AIG's Alan Spear on Trends in Supply Chain Security

Alan Spear, Director of Cargo Security Loss Control for the USA and Canada at AIG, works with clients with regard to the security of their product in the supply chain to help avoid theft or diversion of that product. In this interview he speaks to Andrea Charles from Cold Chain IQ, about trends in supply chain security and the rise and prevention of fraudulent pick-up. Cold Chain IQ: In your opinion, what trends are we witnessing from pharmaceutical supply chain security?

A Spear: I think that the most dramatic change we’re seeing in supply chain security is really an increase in something that we had seen previously, which is called fraudulent pick-up. Fraudulent pick-up is something that I think I saw my case of fraudulent pick-up probably ten years ago, where a driver pretended to be the correct driver and picked up a load of cargo and disappeared with it, and two hours later the proper driver showed up. But thieves have become far more sophisticated in their methodology for those kinds of diversions of cargo. And they are creating false documentation; they are creating corporation out of thin air; they arestealing corporate identities from trucking companies and forwarders to make it appear that they are the proper company to pick up the cargo; and then they pick up the cargo and of course they steal it and it’s never seen again.

In Cold Chain for Pharma this is a slightly different issue, because we tend to be looking quite frequently at the small package environment as opposed to full truckloads. So from the standpoint of the small package environment, how is cargo is re-directed, and it’s re-directed as stolen because the delivery address is changed on the package, or the delivery address when the driver arrives to deliver is told to go some place else to deliver the package, and he does that, and of course then delivers it inadvertently to the thieves. There are a number of different issues here, but all of this has to do with the stealing of identity or the misrepresentation of addresses or identity in order to be able to steal cargo. And it’s a very rapidly growing trend all over the world. [inlinead] Cold Chain IQ: Are there any regions where fraudulent pick up is more prevalent?

A Spear: We have seen this really quite frequently in the United States. But I saw a case just last week of a truckload of chocolates, if you will, which was in Austria, and the week before that two loads of metals which were in Spain. We’re hearing about it in Central and Latin America. I’m sure we will be hearing about it in Asia, although they don’t have any specific cases yet. I’ve not handled a case like this in Canada yet, but I’m sure there have been some, but maybe I just haven’t seen them, and there will be more. It’s simply going to be everywhere. Part of the issue is that the more electronic we become, and the more we don’t actually touch things, we do everything virtually, it becomes almost easier for thieves to create virtual companies, virtual identities, and to use those to be able to cause these thefts.

Cold Chain IQ: As these thieves become more sophisticated, how is the industry responding?

A Spear: There are a number of practices that can be applied in terms of how you ship highly valuable cargo. In the full truckload world, much of this has to do with how you appoint your carriers, and making sure that you appoint carriers that are known to you and that you never ever releaser loads when there are any questions. There are some fairly simple techniques, and I’m going to talk about these at the conference. For instance, a driver arrives with documentation. It’s very important to check the documentation to make sure that the words are spelt correctly; that they’re put in the proper places on the form; that the words are the correct words. I’ve seen situations where cargo was stolen, where documents were presented that were clearly fraudulent. The spelling was incorrect, the forms were not filled out properly, addresses and dates were incorrect, and yet they released the cargo anyway. So much of this has to do with training people who are releasing the cargo to look carefully at what kind of information is presented to them before the cargo is released. Cold Chain IQ: Traditionally it’s been the innovative pharmaceutical companies that have focused on security measures, but do you find that generic companies are now finding themselves under threat?

A Spear: Absolutely, and I’ve worked with a number of generic pharmaceutical companies who have had to adapt really the same levels of security as the original manufacturers. I mean their cargo is also extremely valuable; it’s also at vey high risk because this is a product that is intended to enter the human body, and if it’s not properly cared for in transit, the risks are much higher than, say, for an electronics manufacturer. I mean if the electronics manufacturer loses a load of computers, that’s a very bad thing, but it’s just a load of computers. If a pharmaceutical manufacturer, generic or otherwise, loses a load of cargo that’s intended to be ingested or injected, and that cargo is not properly cared for, then you’re talking about an immediate effect on someone’s health, and that’s a much greater risk, I think, than for almost any other kind of product.

