WHAT YOU NEED TO KNOW: HANDLING SPECIALTY & HIGH VALUE INVENTORY

B Y : A N G E L A C A R V E R

How to Differentiate High Value Cargo• The Federal Motor Carrier and Safety Administration identifies high

value cargo as any item whose value exceeds $100 per pound.

• The most common types of high value cargo handled by supplychain operations include:– Precious metals– Semi precious stones– Electronics– Documents– Life science/pharmaceuticals

High Value Cargo & Increased Theft Risks

• Specialty inventory and high value cargo is more susceptible to riskthan ever due to consumers’ increasing demand for luxury goods and longer supply chains creating added “touch points”.

• Cargo shrinkage rates increased by 24% in Europe alone according tothe Inbound Logistics article referencing the 2013 Global Cargo TheftAssessment.

• These increases result in tens of billions of dollars in lost inventory each year.

Inventory Spoilage• Many supply chain operators do not yet have the technology in place

to track product expiration dates efficiently and accurately.

• When these data points are not recorded, the likelihood for inventoryspoilage is significantly increased, causing additional inventory loss.

• With high value inventory, each lost inventory unit can mean hundreds or thousands of lost dollars.

Additional Labor Requirements• Supply chain businesses handling high value inventory also must

consider the cost implications of additional labor needed to protect their facilities and inventory in transit.

• These costs will vary in each geographical region as the threats and risks differ. Examples of additional security labor costs include dedicated security guards, staff for increased cycle count activity and IT staff to monitor tracking technologies such as RFID and GPS.

Solutions to HVCHandling Issues

Carrier Credential Tracking• Because many supply chains are utilizing one-off transport services

to keep shipping costs low an additional layer of SCM risk is created. False driver credentials are becoming increasingly common and allow thieves to drive off with entire truckloads of high value cargo.

• To identify these risks before it is too late, many supply chain operators are implementing carrier credential tracking technologies. These tools collect carrier credentials in advance so that shippers can control exactly who can enter and leave the property, reducing potential shrinkage risks.

• Developing long lasting partnerships with transportation providers will also help to reduce risk related to fraudulent carrier credentials -immediate cost savings is not the only factor to be considered.

Theft Protection/Prevention Agencies• Both public and private businesses have taken action to prevent

cargo theft by creating theft prevention groups who develop best practices, monitor potential threats and develop standards for safe high value cargo handling.

• Some of the top theft prevention and protection agencies include:– Customs-Trade Partnership Against Terrorism (C-TPAT)– Pharmaceutical Cargo Security Coalition– Transported Asset Protection Association (TAPA)

Inventory Audits• Completing regular inventory audits/cycle counts is one way

warehouse operators are reducing internal inventory loss due to misplacement, damage and theft.

• By regularly reviewing inventory levels and condition warehouse managers can more quickly identify and resolve inventory discrepancies. If the issue is inventory theft, performing regular counts can narrow the timeline in which the incident occurred, making suspect staff easier to identify.

Route Planning & Monitoring• Automating route planning can also help to reduce the risk of theft.

Transportation management software can select routes to minimize travel time or avoid certain geographic areas. Drivers and trucks can then be tracked as they travel along their designated route identifying any unauthorized changes, stops or breaks.

• Operators in the warehouse can be notified in real time of any suspicious activity and alert the driver or authorities.

• This data can also be stored and reported on to identify any patterns or areas where improvement is possible.

Reduce Inventory “Touches”• In an effort to reduce the risk of handling high value inventory many

supply chains have attempted to minimize inventory “touches”. These touches can be anything from hands on the inventory in a warehouse to the number of facilities it travels through before reaching the final customer.

• Direct-to-consumer fulfillment (where applicable) can help to reduce touches by eliminating wholesalers and distribution centers entirely and shipping directly to customers. This can not only help to reduce the risk associated with handling and delivery, but the cost.

• Moving distribution centers to more strategic regions has also helpedto reduce touches and improve delivery speeds.

Recommended SCM Technology• A variety of supply chain management technologies are available to

automate and simplify many of these solutions. Eliminating outdated paper-based processes can help to improve inventory visibility and create a detailed audit trail needed for both internal tracking and regulatory compliance.

• The top tools recommended for managing high value inventory/specialty items each play an important role in the handling/shipping process:

– Warehouse management software (WMS) – creates full audit trail, staff can viewinventory data in real time

– Transportation Management software (TMS) – plan delivery routes and monitor driver activity

– Radio frequency identification devices (RFID) – helps to control costs of locating HVC at any stage in the supply chain through real time tracking

– Automated data collection devices (ADC) – collects staff activity data in real-time and transfers data to WMS database to create a single, holistic view

Conclusion• Managing high value inventory is a complex and costly business, but

with the proper tools and techniques the risk can be effectively managed.

• Take advantage of the resources available through theft protectionand prevention organizations to keep your customer inventory andstaff safe.

• There is no measure too extreme to keep your high value inventory 3PL, warehouse or distribution center safe.