Preventing Shrink and Boosting Supply Chain Sustainability
When we talk about retail shrinkage in the global supply chain, we automatically assume we are referring to malicious theft of top-end consumables—the “A” list merchandise stolen during high-risk, high-stakes heists, possibly even on the high seas. Millions of euros worth of goods go missing from dock warehouses or are hauled from harbour sides, cargo holds, or containers in far-flung locations before they can be shipped into the UK and Europe.
There are plenty of reasons for this assumption, as supply chains have been largely broken in the last three years. Consignments, like the wider population, were locked down, meaning that stock was in the wrong place at the wrong time as seasonal goods missed their all-important time windows and became sitting targets for organised criminal gangs armed with insider information.
The Scale of Cargo Theft
There is ample documented evidence to support this often glamourised view of supply chain theft. For example, 2022 ended with an average of nearly twenty cargo-theft incidents per day and product losses of more than €17 million in just thirty-one days according to data recorded by TAPA EMEA’s Intelligence System (TIS) in December. This data was captured by twenty-eight countries across Europe, the Middle East, and Africa.
The 618 cargo crime reports to the TIS database included twenty-four major incidents involving goods worth €100,000 or more. These highest-value thefts were reported in ten countries and produced an average loss per crime of €535,847, with the biggest single reported crime in December reported in Vojvodinci, Serbia after a truck driver was involved in the theft of unspecified goods valued at €5,535.000.
Goods lost in transit (GLIT) during the final mile or what they refer to in the US as “porch piracy”—the theft of items after they have been delivered to people’s doorsteps—amounted to £33 billion in the year to June 2022, according to IMRG, the UK’s e-commerce association.
Lost Containers and Carriers
But what about the more pedestrian, yet equally important loss of transit carriers—the boxes, pallets, cages, containers, boxes, and totes in which the high-value items are shipped and whose absence would mean the supply chain simply could not function? Here lies a more complex conundrum as no one seems to know, and even fewer seem to care, unless you are a supply chain organisation desperate to fulfil an order. Indeed, we could ask the broader question about this indifference: why is such dependable supply chain packaging treated as totally expendable?
Many of these essential tools are designed as RTPs (returnable transit packaging) and as such are hard-working assets that have a long shelf-life in order to protect the products they are transporting while, at the same time, reduce the carbon footprint of the supply chain.
It is difficult to quantify what the loss of this reusable packaging means, but the materials handling containers or carriers that drive a sustainable circular economy where return, repair, and repatriation of such assets are the more cost-effective solution to replacement of lost items, is mission critical—not just in cash terms, but also supply chain optimisation and environmental sustainability as well as brand reputation.
Unfortunately, only 9 per cent of the global economy is engaged with a circular economy model so the loss of such vital supply chain tools—the humble wooden pallet and the ubiquitous plastic tote (generically known as an ALC or attached lid container) that carry the high-value merchandise to market are even more acutely felt. Without them the global supply chain, which is only as strong as its weakest link, grinds to a halt.
In 2021, academicians at the LIUC University in Cattaneo, Italy were commissioned by the European Pallet Association (EPAL) to publish a “surreal scenario” of whether a world without pallets would stack up.
In the thirty-page report titled A World Without Pallets—Is It Sustainable?, Professor Fabrizio Dallari examined and compared scenarios where the standardised wooden packaging system has created an optimised world of efficiencies and time and financial savings across Italy.
The extrapolated findings measuring efficiencies, including cost and time savings associated with shipping items without sustainable packaging, highlighted that it would be 100 times more expensive than the status quo, costing the global circular economy tens of billions of extra euros each year.
More prosaically, however, these vital assets fall victim to a form of industry miasma. Instead of being looked after, they are more often than not ignored, overlooked, and taken for granted. Rather than malicious intent, the assets are often lost as a result of systemic indifference leading to significant process or compliance failure issues.
The Internet of Things
But even humble pallets and hard-working totes look set to be offered new layers of protection in the big-data age of the Internet of Things (IoT), where the potential for intelligent solutions driven out of seemingly inanimate objects could change the way the supply chain interacts with customer demand.
IPP, one of Europe’s leading pallet-pooling businesses serving the fast-moving consumer goods (FMCG) fresh produce and chilled industries, joined forces in 2021 with Global Tracks, a Dutch business that specialises in the development and provision of IoT solutions for the logistics, automotive, solar, and mobility sectors.
