In 2023, the United States experienced 242 reported supply chain attacks, marking a 115% increase from the previous year. Product pilferage within the supply chain poses a significant challenge for businesses worldwide.
Beyond the immediate financial losses, pilferage can lead to reputational damage, eroding customer trust and impacting brand integrity. The solution to this issue is Implementing effective traceability solutions. They enable businesses to monitor product movement ensure authenticity and reduce the risk of unauthorized access.
In this blog, we'll understand the nature of product pilferage and its impacts. We will also explore strategies such as geofencing, blockchain technology, and polygon mapping to prevent product pilferage.
What is Product Pilferage?
Product pilferage refers to the small-scale, unauthorized removal of goods or materials within a supply chain. It is different from large-scale theft. The product pilferage often goes unnoticed because it happens in small quantities over time, leading to significant cumulative losses. It commonly occurs in industries such as retail, logistics, manufacturing, and agriculture, where products pass through multiple handling points before reaching the final consumer.
Common Forms of Pilferage Across Industries
- Retail & E-Commerce: Store employees or warehouse workers discreetly remove small items, often underreporting stock levels to cover up the loss.
- Logistics & Transportation: Cargo handlers or drivers steal products in transit, especially high-value items like electronics or pharmaceuticals.
- Manufacturing: Workers take raw materials, spare parts, or finished goods for personal use or resale.
- Agriculture & Food Supply Chain: Small quantities of produce, coffee beans, or packaged goods go missing during storage or transport.
Well, people usually get confused between pilferage, theft and shrinkage. So, here is a proper differentiation between all three for proper clarity.
Pilferage vs. Theft vs. Shrinkage
While often used interchangeably, pilferage, theft, and shrinkage have distinct meanings in a supply chain context:
Term | Definition | Key Difference |
|---|---|---|
Pilferage | The small-scale, unauthorized removal of goods by employees, suppliers, or handlers. | Often internal, gradual, and difficult to detect. |
Theft | The deliberate and often large-scale stealing of goods by external parties or organized criminals. | More aggressive, involves break-ins or fraud. |
Shrinkage | The overall loss of inventory due to pilferage, theft, administrative errors, or supplier fraud. | An umbrella term that includes both pilferage and theft. |
Understanding these distinctions is essential for implementing targeted security measures to minimize losses and protect supply chain integrity.
Impact of Product Pilferage
Product pilferage might seem like a minor issue when viewed separately, like just 1kg missing out of 100 kg rice. However, over time, it can cause severe financial and operational damage to businesses. The cumulative effect of small, unnoticed thefts can disrupt supply chains, reduce profitability, and erode customer trust. Let’s explore the major impacts of pilferage:
1. Financial Losses
- Pilferage accounts for a significant portion of inventory reduction. On a larger scale, this costs businesses billions annually.
- According to the National Retail Federation, global retail shrinkage including pilferage cost businesses $112.1 billion in 2022.
- Frequent stock losses lead to increased operational costs as companies replenish missing inventory, often without identifying the root cause.
2. Supply Chain Disruptions
- Missing goods result in delayed shipments, causing inefficiencies in production and distribution.
- Industries like agriculture, pharmaceuticals, and electronics suffer the most, as stolen goods often lead to regulatory non-compliance and product recalls.
3. Reputational Damage
- Customers expect reliability. Repeated stock shortages due to pilferage can impact brand reputation and consumer trust.
- If businesses fail to manage pilferage effectively, they risk losing credibility among partners and stakeholders.
4. Legal & Compliance Risks
- Some industries, such as pharmaceuticals and food production, require strict inventory tracking to ensure regulatory compliance; EUDR for supply chain traceability.
- Uncontrolled pilferage could lead to legal penalties, loss of licenses, or damaged supplier relationships.
5. Employee & Workplace Morale
- Pilferage within a company creates a culture of dishonesty, affecting overall workplace ethics.
- Honest employees may feel demotivated when they see theft going unchecked, leading to productivity issues.
In the end, product pilferage is not just an internal loss. It weakens business stability, disrupts operations, and damages trust. It is in the best interest of businesses to take effective action against this.
Effective Strategies to Prevent Pilferage
1. Implementing Geofencing Technology
Geofencing involves establishing virtual boundaries using GPS or RFID technology to monitor the movement of goods within specific geographic areas. When a product enters or exits these predefined zones, the system triggers alerts, enabling real-time tracking and control.
