Combating Pilferage!

Some years ago, my younger son ran a restaurant in Gurgaon. We would regularly have supplies delivered to us. One day a consignment of beverages came from Coca Cola routed through their distributor. Out of the many cases, there was only one case of Minute Maid Juice. When the case, that was neatly closed and taped, opened; we were surprised that one bottle that looked sealed with a pilfer proof cap was containing turbid water. It was difficult for us to believe a company of such repute would supply a carton with one bottle of dirty water instead of juice. We complained and promptly their marketing manager visited us. On closer scrutiny he observed that the pilfer proof cap had ben opened and the tape on the carton had carefully been peeled off and reapplied. He explained, that either in their own or the distributor’s warehouse or during transportation, someone who might be a habitual offender in tampering had carefully removed the tape, taken out a bottle and replaced it by filling with dirty water and retaped the carton. This was a case of PILFERAGE!

Pilferage is theft but that, at a smaller scale, particularly when either a part of the contents of a package are stolen and the package is left resealed with spurious or fake contents, or a smaller part of the cargo goes missing. Pilferage can take place at any point during the transport of the package from source to the end-recipients. This can happen at the manufacturer’s warehouse, in transport, in distributor’s warehouse, at the buyer’s premises or from the shop shelves of retail outlets. The culprits indulging in pilferage can be company employees, truck drivers transporting the goods, the cargo handlers, or the shoppers in retail outlets. Compared to pilferage, theft is of a much bigger scale and a matter of concern as it has a substantial impact on revenues, recovering the loss by investigating teams or insurance is a time-consuming task that is cumbersome and a pressure on productive time one has for one’s business. Yet it is somewhat possible to recover through insurance. Pilferage being a smaller theft often gets overlooked because of a minimal value as compared to cost of the total consignments. Companies are hesitant to follow up on tracing in such cases because the cost of that would be more than the cost of the loss due to the small theft. Years ago, while visiting a distributor of Nestle in remote part of North Indian state of Himachal Pradesh, close to China border. I noticed that the dealer was getting truck loads of Maggie noodles delivered to him, he was weighing all cartons and separating a few. The separated cartons on enquiry, I understood had been pilfered. The distributor was quite calm about it and said the truck drivers on the way when they are hungry, they steal a few packets of Maggie noodles, and we cannot  control it. We just calculate the number of packets missing and the company replaces them in the next consignment. The small size of this theft is an irritant but the widespread presence of this makes Pilferage a menace.

Since Pilferage does not come to notice, companies are bound to absorb these losses. Jewelry, fashion goods, electronics, beverages & food, pharmaceuticals, etc. are items that are highly impacted. As per market studies a lot of pilferage happens in logistics sector. According to McKinsey report “Around USD 11 billion is lost each year due to theft in India’s logistics network”. Another report mentions almost 2-3% of consumer retail is subject to pilferage. According to BSI (British Standards Institute) and TT Club (International Transport and Logistics Insurance) report, theft of cargo in transit remains highest among all types of cargo theft in 2020. Pilferage and Shrinkage are more or less the same thing. Shrinkage is generally referred to happenings including pilferage, which cause the business to lose money. The Global Retail Theft Barometer, which tracks retail shrinkage in 43 countries, shows that India has the highest rates of shrinkage in the world. The country's retail industry reported shrinkage of 2.38 per cent of the total inventory. The total Indian retail market size is estimated by various agencies at about 900billion US Dollars. By modest estimates, the pilferage can be calculated at over 900 million US Dollars. In India more than 30% of pilferage is attributed to shoplifting alone.

Types of Pilferage:

