Chinese marketplace JD.com has moved quickly to install better security systems following last month’s stunning heist of expensive electronics gear from one of the retailer’s warehouses in a Paris suburb.
Agence France-Presse and other French media outlets last month reported that an organized professional crime gang broke into the facility in the Seine-Saint-Denis region on the night of Dec. 21 and stole more than 50,000 pieces of electronic equipment, including smartphones, computers and tablets, on 30 pallets. The stolen merchandise was worth an estimated $44 million, but JD.com disputed the value of the loss without giving a lower figure. News reports said the thieves disabled the warehouse’s surveillance cameras and the alarm system was not functioning at the time of the break-in.
A recent research note by ARC Advisory Group, a technology research and consulting firm, provides more details of how the organized criminal unit was able to complete the massive theft. Gang members first cut connections to the external power grid and disabled the alarm system using electromagnetic jammers, then damaged security cameras and removed server hard drives to erase trace footage. The team also tampered with electronic labels to simulate legitimate outbound shipments and delay discovery and evacuated the stolen goods in three batches using vehicles with forged license plates, completing the entire operation in three hours.
The level of sophistication required to disable the security cameras, target specific high-value pallets in a large warehouse and get out fairly quickly “suggests some sort of insider involvement,” said Tony Pelli, a practice director at supply chain security and risk management firm BSI Consulting, in an interview. Tampering with bar code labels suggests the thieves were able to infiltrate the warehouse management system using stolen passwords, he added.
JD.com said the warehouse returned to normal operations within a few days.
The retail giant immediately activated a global emergency response plan within 24 hours of the incident, said ARC Advisory analyst Rita Liu in the report.
After isolating what items were stolen, JD.com offered full refunds along with additional compensation to customers with orders and replenished inventory with airfreight through airports in Paris; Liege, Belgium; and Frankfurt, Germany. Within 72 hours, 90% of order fulfillment capacity had been replenished, she said.
JD.com employees cooperated with brand partners to lock the International Mobile Equipment Identity codes of stolen devices and synchronized the information with European telecom operators and official repair channels, with the goal of limiting the circulation of stolen goods at the activation stage. IMEI codes are unique 15-digit numbers that act like a fingerprint or social security number for mobile devices. Telecom companies use them to manage devices and block stolen phones from networks.
The company installed upgraded security cameras, biometric access control systems and 128-bit encrypted RFID tags.
New security measures set industry benchmark
In addition to technical countermeasures, JD.com implemented a comprehensive security upgrade for the warehouse and rolled out the upgraded standards across all its European facilities. The switch to a proactive defense posture sets a new benchmark for e-commerce fulfillment facilities, said Liu.
New security protocols include high-security locking systems that require two people to control access, random shift rotations, hierarchical authorization for high-value warehouses, daily inventory inspections and redundant storage of high-value goods in two separate facilities, according to ARC Advisory.
On the compliance front, JD.com assisted French police in evidence collection, increased the insured amount of theft coverage and added cross-border legal and security audit procedures.
Local police are investigating the JD.com theft, but so far have not produced any suspects. JD.com did not respond to messages seeking an update on the break-in.
The Paris facility is part of JD.com’s growing network of more than 130 overseas warehouses as the retailer expands its reach beyond China. In Europe, the online retailer has nearly 30 warehouses, with its main distribution center in Venray, the Netherlands, enabling direct cross-border delivery of goods within 48 hours through its aviation network. JD.com also sells excess warehouse space and distribution services to European manufacturers with international operations.
Liu noted that warehouse security upgrades for multinational companies need to be tailored to the local environment. She recommended warehouses be equipped with dual backup power supplies, including diesel generators, as well as dual-circuit cabling to prevent shutdowns caused by power outages. Other physical barriers should include anti-cutting cable sleeves, vibration-activated security alarms that can detect break-in attempts, ultra-strong fencing and explosion-proof structural components.
Warehouse operators should also tech-enabled precautions, such as software that enables real-time analysis of suspicious behavior and automatically trigger warehouse lockdowns, linking warehouse and transportation management systems, activating electronic alerts for abnormal outbound shipments and pre-registering IMEI codes to enable rapid locking of stolen devices and prevent their distribution.
“The cross-border e-commerce industry must move beyond a ‘scale-first’ mindset and deeply integrate localized security adaptation, technology-driven risk prevention and control, and multi-warehouse redundancy into its globalization strategy,” Liu wrote.
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Write to Eric Kulisch at ekulisch@freightwaves.com.
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