Benefits of Geofencing in Enhancing Supply Chain Security:
- Real-Time Visibility: Companies can monitor shipments accurately, predicting arrival times and addressing deviations promptly.
- Enhanced Security: Immediate alerts for unauthorized movements help prevent theft and unauthorized access.
- Operational Efficiency: Optimizing routes based on real-time data reduces transit times and operational costs.
By integrating geofencing into supply chain management, businesses can achieve greater control over their assets, reducing the risk of pilferage and ensuring products reach their destinations securely.
2. Enhancing Traceability in the Supply Chain
Traceability involves tracking products throughout their journey, from production to the end consumer. This transparency ensures that each step in the supply chain is documented, making it easier to identify and address issues like pilferage.
Role of Traceability:
- Product Authentication: Ensures that products are genuine and have not been tampered with.
- Supply Chain Transparency: Provides visibility into each stage of the product's journey, facilitating quick identification of where pilferage may occur.
- Regulatory Compliance: Helps businesses adhere to laws and regulations by maintaining detailed records of product movements.
Importance of Compliance with Regulations like EUDR:
The European Union Deforestation Regulation (EUDR) mandates that companies demonstrate their products are not linked to deforestation, requiring comprehensive traceability. Non-compliance can lead to legal penalties and loss of market access. Implementing robust traceability systems not only aids in regulatory adherence but also enhances brand reputation by showcasing commitment to ethical practices.
Incorporating advanced traceability solutions enables businesses to monitor their supply chains effectively, deterring pilferage and ensuring compliance with international standards.
3. Utilizing Blockchain-Based Solutions
Blockchain technology offers a decentralized and immutable ledger system, ensuring transparent and tamper-proof records of product movement throughout the supply chain. Each transaction or event is recorded in a block, linked chronologically to form a chain that is virtually impossible to alter without consensus from the network.
Advantages of Blockchain in Preventing Unauthorized Alterations and Ensuring Product Authenticity:
- Immutable Record-Keeping: Once data is added to the blockchain, it cannot be modified or deleted, safeguarding against unauthorized alterations and ensuring the integrity of product information.
- Enhanced Traceability: Blockchain enables end-to-end tracking of products, allowing businesses and consumers to verify the origin and journey of goods, thereby ensuring authenticity and ethical sourcing.
- Increased Transparency: All participants in the supply chain have access to a shared, transparent ledger, fostering trust and collaboration among stakeholders.
By integrating blockchain solutions, companies can mitigate risks associated with pilferage and counterfeiting, while enhancing overall supply chain transparency and efficiency.
4. Adopting Polygon Mapping for Asset Monitoring
Polygon mapping involves defining precise geographic boundaries which are polygon-like shapes on a map to monitor and manage assets within those areas. This method allows businesses to oversee activities and movements within specific zones, ensuring assets remain within authorized regions.
Application in Industries like Agriculture, Particularly in the Coffee Supply Chain:
- Agriculture: Farmers and agribusinesses use polygon mapping to delineate farm boundaries, monitor crop health, and manage land use efficiently.
- Coffee Supply Chain: With regulations like the European Union Deforestation Regulation (EUDR) requiring proof that products are not linked to deforestation, coffee producers are adopting polygon mapping to provide geolocation data of their farms. This practice helps in demonstrating compliance by showing that coffee is sourced from non-deforested areas, thereby maintaining access to markets with stringent environmental standards.
Implementing polygon mapping enables businesses to maintain accurate records of asset locations, ensure compliance with environmental regulations, and enhance overall supply chain integrity.
How Acviss Can Help
Acviss offers a comprehensive suite of products designed to combat pilferage and enhance supply chain security. Our solutions, such as Origin and Certify, are tailored to meet the unique needs of various industries and ensure product authenticity and operational transparency.
Origin: Transforming Supply Chain Transparency
Origin is an advanced track-and-trace solution that leverages blockchain technology to provide real-time visibility into product movements. By integrating Origin into your operations, you can monitor the entire product lifecycle, from manufacturing to the end consumer, ensuring authenticity and reducing the risk of pilferage.
Key Features of Origin:
- Real-Time Product Visibility: Gain comprehensive insights into each stage of the supply chain, enabling prompt responses to discrepancies.
- Custom Product Serialization: Tailor serialization to fit your brand's specific requirements, enhancing product tracking and authenticity.
