Moving Targets: Contemplating Cargo Theft Amidst US Supply Chain Diversification

An earthquake in Japan[i], shootings and closed US border crossings in Nuevo Laredo, Mexico[ii], and US-imposed sanctions against Russia.[iii] Every month appears to bring new challenges for global businesses and supply chains. These supply chain challenges will not cease, nor will the targeting of shipments and goods by cargo gangs.

As more companies look to near-source production in the US to hedge against overseas delays and bottlenecks, we believe that they should consider and prepare for a likely shift in where cargo shipments within the US are targeted and stolen. Businesses that take a proactive approach to their supply chain security will be more resilient to cargo disruptions and shifts in where cargo is targeted for theft.

COVID demonstrated the limitations of Just-In-Time manufacturing and a reliance on overseas operations, particularly in China where lockdowns and factory closures have become commonplace amid increases in cases.[iv][v] Existing and future US-imposed trade tariffs and restrictions, along with further fissures in US-China relations[vi][vii] will test China’s attractiveness as a global manufacturing hub.

Considering these challenges, the US and other western governments and companies continue to open, relocate, or explore manufacturing operations in their home countries or in adjacent countries. This is especially true for critical industries such as semiconductors[viii], batteries, and electric vehicles. This drive for more domestic manufacturing will likely continue as US cities offer incentives for residents and businesses to relocate or open factories and offices.[ix][x]

At the same time many US companies continue to open or explore options to open offices in developing technology hubs and second tier cities to attract local talent and appease increasingly mobile workforces.[xi]The US states that experienced the largest population change as a percentage in 2021 compared to the previous year were Arizona, Utah, Idaho, Montana, Texas, Delaware, and South Carolina.[xii]

As US supply chains and workforces adjust to this change, the US could see a shift in where cargo thefts occur. Cargo thefts can range from the elaborate and coordinated to opportunistic.[xiii] Although there was an apparent 15 percent decline in the number of cargo thefts in the US and Canada in 2021 compared to the previous year, they still lead to substantial losses for companies—almost $58 million in 2021.[xiv] This figure is almost certainly higher, as not all thefts and losses are reported, and the data is only from thefts in the US and Canada as identified by one company. California, Texas and Florida combined accounted for around 49 percent of all cargo thefts across the US and Canada in 2021.[xv]

Second tier cities such as Phoenix, Columbus, Salt Lake City, and Charleston have seen population increases during COVID[xvi][xvii]; new manufacturing centers around these locations will also likely spur demand not only for additional goods for new residents, suppliers, and manufacturers, but also new warehouse hubs and storage space. Warehouse hubs around major ports and large cities exist; however, they are becoming increasingly expensive due to land availability.[xviii]

As companies and shippers shift to maintain larger inventories at warehouses and distribution centers to reduce disruptions during bottlenecks, additional storage space will be needed to accommodate the increase in goods. Access and proximity to major cities is still essential; however, the combination of lower land prices, increased customer demand in up-and-coming cities, and revitalized industries will likely lead to a push for additional space around these new locations.

Enterprising criminal groups may take advantage of this development and concentrate efforts around these locations. These cities may be seen by criminal groups as being less risky than known cargo theft hotspots like Los Angeles, New York City and the Port of New Jersey, and Dallas, where specialized law enforcement units are actively engaged in suppressing and disrupting thefts. Increased law enforcement efforts around the Port of Los Angeles in response to the increase in thefts toward the end of 2021 and the beginning of 2022 helped curb the number of thefts but may also have driven criminals to seek out other lucrative areas. [xix][xx][xxi]

Phoenix and Columbus in particular are within growing population centers that have major infrastructure developments (chip manufacturing facilities) that represent long term financial investments for both companies and cities. Large-scale population departures from these areas are less likely due to the substantial investment required in chip manufacturing facilities and the businesses that support these industries, both directly and indirectly. Furthermore, these two cities are along major transportation routes and are within a day’s drive of major port cities—Los Angeles/Long Beach and New Jersey/New York, respectively. 