The trial partnership was established to enable the digitalisation of existing business processes to gain greater insight into how IoT expertise can be deployed in the IPP pool and leverage the extensive data provided every time a pallet is used.
Data flows were digitalised to provide intelligence into asset damage, usage, and loss, which in turn made it easier for customers to work with IPP, which supplies more than 50 million sustainable wooden pallets to customers across Western Europe every year.
The so-called “smart pallets” also provided intelligence on damage reduction and how extreme heat and cold storage, environmental conditions that many wooden pallets find themselves in, could impact their efficacy and life span, all of which delivered critical insight into the business’s circular economy model at a time of rocketing global timber costs.
This kind of approach is now being adapted into the wider market for intelligent returnable packaging where several international businesses are utilising tracking technology.
Freight shipping companies using the giant metal containers alluded to earlier are now adapting tracking technology, not just to protect merchandise but to optimise their use across the globe in the wake of the pandemic, when the supply chain was largely incapacitated with stock lying idle in parked containers awaiting shipment and making them vulnerable to theft.
Now, one consumer brand is using tracking technology on its high-end products and the containers they are travelling in, giving it the ability to identify where its products are in transit—whether they are on land or at sea.
Operating via an app, both the LP and logistics team have a data-driven, real-time eyes on the prize solution that can identify problems in transit so they can take immediate remedial law enforcement action, if required.
For example, the technology has the capability to geo-fence all expected stops and it has live, 24-hour monitoring with the ability to contact drivers and brokers en route if a shipment has not moved or deviates from the agreed-upon route.
And in high-risk parts of the world, the tracking technology has the capability to constantly photograph the outside of the shipment for security purposes as well as boasting “open-door” sensor alerts, together with tamper-proof and anti-jamming technology that is integrated into the solution and available to monitor via a dashboard.
With such developments, previously inanimate yet essential supply assets just got “smarter.”
However, there is still a long way to go to bring all supply chain assets to the same level of intelligence, but this starts with getting businesses to change their cultural attitude from dismissive to appreciative of what every vital supply chain asset can deliver, and this goes beyond the desirable items that it may be carrying to the end customer.
According to a report from Roambee, an IoT smart logistics and asset management company that delivers on-demand real-time visibility, tracking, and condition monitoring for goods and assets in transit and in field: “Reusable transport packaging made with durable materials like wood, plastic, or metal and designed for multiple trips in rigorous logistics systems and circular economies represent a major expense to supply chain budgets, yet these ‘assets’ are seldom treated that way. They are rarely tracked and managed with the same level of care and scrutiny afforded to other assets in a company’s book and as it has often been treated like an expendable commodity.”
This is quite easy to understand in busy supply chain eco-systems where, because time is of the essence, such packaging is simply taken for granted and abused, with wooden pallets simply disappearing into a one-way system with no ongoing accountability for them. They often end up on bonfires or at the back of distribution centres (DCs) or in sortation yards of retail stores. They are even upcycled as artisan furniture—coffee tables and bookcases—by the so-called Pinterest generation.
But, as the Roambee report adds, there are often more malign forces at play: “Reusable packaging assets like pallets, crates, and totes also have significant aftermarket and salvage value, which is why its theft is on the rise. There’s a growing market that thrives on the theft and resale of reusables, especially plastic items (like reusable plastic containers) that can be ground down and sold off as scrap. There’s no shortage of unscrupulous elements waiting to capitalise on supply chains that aren’t tracking their reusables.”
Indeed, many totes, even retail branded ones, are often stolen to order and openly re-sold on auction sites or social media platforms, resulting in a whole industry growing up around the use of so-called “repo” (re-possession) companies that monitor such platforms and act as bailiffs in order to repatriate assets on behalf of logistics companies.
In the world of retail itself, there have been incidents where such services are engaged to put a halt to the practice of one high street business ending up funding another’s supply chain purely because stolen or misplaced totes and cages have found their way into a competitor’s premises. For one supermarket, the re-possession company concerned successfully reclaimed a seven-figure sum in lost “returnables.”
DPD and Powerflex Solutions
But this is an expensive and reactive practice, which is why many supply chain organisations have veered more towards more sustainable practices and focus around preventative measures, namely not losing the assets in the first instance. Renewed attention has therefore been given to more robust circular economy methodologies involving tracking and tracing the assets from farm to fork, or from DC to shop floor. In addition, there is greater attention being directed towards 21st century asset design, whether it’s to improve its durability, its trackability, or simply to reduce the overall carbon footprint of the plastic ALC.
