where those trailers and containers are routinely checked for locks and seals when they leave the lot.

Saddle Creek trailers have a large corporate logo painted on the outside and a global positioning system (GPS) device on the inside. "For several years, we've used Terrion, a GPS system that can tell where trailers are," says Harben. "We use it in all high-value loads and place it at random in other trailers."

Saddle Creek experimented with satellite communications systems and found what works best for them is a combination of cell phones for the drivers and the Terrion GPS system. "The Terrion system doesn't require action on the part of the driver," notes Harben.

When parked on the lot, high-value loads are required to use a Glad Hand lock in the pneumatic brake connectors and a pin wheel lock on the fifth wheel. Inside the warehouses, employees do daily physical inventory of high value product if requested by customers.

At DSC Logistics, our most effective solutions to risks include a wide variety of proactive and reactive activities combining employee recruitment and screening, training, employee awareness, and management visibility within operational areas," says Kevin Lacey, group general manager with DSC Logistics. "Sound yard control practices combined with disciplined cycle counting and inventory processes also provide a strong measure of security against product loss."

If theft or collusion slips through all the other safeguards, Saddle Creek depends on its employees to catch a thief. The company installed its own internal ethics hotline for employees to anonymously report unethical behavior.

As these trying times increase awareness of vulnerability, security benefits from the added attention and resources.

View Customs as an Ally
Post 9/11, there is more of a working relationship between government and industry to enhance security, says Barry Brandman, president of Danbee Investigations. Customs' Trade Partnership Against Terrorism (C-TPAT) has US Customs working with industry to upgrade security in the supply chain and balance enhanced security with efficient facilitation of goods brought into the US. The idea is to improve security but not have it so oppressive companies can't operate.

"If Customs inspected 50% of containers, the financial implications alone would be devastating," claims Brandman. Finished goods would not arrive in a timely manner. Currently, Customs only physically inspects about 3% of containers—mainly due to limited resources but also because of the negative effect on timeliness, according to Brandman. While C-TPAT is designed to dramatically reduce the odds of weapons of mass destruction being imported into the US, it also minimizes the risk of goods being lost to theft. C-TPAT includes internal security assessments, a high level of screening, policies on locking and sealing, and safeguards against insecure areas where goods are held and against unauthorized people finding out when a shipment will move.
© Transportation & Distribution, February 2003. All rights reserved.

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