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Anti-Diversion: How 3PLs Tackle Theft 

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In the 3PL world, the first step towards fighting theft and diversion is to acknowledge it. Whether we’re talking about the counterfeiting of luxury goods or legit product “falling off the truck,” a 3PL can be a brand’s best ally towards fighting theft and diversion. 

Here are theft prevention anti-diversion best practices brands should look for in their 3PL.


Strong security protocols are non-negotiable. Who has warehouse access? How is that access logged? What are the points of entry and exit like? Security guards? Screening? Are there security cameras? Inside the warehouse? Outside the building? Any blind spots? How is that footage stored? What can staff bring in and out of the warehouse? What about access controls to picking products? How’s the lighting inside the buildings? 

3PL security ultimately comes down to trust. Brands are trusting them with their goods and, largely, the success of their business. They should be doing everything they can to ensure a secure facility. 


Fulfillment is still very much a people-driven business. 3PLs that invest in training their employees on theft and theft prevention are signaling to brands that they take their role seriously. 

Here at Capacity, we conduct initial and continuing employee education on a range of topics, including theft and theft prevention. We identify suspicious behaviors folks should look out for. We offer an anonymous tip service where employees can report observations without risk of retribution or retaliation. Team leaders are trained on how to handle theft-related incidents.

Concrete security measures like cameras and access controls are absolutely required. But hiring, training and retaining staff with high integrity can make all the difference. 


Here’s where theft-conscious 3PLs really shine. 

When goods go missing, they often end up on the gray market. The gray market isn’t quite the same as the black market. The black market refers to “any market where the exchange of goods and services takes place in order to facilitate the transaction of illegal goods or to avoid brand or government oversight and taxes, or both.” Think of mountains of knock-off luxury designer handbags piled on folding tables on Canal Street in New York City selling for $70 instead of $700. 

That’s not what we’re talking about with the gray market. 

Gray market activity occurs when a brand’s products are sold through unofficial or unauthorized channels. 

The industry term for this is “diversion.” 

Imagine a pallet of skincare products that a brand authorizes for sale only through a specific retailer appearing on Craigslist or Facebook Marketplace. Or consider an authorized but perhaps less-than-upstanding retailer unloading unsold products on Amazon because it makes more financial sense to sell them at 70% off than it is to return them. 

That’s the gray market.

Anti-diversion conscious 3PLs actively help prevent their brands’ products from winding up on unauthorized channels. Here’s a high-level look at how.

When a brand manufactures its goods, they have the ability to apply QR codes, otherwise known as a data matrix, to its items, inner cases and pallets.The QR code that is applied on the pallet has information about all cases on the pallet and the case QR has information about all of the inner cases and each of the individual products.

As the brand’s 3PL receives these goods, the highest unit of measure (UOM) is scanned at intake. This data is electronically shared with the brand, providing assurance that its 3PL is in possession of their goods.  

On the outbound, the QR codes on the highest UOM (be it the pallet, case or individual product for the order) is scanned against the order or purchase order, giving the brand additional insight on what products are with what retailers. This data is also electronically communicated to the brand. 

So if a brand does see its products on the gray market – and trust us, they’re looking and even incentivizing their customers to join the hunt – they’ll typically place an order with the sole purpose of scanning the product’s QR code. This will give a trace back to the outbound retailer to which the product was shipped via the data that the 3PL previously provided to the brand. 

If the data doesn’t match, the brand can then take action with the retailer. 

This applies to counterfeit goods too. Some counterfeiters do so down to the last detail – including the QR code. But a legit QR code is virtually impossible to counterfeit. 

Theft Happens… 

But here at Capacity, we’ve got the experience, tools and technology to help our brands fight it. 

Want to learn more about how we approach theft prevention? Give us a shout. We’re here to help.

Karan Maniar is a Senior Industrial Engineer at Capacity.