The vice president of supply chain for one of the world's largest auto companies was not having a good day. In fact, it had not been a very good year, and the VP was reviewing the litany of recent problems with his operations team. The latest crisis was a go-no-go decision on the site for a new assembly plant long planned for central Texas. The site was ideal, but a final decision was suddenly on hold because of serious concerns about the adequacy of current rail service vital to both inbound and outbound materials movements. Only one weak carrier overwhelmed with operations failures currently served the site. While another carrier was eager to provide additional service, the existing carrier stubbornly refused to grant competitive access to the proposed site. The entire North American strategy for a new line of pickup trucks depended on this project moving ahead on schedule. Now, the project was dead in the water.
"Didn't our general counsel say this was just a formality?" the VP asked his logistics director.
"He's sure changed his tune," replied the operations director, who was especially angry about this glitch that threatened his production strategy. "Now he's trying to get help from some state agencies and anybody else who will listen. He says this will take months to resolve. I don't think he has any idea what to do."
Glad we have such legal geniuses on our team, the supply chain VP thought to himself before moving on to the next issue on the agenda. The plant near Atlanta was just getting back on schedule after weeks of disruptions caused by a disastrous train wreck that had destroyed 10 containers of critical electronic components. The $12m of imported parts had made their way all the way from Japan to within a few hundred miles of the destination plant when the train derailed and all the containers went into an adjacent lake. The loss of the electrical components disrupted production for weeks, and to add insult to injury, the railroad was denying liability for the $12m loss.
"There is no doubt that the railroad is at fault," said the exasperated VP. "How can they possibly decline our claim?"
"I know what you're saying," the logistics director agreed sheepishly, "but the railroad says the bill of lading just makes them agents for the ocean carrier, and their liability is limited to $500 per container. I'll get our lawyers on this as soon as the freight payment debacle gets solved."
Oh, yes, the freight payment debacle. The supply-chain executive had even heard from headquarters in Tokyo about this embarrassing situation. It seems that the third-party the company had entrusted with $3m to pay all of its freight bills mysteriously went out of business before making the payments. Now the company was being sued by all of its carriers to pay the bills again, just because his team picked the wrong third-party. Not only did this mistake make his whole department look incompetent, but also it had put a $3m hole in his budget.
"Don't we have great supply-chain processes, the best technology and terrific suppliers?" the VP asked of no one in particular. "How can a great company like ours have such disruptive problems with basic transportation operations? We've got to get someone on board who knows about this stuff!"
Fortunately, this beleaguered supply-chain executive is fictional. No one deserves this amount of misery. But every one of the issues described above is a real situation that some company has had to wrestle with because of its own ill-informed decisions.
Consider the following real situations that the above fictional examples are based upon.
Toyota has just broken ground on a new $800m assembly plant near San Antonio to build its Tundra pickup truck, but not before going through a difficult situation to gain adequate rail service, which the company apparently thought was a routine matter. The Union Pacific Railroad, however, refused to allow the BNSF to use its lines to access the proposed site, and it was totally within its rights. It took many high-priced lawyers and lobbyists talking to the right powerful politicians to leverage a solution that would save the project without litigation or lengthy delays. The state is providing $15m to help build a new rail line that will connect the BNSF to the site. Everyone is putting on a happy face, but they all know the situation could have ended quite differently.
|"There is a greater need than ever to have people on staff educated in the legal aspects of transportation and logistics."|
-William Augello, University of Arizona adjunct professor of law
|Transportation Logistics and the Law|
|If you are among the majority of supply-chain executives who have been told that freight transportation is no longer a big issue because it's deregulated, a book from one of the most prominent transportation attorneys in the U.S. will open your eyes. William J. Augello's book Transportation, Logistics and the Law (Second editor, 2004), reveals the legal risks, costs and other traps for the unwary that threaten the smooth operation of every supply chain. More important, this text explains in very clear language how to prevent many of these problems and what to do if your company is involved in any of the myriad legal hassles that are extremely common when moving freight today. |
While the various federal, state and international agencies that regulated freight transportation for decades have ebbed away since the 1980s, even more complex and arcane bodies of law have stepped in to deal with the challenges that are inevitable with movement of goods. Problems with freight loss, damage, pricing, payment, service levels, insurance and security are as prevalent now as they ever have been. Augello's book clearly explains which bodies of law and regulation now apply to each type of transportation activity and how to resolve such issues.
The book is divided into four major sections. The first, and most important, is Augello's narrative explaining the law and regulations covering every aspect of transportation, including:
• Federal jurisdiction
• Regulation of the railroads, motor carriers, airlines and ocean carriers
• Regulation of intermediaries to include brokers, forwarders and 3PLs
• Multimodal shipping
• Principles of contract law for transportation
• Liability for loss and damage
• Cargo insurance
• Shippers' and carriers' duties and responsibilities
• Importing and exporting
• Terms of sale
• International laws and treaties
• Hazardous materials laws and regulations
Two large appendices contain the actual text of carefully selected statutes and regulations covering the most common problem areas impacting users of transportation. Approximately 30 small appendices follow, and include very handy tables, check lists, sample agreements, documents, glossaries and otherwise hard-to-find information that makes Augello's book an everyday reference source.
Augello served for nearly 30 years as head of the Transportation Consumers Protection Council, which helps companies deal with basic issues such as freight claims for loss and damage and transportation pricing. His book devotes a significant amount of attention to such transactional issues, which high-level supply-chain executives may consider relatively minor issues. As Augello points out, however, a company with a net profit margin of one percent must sell $100,000 of its products to make up for a $1,000 unrecoverable loss.
"Management may increase its attention and allocation of resources to its logistical operations when it realizes this [impact on its bottom line]," says Augello.
One intent of the book is to make management take notice of the need for more attention to transportation, which he correctly labels as a "quasi-legal subject that requires paralegal training for all of the persons charged with responsibility for any segment of the supply chain."
The primary intent of the book is to help the practitioner who wants to establish a compliance program for his company to prevent problems before they occur. It is organized to serve as an integral part of a corporation's operating manual. More than likely, nearly every logistics manager reading this book will find that some important aspects of his company's supply-chain operations are vulnerable to serious legal problems. Augello's book is an easy way to correct transportation procedures that can cripple a company's entire supply chain.
For more information, go to www.transportlawtexts.com
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