Top 3 challenges shippers face and how to overcome them
At this time of the year, with the holiday season in full swing and the retail business at its busiest, freight transportation volume also reaches new heights.
Considering the amount of transported goods and the number of fully loaded trucks on every motorway many things could go wrong. How can you, the shipper, be sure that your cargo will reach its final destination intact? Fortunately you can be proactive by choosing trustworthy freight brokers and reliable carriers. It does help to be aware of various situations that may arise. Here’s what to be aware of so your shipment can be protected either by the freight surety bond or federal regulations.
Common risks of the shipping business
On 1 October 2014, a hefty increase of the freight broker bond from $10,000 to $75,000 went into effect in the USA. The Obama administration explained that the drastic jump is the due to the need to prevent fraudulent practices. Just like with any business, the transportation industry faces its own unique challenges.
1. Payment delays.
Shippers usually select brokers based on their vast knowledge of the industry, including most reliable carriers. However, many shippers are unaware that if their freight broker or freight forwarder doesn't pay the carrier they hired to haul a shipper’s cargo, the carrier can come to the shipper with the final bill. It could happen even if the shipper has already settled their payment with the broker or forwarder.
The freight broker bond, also known as BMC-84, protects the shipment and all parties involved. Last year's new regulations required the freight forwarder to be bonded as well. If the bond principle operates as both a broker and a forwarder, it needs two bonds to legally stay in business.
In the case that industry regulations are not followed and there's a delayed payment claim going, the surety will step in and cover all claims.
2. Liability for bad loading securement
Let's say that you wanted to ship live load on a standard B/L (bill of lading). The load, however, wasn't properly braced or blocked, and during transportation fell and it was damaged. Who is responsible; the shipper, the carrier, or some third party? Does that solely depend on the initial shipper-carrier agreement?
Even if you were there to assist in the loading, based on the federal safety regulations, stipulated in 49 CFR 392.9 and 49 CFR 393.100, the carrier bears the primary responsibility for the safety of the load. Moreover, under the Carmack Amendment, unless the carrier can prove that the cause for the damage was due to an act of God, shipper's fault and not a result of negligence, the carrier is liable for loss or damage of goods.
3. Shipping trailer catches fire during transit
You can file a claim for the entire shipment, but is liability limitation enforceable, and when? First of all, make sure that the bill of loading indicates the carrier's tariff and you get a copy of it. Usually the court decision for enforcing liability limitation is based on certain requirements that need to be met:
- A notice of a tariff limitation found on the bill of loading;
- A tariff applicable to the price asked for the shipment;
- Rates equivalent to the liability assumed by the carrier.
If you meet these criteria, it makes no difference what caused the loss or damage.
The impact trucking industry has on the economy
Towards the end of November, the American Trucking Association (ATA) reported that the seasonally adjusted tonnage index for October 2014 rose by 4.5 percent compared to the same time in 2013. The ATA was optimistic for the fourth quarter. It said that the increase coincided with a nice rise in factory output and retail sales for the same month.
The ATA's report also states that last year trucks hauled 9.7 billion tons of freight. In monetary terms, that means $681.7 billion for motor carriers, which amounts to 81.2 percent of total revenue earned by all transport modes. In other words, trucking is a “barometer of the U.S. economy, representing 69.1 percent of tonnage carried by domestic freight transportation, including manufactured and retail goods.”
What is your story?
Every shipper has a story to tell. Share with us your experience of hardships on the road and unusual occurrences. How did you overcome them, and were there any regulations that you found helpful in the process?
Many of your fellow shippers may benefit from your advice, especially now, with the busy holiday season upon us. Let us know in the comments below or @Supply ChainD on Twitter!
Vic Lance is the founder and president of Lance Surety Bond Associates. He is a surety bond expert who helps freight brokers get licensed and bonded. Vic graduated from Villanova University with a degree in Business Administration and holds a Masters in Business Administration (MBA) from the University of Michigan’s Ross School of Business.
Driver shortages: Why the industry needs to be worried
While driver shortages are a global problem, with a recent survey from the International Road Transport Union suggesting that driver shortages are expected to increase by 25% year-on-year across its 23 member countries, the issue has very much made itself felt for UK businesses in recent weeks.
A perfect storm of factors, which many within the industry have been wary of, and warning about, for months, have led to a situation wherein businesses are suddenly facing significant difficulties around transporting goods to shelves on time, as well as inflated operating costs for doing so.
What’s more, the public may also see price rises as a result due to demand outmatching supply for certain product lines, which in turn brings with it the risk of customer dissatisfaction and a hit to brand and stakeholder reputation. Given that this price inflation has been speculated to hit in October, when the extended grace period on Brexit customs checks comes to an end, the worst may be yet to come.
"Steps must be taken to make a career in the industry a more attractive proposition for younger drivers, which will require a joint effort from government, industry bodies, and the sector as a whole"
That said, we have already been hearing reports of service interruption due to lack of driver availability, meaning that volumes aren’t being transported, or delivered, to required schedules and lead times. A real-world example of this occurred on the weekend of 4-6 June with convenience retailer Nisa, with deliveries to Nisa outlets across the UK affected by driver shortages to its logistics provider DHL.
But where has this skills shortage stemmed from?
Supply is the primary issue. Specifically, the number of available EU drivers has decreased by up to 15,000 drivers due to Brexit alone, and this has been further exacerbated by drivers returning to their home country during the COVID-19 pandemic, as well as changes to foreign exchange rates making UK a less desirable place to live and work. This, alongside the recent need to manage IR35 tax changes, has also led to significant inflation in driver and transport costs.
COVID-19 complications have also meant that there have been no HGV driver tests over the past year, meaning the expected 6,000-7,000 new drivers over the past year have not appeared. With the return of the hospitality sector we understand that this is a significant challenge with, for instance, order delivery lead times being extended.
It is little surprise, therefore, that the Road Haulage Association (RHA) earlier this month became the latest in a long line of industry spokespeople to write to the government about the driver shortage for trucks. The letter echoed the view held by much of the industry, that the cause of this issue is both multi-faceted and, at least in some aspects, long-standing.
So, many in the industry are in agreement as to the driving factors behind this crisis. But what can be done?
Simply enough, outside of businesses completely reorganising their supply chain network, external support is needed. In the short-term, the government should consider providing the industry with financial aid, and this can also be supported more widely with legislative change.
Specifically, immigration policy could be updated to place drivers on the shortage occupations list, which would go some way towards easing the burden created by foreign drivers returning to their home countries. Looking elsewhere, government should also look for ways to increase the availability of HGV driver tests after the blockage created by the coronavirus lockdowns.
Looking more long-term, steps must be taken to make a career in the industry a more attractive proposition for younger drivers, which will require a joint effort from government, industry bodies, and the sector as a whole. As it stands, multiple sources suggest that the average age of truck drivers in the UK is 48, with only one in every hundred drivers under the age of 25. We must therefore do more to increase the talent pipeline coming into the industry if we are to offset more significant skills shortages further down the line.
On the back of a turbulent year for the supply chain industry, it has become increasingly clear that the long-foretold shortage of drivers is now having a tangible and, in places, crippling effect on supply chains.
Drivers, and the wider supply chain industry, have rightly been recognised for the seismic role they played in keeping the nation moving and fed over the past year under unprecedented strain. If this level of service is to continue, we must now see Government answer calls to provide the support the sector needs, and work hand-in-hand with the industry to find a solution. If we do not see concrete action to this effect soon, we are likely to be in for a turbulent few months.
Rob Wright is executive director at SCALA, a leading provider of management services for the supply chain and logistics sector