Most of the pilferage takes place in the warehouses, which can be those of the manufacturers, their distributors, the logistic companies or the buyer’s own stock points. Bigger cartons that have been taped by manufacturers are slit with a blade, the carton is opened, and a part of the merchandise is removed and replaced by some bogus item of similar weight. The carton is then closed, and a similar tape is reapplied making it difficult for anyone to assess the pilferage. Shop shelves in organized retail are also a target to clever shoplifters or even store staff. There have been instances whereby even duty-free shops have also been facing pilferage. In one particular incident, I was in London visiting my brother-in-law who had also just returned from Dubai and was carrying a bottle of Johnnie Walker Black Label whiskey. When he opened the carton, it was shocking to see that instead of the square shaped Johnnie Walker bottle, there was another bottle filled with water and wrapped with tissue paper to restrict moving of the bottle in the carton. Obviously, it is an inside staff job. It is possible the contents may have been consumed before them leaving the duty-free premises. Pilferage in transit by drivers, couriers, or other logistic staff is widespread practice. All those who indulge in pilferage have honed skills to open and reclose the packages. There are instances where shoppers remove barcode sticker of a cheaper item and affix on a costlier product. They que in at a cash counter with rush and  just pass off with a cart full of other things as well. Petty items go undetected like smaller stationery items or candies and chocolates which children may consume inside while shopping.

With fast growing size of retail ecommerce and increasing patronage, companies continue to find ways to counter this menace. Fraudsters on the other hand are no less innovative in finding ways to steal from the packages of unsuspecting consumers. Theft or pilferage of mobiles, fashion items and food products are some of the preferences of the pilferers. A couple of years back Flipkart has introduced an innovative "anti-theft" packaging to secure its high net and luxury goods from in-transit theft and tampering. Logistic companies facing the heat due to pilferage have been tightening their security to curtail this menace. Retails stores resort to IT solutions like CCTV cameras, track and trace barcodes or RFID labels. This may reduce the impact but as time progresses, the culprits find new ways to bypass the security or tracing mechanisms. Innovations in packaging have been created to detect and deter pilferage, however it is an imperative that security be created in packaging must be an ongoing process. Highly decorated  multi-colour packaging is considered as great marketing tool for leading brands but then for the thieves it is easy to identify the goods inside and plan pilferage. For this reason, at least for ecommerce, plain packaging without  details of content inside is considered better. Water remoistenable paper tape can be a good alternate to combat package theft as the package cannot be opened without leaving evidence of tampering. Plastic packaging tapes (polypropylene tapes) do not adhere well to high recycled content cartons, they are easy to open and re-close. While the pressure sensitive tape adhesive becomes soft with heat and hardens to fall off in extremely cold temperatures, on the contrary the water-activated Tape is not affected by extreme hot or cold temperatures and can bond to cartons in dirty/dusty environments. Additional strength in paper is achieved by using reinforced paper tapes.

It would not be out of place to trace the journey of the pilfered items. It would be interesting to study the reasons why people resort to pilferage. One big reason could be poverty, they would steal and then sell at shops of those unscrupulous shopkeepers who act like pawn shops. Some time back the police raided central Delhi’s Gaffar Market in Karol Bagh, renowned for selling cheaper mobiles and accessories. It was realized all stolen mobile phones, batteries and accessories were bought by many of the shopkeepers there and sold at highly reduced prices. The market flourished and became very popular. Poverty also drives them to achieve the “me too” need for possessing the items they cannot afford. Other times it could be an imperative requirement of their household. Then there maybe those employees who might steel after being convinced that they are not being adequately compensated by their employers and it is their right to take what they need. Then there are those who will not miss an opportunity when it comes their way to pilfer and steel easy to conceal small size items like makeup, clothing, foodstuff and electronics. Finally, there are those adventure or compulsive thieves who get sinister pleasure out of pilfering, stealing or shoplifting. These maybe some well-to-do persons who can otherwise afford to buy the merchandise. It apparently is a psychiatric issue with them.

I am not sure if it is possible, but it would be interesting if a package is designed  such that once opened it will self-destruct. In times when the electronics are advancing rapidly, a RFID circuit can be built in a label or the tape such that when it is cut or destroyed it gives a signal or it will show up on scanning. In high value goods an over wrap with security features can become a deterrent. Another way to counter this menace could be to use Track and trace labels that are scanned, and the cartons weighed at every inward and outward point to provide substantial information regarding pilferage.

Pilferage, shrinkage and theft are an age-old menace that has always existed. Companies keep finding ways to deter such activities but then people who indulge are also innovative and find ways to tamper. In case of duplication it is often said, “if someone can make it, someone can fake it.” In case of pilferage I would say, “If you can seal it there will be someone who can steal it.”

Written by Harveer Sahni, Chairman Weldon Celloplast Ltd. New Delhi India. June 2022

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