Strategic Supply Chain Nightmare

The recent Mona Vale Tanker Accident, Cootes Transport accident was a tragic loss of life that has highlighted that vehicle compliance levels at Cootes was not adequate. The immediate reaction by law enforcement agencies in NSW and Victoria was to inspect Cootes operations. The defect notices issued by the authorities led to a significant number of Cootes’ trucks being out of action.

The reduction in the total available fleet for distribution of fuel has disrupted fuel supply and availability throughout the eastern seaboard. How many retailers could afford to have a disruption to their supply chain by their 3PL or transport supplier being shut down by the police, transport inspectors or OHS inspectors?

Retailers and wholesalers reliant on single transport channels should be reviewing their Supply Chain Partners and testing their supply chain resilience. Given the modern structure of the supply chain in Australia, many retailers and wholesalers are fully dependent on transport companies to ensure stock is available to consumers.

This exposure of a critical part of their supply chain leaves retailers and wholesalers exposed to transport companies. What is clear from a number of high profile cases in recent months is that law enforcement agencies (police, transport and OHS) have adopted the following mode of operation:

• attend and deal with the scene of the accident
• investigate the accident for any road transport breaches
• police and transport inspect the transport company and its trucks

The consequence is that the police will very quickly have the evidence about:

• the particular truck and driver (maintenance log, Work Diary)
• CoR breaches by the transport company and the employees of the transport company, which led to Cootes grounding its entire fleet
• CoR breaches by the supply chain partners that can be further investigated, leading to possible further prosecutions along the “Chain”.

In a number of cases the police have taken not just the evidence of tampering, but also information about Work Diaries and Maintenance to determine who in management was responsible for the active breach or the failure to act.

While there are a number of strategies for testing resilience, contract terms and contract oversight should also be reviewed to ensure Chain of Responsibility (CoR) compliance and that the contract embeds appropriate performance metrics and monitoring mechanisms.

Reliance by supply chain partners on contractual provisions for penalties against transport companies, in the case of a shutdown, is of little comfort for failing to meet customer expectations. Such clauses may also direct culpability at the consignor or consignee.

Supply Chain Partners reliance on contract terms that may or not comply with the CoR laws will be of little practical use when stock is not in store for consumers to purchase. Some existing contract terms while conducive to complying transport services may alone or with conduct expose the Consignee to CoR law breaches.

What needs to be done by purchasers of transport services?

• Strategies for selection, retention and use of transport companies should be reassessed to ensure that the transport task can be completed in all circumstance.
• Diversification of critical tasks across a number of transport companies or processes, so that if one supply channel is disrupted, another supply channel (transport company) can be used to take up the extra work
• Introduce lead and lag indicators into transport company contracts, to provide insight into how secure the transport service is and how at risk your consumer’s experience might be.
• For highly sensitive freight tasks (timing, availability), internal and external recovery strategies should be documented. The strategies should be tested under “live” conditions to ensure suitability and response capacity.
• Ensure appropriate reporting and external review of the transport company for CoR and OHS performance in addition to the existing contract performance criteria.

What is sure, is that many organisations with single 3PL and Transport relationships are reviewing their arrangements and realising that they have significant risk.   Regulators and enforcement agencies now must play a more significant role in ensuring safety is managed and that proper systems, procedures, training and tools are used ensure compliance to demonstrate “Reasonable Steps” are taken.

Visit www.CORAustralia.com for assistance with CoR legislation preparations, pre-audits and training.