Cold Chain IQ: In a global market, what would you say are your top three tips for improving supply chain visibility?

A Spear: From a more general standpoint, I think the critical issue is in the communications between the shipper and the carrier. The shipper and the carrier must maintain communications about what their protocols are; what their priorities are; what security processes in place, and they must monitor and audit those. So rather than say what top three, I would say that’s the top one, that almost every cargo theft I have ever seen was a result of some sort of failure in communication between somebody and somebody, and so that’s really the issue that needs to be addressed most clearly in all the time. It’s not something you can fix once and then forget it: you’ve got to fix it and work on it continually.

Cold Chain IQ: In your opinion, what guidelines or regulations will have the biggest impact on supply chain security in the next two to three years?

A Spear: I think one of the things that’s very important is that governments are looking to make their systems exchange on an equal basis. So C-TPAT and AEO, for instance, to develop mutual recognition across country boundaries, I think will significantly strengthen the supply chain. Now, C-TPAT and AEO are both really designed to be anti-terrorism processes, but the side effect of those is that they clearly also affect cargo security in general. You know they were designed to keep bad things out of the supply chain - you know, something bad being put into the supply chain and shipped into the country – but they also helped to protect good things being taken out of the supply chain. So I think the big change over the next couple of years will be more mutual recognition, and I think that’s all plus. Cold Chain IQ: Looking to the future, what would you say is your prediction for the global supply chain in 2013?

A Spear: The supply chain tends to follow the market, in a very general sense. For instance, when the price of metals goes up, there’s a lot more metal theft; when the price of construction materials goes up, there’s a lot more theft of construction materials, like wood, and, you know, plywood and planks, and so forth, and so on. When the price of rubber goes up, there’s a lot more theft of tires. So I think what we can say in a general sense is that any time the market is going to go up in a particular area and the expenses are going to get a lot higher, there will be more theft in that area. Now, if I could predict exactly where the market was going to go up, I’d be a very rich man, and I’m not. So, you know, none of us are able to do that. But I think that those are how we can look for trends. So if it appears that prices are going to up dramatically in a particular area, we can count on thefts going up in that area. Other than that, we know an awful lot about the patterns of cargo. We know that cargo in the United States and Canada tends to be stolen on week-ends as opposed to in the middle of the week. We know that they tend to be stolen over holiday week-ends; long holiday week-ends in particular there’s more cargo theft than in any other time. We know that electronics and high end clothing and so forth tend to be stolen more just prior to Christmas season for obviously reasons, because there’s more product out there. So all of those trends are things that we need to look at, but they don’t necessarily help us predict as much as they help us expect.

Cold Chain IQ: Alan, you are going to be speaking at the upcoming 11thAnnual Cold Chain and Temperature Management Summit in Canada , taking place 25thto 28thFebruary in Toronto. For anyone interested in attending the event, could you just highlight what your presentation will cover, and also what are you looking forward to about the event?

Alan Spear: I’m going to talking about this whole issue of fraudulent pick-up and how it applies to all sorts of different shipments, and what companies can do to help protect themselves against fraudulent pick-up, because we think it’s an increasing trend. I’m also going to talk a little bit generally about the TAPA standards and how they apply to cargo security in general. But primarily I’m there to talk about fraudulent pick-up. I’m looking forward to meeting people from the industry. I think it’s always interesting to meet folks who are concerned with supply chain security. I have to say that this group is concerned with it in a different way than most of the groups that I meet with. There tends to be much more focus on the small package environment; whereas most of what I’ve looked at in my career has been full truckloads, or at least partial truckloads of cargo, because that’s where the majority of cargo theft is. So I’m looking forward to both making the presentation and getting a different perspective on what the risks are.

Find out more about the 11thAnnual Cold Chain and Temperature Management Summit in Canada.

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Please note that we do all we can to ensure accuracy within the translation to word of audio interviews but that errors may still understandably occur in some cases. If you believe that a serious inaccuracy has been made within the text, please email editor@coldchainiq.com .

AIG's Alan Spear on Trends in Supply Chain Security

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