Transportation and logistics infrastructure may exist around these second-tier cities; however, they may not be fully developed or able to accommodate the increase in shipments over the next few years as industries come online and warehouses open. This in turn could lead more risk taking during peak shipment periods or during future delays at ports from port worker strikes. Logistics and warehousing companies could resort to storing truckloads of goods outside of secure areas or keeping them at rest stops for longer periods to wait out delays. Company perceptions around these second-tier cities being less risky and outside of high-theft geographic areas could factor into the risk-taking calculus. Cargo gangs will likely take advantage of this false sense of security and the belief that smaller cities away from major theft hotspots have fewer dedicated law enforcement resources that can properly investigate and disrupt organized cargo thefts.

As companies shift to support more US domestic manufacturing and workers relocate to smaller second and third tier cities, supply chain disruptions will continue. Holding more product within warehouses and diversifying warehouse and manufacturing locations stateside are prudent measures that will help alleviate disruptions in the future. That being said, manufacturers, shippers, and companies that are exploring options to store—and ship—larger concentrations of goods in these second and third tier cities and along the major highways that connect to these cities should anticipate and account for increases in cargo thefts.

Based on SRG’s expertise and prior engagements in these areas, we believe some of the best ways to adequately counteract such threats is by proactively vetting providers and assessing third party warehouse locations, routing, and shipping contingency plans as new expansions take place. Such steps can help minimize loss and increase situational awareness and visibility to domestic supply chains.

Sources:

[i] Arata Yamamoto, Minyvonne burke, “7.4-magnitude earthquake hits off Fukushima, Japan, killing 4, injuring more than 90”, NBC News, March 16, 2022.

[ii] Maria Verza, “Mexico deports gang leader after shooting”, AP News, March 16, 2022.

[iii] No Author, “Fact Sheet: United States. European Union, and G7 to Announce Further Economic Costs on Russia”, WhiteHouse.gov,March 11, 2022.

[iv] Eamon Barrett, “China’s tech hub Shenzhen locks down 17.5 million residents, closing Apple factories and risking chaos in global supply chain”, Fortune, March 14, 2022.

[v] Naoki Matsuda, “China COVID crackdown closes several factories in industrial hub”, NikkeiAsia, December 14, 2021.

[vi] Xu Jing, Stella Qiu, Gabriel Crossley, “China hopes U.S. will remove tariffs, end sanctions to create conditions for trade”, Reuters,February 9, 2022.

[vii] William Mauldin, “U.S. Looks to Make China Pay for Close Ties to Russia in Ukraine Crisis”, The Wall Street Journal, February 27, 2022.

[viii] No Author, “Statement by President von der Leyen on the European Chips Act”, European Commission, February 8, 2022.

[ix] Megan Cerullo, “Cities in Illinois and Oklahoma are latest to lure remote workers with free land, cash”, CBS News, December 8, 2021.

[x] Reid Wilson, “States dole out mega-subsidies in bid to lure companies”, The Hill, January 28, 2022.

[xi] Katherine Bindley, “Thousands of New Tech Jobs Spring Up Far From Silicon Valley”, The Wall Street Journal, March 9, 2022.

[xii] No Author, “New Vintage 2021 Population Estimates Available for the Nation, States and Puerto Rico”, The United States Census Bureau, December 21, 2021.

[xiii] John Cádiz Klemack, “Piles of Trashed Amazon and FedEx Packages Along Tracks. California is Top Target for Cargo Thieves”, NBC Los Angeles, January 19, 2022.

[xiv] No Author, “2021 Supply Chain Risk Trends Analysis”, Verisk, No Date.

[xv] No Author, “2021 Supply Chain Risk Trends Analysis”, Verisk, No Date.

[xvi] No Author, “New Vintage 2021 Population Estimates Available for the Nation, States and Puerto Rico”, The United States Census Bureau, December 21, 2021.

[xvii] Mark Muro, Yang You, “Superstars, rising stars, and the rest: Pandemic trends and shifts in the geography of tech”, Brookings Institution, March 8, 2022.

[xviii] Victor Ordonez, William Kim, “US warehouses running out of room amid supply chain crisis”, ABC News, November 3, 2021.

[xix] John Cádiz Klemack, “Cargo Theft, Fire in Containers, Employees Threatened: LA Tracks Are Still A Mess”, NBC Los Angeles, January 18, 2022.

[xx] John Cádiz Klemack, “Train Cargo Thieves Caught In City of Industry”, NBC Los Angeles, March 16, 2022.

[xxi] John Cádiz Klemack, “Cargo Theft Cleanup: Tracks in East LA Are Looking Different These Days”, NBC Los Angeles, March 4, 2022.