- Blockchain Integration: Utilize immutable ledger technology to ensure data integrity and build trust among stakeholders.
- Geofencing Capabilities: Monitor and control the movement of goods within designated geographic areas to prevent unauthorized access.
Implementing Origin can lead to increased supply chain visibility, reduced losses due to pilferage, and improved compliance with regulations such as the European Union Deforestation Regulation (EUDR).
Certify: Ensuring Product Authenticity
Certify by Acviss focuses on protecting your brand against counterfeiting and unauthorized distribution. This solution provides consumers with a seamless method to verify product authenticity, thereby enhancing trust and loyalty.
Key Features of Certify:
- Non-Cloneable Labels: Incorporate distinctive, tamper-proof labels that are impossible to replicate, safeguarding your products from counterfeiting.
- Digital Certificates: Assign unique digital certificates to each product, offering personalized proof of authenticity to consumers.
- Real-Time Analytics: Access insights into consumer behaviour and market trends, enabling data-driven decision-making.
- Mobile Integration: Provide a dedicated mobile app for consumers to easily verify products, fostering direct engagement and loyalty.
By adopting Certify, businesses can protect their brand reputation, recover revenue lost to counterfeit products, and build stronger relationships with their customers.
By implementing Origin and Certify, companies can enhance their supply chain security, ensure product authenticity, and maintain compliance with industry regulations.
Case Study: Acviss' Solution for a Global Agrochemical Company
A leading global agrochemical company faced significant challenges with pilferage and counterfeit products infiltrating their supply chain. These issues not only led to financial losses but also jeopardized their brand reputation and posed risks to end-users, including farmers and consumers.
Challenges:
- Supply Chain Vulnerability: The company's extensive and scattered supply chain made it difficult to monitor product movement effectively, creating opportunities for pilferage.
- Counterfeit Products: A substantial portion of their products, especially pesticides, were being counterfeited, leading to reduced efficacy and potential harm to crops and the environment.
Acviss's Intervention:
To address these challenges, Acviss implemented a comprehensive traceability solution tailored to the company's specific needs. This solution included:
- Blockchain-Based Traceability: By integrating Acviss's blockchain technology, the company achievedreal-time visibility of their products throughout the supply chain. This immutable ledger ensured that every transaction was recorded transparently, making it nearly impossible for unauthorized alterations.
- Non-Cloneable Labels: Acviss provided tamper-proof, unique labels for each product unit. These labels allowed stakeholders and end-users to verify product authenticity instantly using a smartphone app or web interface.
- Geofencing and Polygon Mapping: The solution included geofencing capabilities, and defining precise geographic boundaries for product distribution. Any movement outside these predefined zones triggered immediate alerts, enabling swift action against unauthorized activities.
Outcomes and Benefits:
Post-implementation, the agrochemical company experienced significant improvements:
- Reduction in Pilferage: The real-time monitoring and geofencing features led to a substantial decrease in unauthorized product movements, effectively curbing pilferage.
- Enhanced Brand Trust: With the ability for end-users to verify product authenticity easily, customer confidence in the brand increased, leading to improved market reputation.
- Regulatory Compliance: The comprehensive traceability ensured adherence to international regulations, including the European Union Deforestation Regulation (EUDR), facilitating smoother market access.
- Operational Efficiency: The company gained better control over their supply chain, leading to optimized operations and cost savings.
This case exemplifies how Acviss's tailored solutions can effectively address complex supply chain challenges, providing robust protection against pilferage and counterfeiting while enhancing overall operational efficiency.
Conclusion
Pilferage isn’t just a minor issue. It’s a growing challenge and it can drain revenue, erode brand trust, and disrupt supply chains. The good news? Businesses no longer have to bear these losses as a cost of doing business. With technology-driven solutions like geofencing, blockchain-based tracking, and polygon mapping, pilferage can be minimized, if not eliminated altogether.
Acviss is helping businesses across industries secure their supply chains, prevent pilferage, and build consumer trust. Whether you’re dealing with high-value goods, agrochemicals, or any industry vulnerable to unauthorized diversions, solutions like Origin and Certify offer a seamless way to monitor, authenticate, and safeguard your products.
It’s time to stop playing defence and start securing what’s rightfully yours. Connect with Acviss today and take the first step toward a pilferage-proof supply chain!
