Getting a Handle on Regulations and Compliance
Q: How do regulatory changes impact capacity, service, and pricing?
A: Numerous regulations and market dynamics have impacted the transportation industry. In North America, for example, the Moving Ahead for Progress in the 21st Century Act, which passed in 2012, resulted in the cancellation of nearly 9,000 bonds and freight forwarder licenses, removing 35 percent of the brokers and freight forwarders from the market.
As a result, brokers have higher operating expenses due to increased bond costs, and freight forwarders who have operated without bonds now have higher operating costs. Carriers without a brokerage license have increased operating expenses or have decided to no longer commit to more freight than they can haul on their own assets, reducing effective capacity. In addition, smaller carriers who have traditionally relied heavily on brokers to utilize their capacity could be left with under-utilized backhaul capacity. This leads to carrier inefficiency and increased costs that eventually have to be passed on to the shipping community.
Even with the impact of these regulations, and the tightening of capacity due to other factors, shippers need to be more cautious than ever to ensure they employ a broker or third-party logistics (3PL) provider with the financial depth, resources, and integrity to protect their interests.
Q: What are the challenges and opportunities in global trade driven by Foreign Corrupt Practices Act (FCPA) compliance requirements and processes?
A: In the United States and around the globe, the Department of Justice and the Securities and Exchange Commission have signaled their intent to increase enforcement of the FCPA. The challenge lies in the complexities and associated expense of navigating the qualification, audit, and compliance requirements in countries all over the world.
Because of valid concerns and high-profile exceptions experienced by some shippers—as well as the multinational 3PLs representing them—there has been tremendous interest in securing the services of 3PLs whose commitment to FCPA and other corporate governance is absolute.
Q: What solutions can shippers implement to neutralize these regulations’ impact on capacity?
A: Build virtual fleets by mining capacity from smaller carriers that are quality providers. Carriers that may not show up on many shippers’ radar due to size, location, or lack of direct sales effort represent viable capacity when vetted and managed by a capable 3PL. Ten smaller carriers, each providing a few trucks per week, managed through a single 3PL channel, can provide a level of capacity that larger carriers might not be able to supply.
Another solution to capacity constraints is exploring mode conversion options where viable. Every load converted to an alternative mode leaves an over-the-road truck available to cover loads in markets where alternative modes are not viable.