'Goods lost in transit' threaten UK supply chain

By Freddie Pierce
By David Upton, Managing Director of DA Systems UK retailers lost over £400 million last year as a result of fraudulent ‘goods lost in tran...

By David Upton, Managing Director of DA Systems

UK retailers lost over £400 million last year as a result of fraudulent ‘goods lost in transit’ (GLIT), with the average cost estimated at over £40.

Now, 90 percent of retailers believe growing numbers of fake GLIT claims pose a serious threat.  This is an ongoing problem and highlights a new form of theft: ‘digital shoplifting’. 

David Upton.jpg

Many retailers are shrugging GLIT off as a cost of doing business, yet with e-commerce and m-commerce growing at their current rates, it needs to be tackled.

The British Retail Consortium estimated the total cost of retail crime was £1.6 billion in 2012. How can retailers tackle this modern digital problem in the same way that cameras and security tags help control in-store theft?

Finding a solution comes down to establishing proof of delivery and traceability. Proving a delivery took place without a signature or if a tracking system is slow, is virtually impossible.

Retailers exercise goodwill over GLIT queries because they lack the right information. With a real-time track and trace solution, they can verify delivery status and deal with fraudsters accordingly. For example, it creates a customer services dilemma when someone signs for a package e.g. an iPod and then claims it never arrived because they put it somewhere and then forgot.

Although there is evidence that something was signed for, you can’t prove exactly what happened. This situation happens frequently and many service-focused retailers will follow the ‘customer is always right’ mantra rather than risk alienation.

More than three quarters of retailers admit it’s hard to distinguish fraudulent claims with honest ones. To resolve these queries, retailers need real-time data feeds to manage the doorstep interface and real-time integration between retailers and delivery agents. Without this, there’s an opportunity for customers to make a fraudulent claim because having to ask them to wait for systems to update before proof of delivery can be verified is an unacceptable delay.

Added to this issue, many items bought online are relatively low value, which means customer service costs (at £40 per claim) will exceed their actual loss value.

Contrast this with the cost to goodwill of deferring a query and investigating what happened the following day. Retailers are reluctant to take this option, so they accept the losses. If they used a real time system, they would have information to resolve queries straight away.

Managing returns

Traditionally, collections from consumers have also been a real challenge to complete cost-effectively.

When managing returns, the biggest issue is labelling of goods. For example, you buy two pairs of shoes, intending to return the ones that don’t fit. This means following a returns process, including packaging the item and labelling it.

Some companies provide return bags and labels to ease the process but many do not, leaving the consumer to handle re-labelling. Retailers need to consider the cost of GLIT against the impact of introducing extra steps to streamline reverse logistics.

Having real-time integration between suppliers and the capability to link organisations involved in the supply chain is essential and each carrier needs appropriate track and trace data.

With carriers all having different processes and labelling systems, what’s needed is a standardised procedure.  Potentially, retail distribution partners can act as a broker to courier companies, enforcing standard processes between retailers and carriers so they are interchangeable.

It’s all about the tech

Sadly it’s a fact of life that some people will always try and break a system. Technology can only go so far to prevent fraud by making the process of resolving and following up queries easier and more cost-effective.

Having a track and trace system in place means retailers have the ability to improve decision making accuracy and judge each situation in real time.

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