May 2004 | Commentary | Viewpoint

Does Your 3PL Have an Effective Hazmat Program? Here's Why it Should

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Safe handling and management of hazardous materials has come a long way since logistics providers crossed their fingers and hoped that an incident involving hazmat wouldn't happen. And if it did, they hoped that the carrier would do a good job of handling it.

Gone are the days when simply complying with a dizzying array of federal, state, and local laws was the ultimate goal for providers entering the hazmat business.

Now, every customer and product is unique. New realities and market forces have closed the gap between what you must sell and what you must deliver.

New security rules and technologies have changed customer requirements and expectations with regard to hazmat; however, customers aren't paying more. Carriers squeezed by competition and evaporating margins have abandoned written contingency plans and on-the-ground response capabilities designed to control costs and limit liability arising from hazmat incidents.

Shippers, carriers, and regulators increasingly look to third-party logistics providers to provide the solution. And only nimble 3PLs can fill the bill.

Strict Liability vs. Negligence

A clear understanding of legal responsibility allows the nimble 3PL to stay focused on serving the customer, controlling cost, limiting liability, and remaining profitable. Without concise hazmat transportation and facility information, hazmat can be an expensive proposition. Legal responsibility serves as a chart for navigating the intricate jurisdictional variations explicit in local, state, and federal regulations.

Not only does spill location play a role in determining what a 3PL must do to remain in compliance, but the material, type, and amount of release and container create regulatory obligations as well. It's not the material alone that gives rise to liability; a 500-gallon release of anything poses a problem.

More often than not it's the incident or event that creates responsibility under the law. Identifying the day-to-day activities that put 3PLs at risk is the first step to begin to control costs and limit liability.

Seamless Response Planning

Dealing with customers, landlords, realtors, and regulators is more straightforward when 3PLs understand what they have to do to avoid claims for damages, fines and penalties—not only for themselves, but for shippers, carriers, and consignees.

Seamless and competent response planning and claims management systems provide value to customers, carriers, insurers, and regulators. Robust back-office claims and response systems help control costs, limit liability, document losses, create subrogation claims, and recover costs and charges for services provided. These systems can generate revenue for 3PLs.

A centralized hazmat management system is the cornerstone for sharing knowledge. A single approach to contingency planning, compliance, claim handling, response, and billing serves as a rallying point and resource for all personnel. The system organizes expertise along traditional lines and makes it accessible to all involved.

Activating the Plan

Effective response involves immediately identifying the responsible party and activating the appropriate plan. If the 3PL does not have a legal responsibility to respond to a release, but knows who does and how to involve them, value has been provided and costs can be recovered. Successful cost recovery is directly related to understanding liability and making a proper claim.

Cargo, hazmat, and property damage claims must lend themselves to automation and system integration. Customer input in the form of claims handling instructions enables nimble 3PLs to handle claims quickly and consistently—and get paid.

Understanding the hazmat challenge thoroughly enables the nimble 3PL to reduce legal liability to a non-legal business decision. By the same token, a thorough understanding of hazmat enables effective contingency planning.

An effective hazmat program can go a long way toward making the promise of market differentiation and increased revenue a reality for 3PLs.

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