DPD UK has been working with Powerflex Solutions, the UK distributor of one of the world’s most intelligent returnable packaging systems, and its design partner the Horen Group, which specialises in the digitalisation of the process of asset protection of returnable and reusable logistics packaging, to deliver an innovative new product that provides integrated tracking technology into a more secure ALC while at the same time dramatically reducing the carbon footprint of the market-leading parcel delivery company.
Although the traditional ALCs have a five-year life span, DPD UK recognised that the existing industry-wide model of high losses was not sustainable from a cost or environmental perspective because it was having to order surplus totes to ensure it met the high demands of its customers and ensure it never ran out of the vital boxes.
The previous model boxes were secured by a series of cable ties, nylon strands that were applied at the point of loading and cut off at the delivery location. Two cable ties could be applied to each tote on its one-way journey from the depot to the hub where their removal was often added to plastic waste in error, thus potentially contaminating a recycling batch that in terms of waste removal tariffs would increase a company’s tax liability. If not added to the plastic waste, they were sent for incineration to generate energy because of DPD’s “zero to landfill” policy.
Paul Herring, waste and resources manager at DPD UK, explained, “Like a lot of businesses we were losing a lot of totes every year. In a busy supply chain environment, many businesses don’t tend to think of their importance until they don’t have them anymore and then there is a real problem.”
The business took a forensic look at its overall process and realised that with the right solution in place it could halve the number of totes it orders every year and also cut its CO2 via an alternative solution and the utilisation of an innovative magnetic re-useable locking device.
DPD UK had already starting using Powerflex’s asset tracking technology to keep tabs on ALCs throughout the supply chain so they would know where they were at any given time, but now approached the business and its design partner, the Horen Group, to come up with a solution that would no longer require the use of single-use cable ties that was not only greener in its long-term application, but also more cost-effective and efficient in terms of labour costs.
“In short, we needed to improve the circularity of the totes, identify where they are reducing labour costs around having to apply and remove the cable tie security,” said Paul.
“We were using £40,000 worth of cable ties per year at a time cost of approximately four seconds per tie application.
“The waste issue was also creating 22 kilograms of CO2 which went against our broader strategy of cutting waste and carbon to meet our net-zero targets and the removal of single-use plastics.”
He added, “We have worked with Powerflex for a number of years, and we knew they were the kind of collaborative business that could innovate with us and create a bespoke offering. It will also remove a staggering eight tonnes of cable ties used by the company every year—ties that could not be used again.”
The Powerflex/Horen solution, an ALC called the MagnaTote, was introduced in less than ten weeks—from design to tooling and manufacture—and eliminated the cable tie issue, which helped DPD save £2 million in labour costs overnight.
The MagnaTote, with its magnetic locking device and unique metal backbone for additional rigidity in the supply chain, provides a cost-effective alternative that is robust and secure as well as fully traceable, utilising Powerflex’s concealed asset tracker and management software.
Set to “ping” between one and four times per day, combined with the average five-year life of the MagnaTote, means it provides a cost-effective alternative that is not only difficult to lose but allows DPD UK to re-deploy its colleagues to focus on more frontline priorities.
“The supply chain has been under increasing recruitment pressure as everyone is short-staffed,” said David Turner, director of innovation at Powerflex. “By removing this labour-intensive process, it allows better colleague deployment and greater waste reduction. It also has other softer benefits in terms of reduced health and safety risks at the other end of the supply chain, as removing the ties often resulted in sharp injuries. It becomes a closed-loop solution that means that fewer ALCs and their contents are lost or stolen,” he added.
Travis Teague, director of global sales for Horen, said, “We listened to the problem that DPD UK had in terms of the need to remove single-use plastic ties from the security process and, working with Powerflex, were able to quickly come up with this innovative, intelligent, and protected design.”
He added, “Both Powerflex and we were rewarded with a long-term contract to support the business going forward.”
Retailers and logistics providers are at long last reassessing their priorities, moving from the reactive to the proactive when it comes to protecting their vital assets that have up until recently suffered from a Cinderella syndrome, in that they have been dismissed and forgotten—although it is they that perform the magic that moves the supply chain along. Focus on protection of those returnable containers, cages, boxes, and totes only strengthens the links in that supply chain and can help reduce the overall business impact on the environment. In short, they are an asset to the business.