With volume spikes, prolonged truck price increases, and record-level tender rejections, 2020 has been one of the most volatile years in recent freight market history. If you’re like most shippers we’ve talked to, you’ve had to work hard this year to get the coverage you need, and have brought on new capacity providers to fill the gap. Are you taking into consideration all of the quality and compliance risks of your providers?
The drivers who move your product present legal, financial, service and reputational risks for your business. Read on to learn why quality and compliance is something you should be talking about with your brokers and carriers, what questions you should be asking, and how Machine Learning is being used to change the game when it comes to driver quality and compliance.
The risks of quality and compliance in freight
At a high level, shippers face legal, financial, service and reputation risks every time they ship freight.
Legal risks – On the legal side, there has been a trend over the past 10-15 years where shippers can be held liable for the actions of their carriers via vicarious liability. Similarly, a precedent has been set around negligent hiring. Here, if the carrier hauling the load is deemed unfit (due to authority, insurance, safety history, or some other reason) legal ramifications can come down on the shipper.
Financial risks – Not only are there the legal costs if you are pulled into a lawsuit but also compensatory costs if you are held liable, as well as increased insurance costs. Plus, poor-quality drivers lead to a higher number of cargo claims which can have a material impact on transportation costs.
Service and reputation risks – Service and reputation often go hand in hand. Poor service such as late pickups and deliveries, accidents, and cargo damage can have negative implications for the service you give to your customers and your ability to continue to earn their business
The pitfalls of using CSA ratings for quality and compliance
Many traditional brokers and asset carriers who broker loads use the FMCSA’s CSA ratings to determine whether or not a driver is good to haul. This approach has a lot of blind-spots because the CSA rating program was not meant to be used as a mechanism to understand carrier safety and compliance. In fact, it was designed solely for enforcement authorities to intervene with very poor performing carriers.
Based on time and resources, the FMCSA only does a full inspection of carriers who have been flagged by their system. Typically, only carriers with a significant amount of safety violations qualify for a full review which means that a startling 95% of carriers are not rated at all.
When capacity providers rely on CSA ratings to vet their drivers they have very limited visibility into the vast majority of safety records. This prevents an adequate assessment of carrier and driver safety during hiring and leads to a lot of uncertainty for shippers.
Five questions you should be asking to improve quality and reduce risk
Not sure where to start? Use these five questions to check-in with your brokers and carriers to make sure you’re on the same page.
- Are you registered, licensed and bonded? This may seem basic, and it is. But if you or your team is frantically trying to find coverage for backup or spot, this fundamental step can be overlooked, and introduce significant risk.
- What types of insurance do you have, and what do you require of your carriers? A freight partner with a comprehensive and thoughtfully designed suite of insurance policies will be a better partner in managing risk. sleep easier at night by verifying that your freight partner has the following core types of coverage or suitable equivalents: Broker liability, excess liability, contingent and additional transportation cargo coverage, workers compensation and employer liability, crime, and mandatory broker bond insurance.
- How is carrier and driver safety assessed? Accidents are an unfortunate reality in this industry, so you need to take proactive steps to mitigate risk by requiring transportation partners to set safety standards that are acceptable for your business. Ask for a list of what their safety standards are. You should be provided with a speedy and thorough reply that amounts to more than “We don’t use unsatisfactory rated carriers.”
- How often are carriers screened and audited after onboarding? It’s not enough to check for compliance requirements at the time of onboarding. Even regularly scheduled static checks (e.g. once a quarter or, gasp, once a year) of carriers is insufficient. We recommend working with partners who can audit their carriers automatically and in real time — at least daily if not more frequently.
- How do you identify and address fraud? In this industry, data is a powerful tool that everyone should use to prevent fraud. Your transportation providers should have a clear process to identify fraudulent sign-ups onto their platform.
How Machine Learning is changing the quality and compliance landscape
At Convoy, in order to safely and accurately vet our carrier network we created a robust quality and compliance program from the ground-up. This industry-leading program leverages a rich data set and vet carriers not just once, but every single time they are assigned to a load. This is where Machine Learning comes in.
There are thousands of data inputs, like speeding violations and inspection outcomes, that can be vetted across millions of carrier records, which means information is changing all the time. Not only is identifying the safest carriers a challenge, but being able to constantly monitor compliance as it fluctuates in real-time is a feat no human can accomplish. Convoy uses Machine Learning to process millions of inputs in a short time, correlate them to crash likelihood, and generate a score for every carrier that indicates how safe that carrier actually is.
The more data we feed our model, the more accurate it becomes, and because it’s a learning algorithm, it actually gets better over time, driving incremental accuracy and better results. This approach has resulted in a carrier network with 16% fewer accidents compared to the rest of the industry, as well as a claims-incident ratio that is 20x lower than the industry average. With Machine Learning, Convoy has taken the guesswork out of carrier safety assessment, and replaced it with concrete, data-based modeling to yield bottom-line results for our shippers.
Sign up for Convoy’s free shipper platform today and start taking advantage of the benefits of Convoy’s industry-leading quality and compliance approach. Or, tune in to Let’s Talk Supply Chain on Tuesday, December 15th to hear Lorin Seeks, Director of Quality and Compliance at Convoy, dive deeper into this topic with a special focus on small and midsize businesses.
Convoy is the nation’s most efficient digital freight network. We move thousands of truckloads throughout the U.S. and cross-border to Canada through our optimized, connected network of carriers, saving money for shippers, increasing earnings for drivers, and eliminating carbon waste for our planet. We use technology and data to solve problems of waste and inefficiency in the $800B trucking industry, which generates over 72 million metric tons of wasted CO2 emissions from empty trucks. Fortune 500 shippers like Anheuser-Busch, P&G, Niagara, and Unilever trust Convoy to lower costs, increase logistics efficiency, and achieve environmental sustainability targets.