Opinion: Supply Chain Accountability

By William Feld

President

D&G Transportation Inc.

This Opinion piece appears in the Dec. 17 print edition of Transport Topics. Click here to subscribe today.

Over the past several years, government regulation that should be directed at every link of the supply chain has become increasingly focused on the trucking industry’s portion. If this continues, it quickly will become toxic to our industry and the economy as a whole.

Those who speak of “leveling the playing field” without also including the words “throughout the supply chain” are not friends of trucking. In fact, even within the trucking industry, rules and policies that make sense for large truckload carriers of dry products will not always apply in a practical fashion to smaller, temperature-controlled, less-than-truckload carriers.

I will argue that many of the enacted and proposed regulations are most damaging to — and do not bode well for — small carriers/fleets and owner-operators. This also points to a hidden agenda that goes far beyond things such as safety concerns and best practices.

Doesn’t the independent-contractor business model drive innovation, efficiency, and productivity as well as being the lifeblood for job creation in our economy? Can anyone truthfully claim that they promote business while at the same time drive regulations designed to eliminate independent contractors?

A healthy supply chain requires a balance between production, transportation and distribution. This will happen only through a holistic, process-oriented approach to governance and oversight. When one part is overregulated, the entire supply chain becomes out of whack and dysfunctional.

Regulation that focuses exclusively on trucking serves to place a disproportionate amount of liability, expense and risk on transportation companies and their drivers.

It is easy to see how and why this has happened.

Transportation of goods from shippers to distributors is the part of the supply chain that interfaces with the general public via the common use of roadways. When a manufacturer experiences production problems or a consignee is behind schedule, few if any in the public sector would be aware because these processes are self-contained.

All things being equal, it becomes incumbent on the transportation service provider to somehow “make up” for these delays or experience significant loss of revenue. Consequently, any buffer that was built into the manufacture and distribution of time-sensitive goods is “squeezed out” on the transportation side.

The result quickly becomes apparent when carriers attempt to stay on schedule. When this happens, drivers become agitated and may take risks they would not otherwise consider. When limitations are exceeded, safety is compromised.

With delayed LTL routings, for example, extra expense is incurred with rearranging trips, rescheduling appointments, driving extra miles, paying for redeliveries and/or moving products at docks along the way and additional time spent in the truck versus at home.

In addition, when cargo is time-sensitive and shelf life is limited, there is a great risk that products will be rejected, resulting in more lost revenue, both short-term (trip-specific) and long-term (distressed customer relations, higher driver turnover). Opportunities for return-loading may be lost because of timing and/or having cargo remain on the trailer. Don’t forget to add in fines and back charges incurred from consignees caused by late deliveries and missed appointments.

Trucking companies often are held solely accountable for these added expenses. Shippers and consignees may agree in principle with carrier concerns on the unfairness of the system, but few will help to stem the revenue losses. With the current economic and regulatory environment, there is no realistic method available for a carrier to seek compensation for lost productivity — at least with having a reasonable chance of success.

There also is no real incentive for shippers and consignees to help mitigate additional expense and risk incurred by carriers. Why should they, when prevailing litigation and regulation selects heavily against trucking companies and their drivers?

Precedence already has been established in Australia, where regulation was enacted that serves as a model for fairness and accountability throughout their supply chain. A great start for improvement in the United States would include appointing logistics professionals with firsthand working experience into higher-level positions.

We desperately need passionate, farsighted individuals working together with all members to establish, enforce and sustain practical, common-sense policies that will result in a safe, efficient and more productive supply chain. A complementary idea would be the creation of a cabinet-level department relating to U.S. supply chain dynamics.

Our industry now is experiencing the results of years of reckless rhetoric and regulation. A major change of direction is needed to avoid a “logistical cliff” very similar to our current fiscal situation. We need to leverage all resources and drive improvement to correct misguided policies and a short-term Band-Aid approach to distribution.

We own it, we allowed it to happen and we can fix it. All must be held accountable to provide balance and incentive to function as partners. Until this happens, shippers, truckers and consignees will continue to focus on their own needs — often in opposition to each other — rather than working together to improve.

Based in Germantown, Wis., D&G Transportation Inc. is a family-owned truckload and less-than-truckload carrier that offers temperature-controlled services.