Freight Fraud: Protecting Your Supply Chain

An increasingly complex global supply chain environment and increasing reliance on technology have created a setting where freight fraud has become a significant concern over the last few years. Understanding the different types of fraud and implementing effective strategies can help supply chains limit their exposure and protect their operations.

Types of Freight Fraud

1. Identity Theft: Businesses are just as susceptible to identity theft as individuals. Fraudsters may pose as legitimate carriers or brokers by using stolen or forged credentials. They may also create fake companies that appear trustworthy.
2. Cargo Theft: This is your traditional heist and involves the actual, physical theft of goods during transit. This type of fraud can happen through stolen vehicles, hijacking, fictitious pickups, or warehouse burglaries. Theft also means portions of shipments that frequently go missing and unnoticed until unpacking.
3. Double Brokering: A fraudulent broker re-brokers a load to another carrier without the shipper’s knowledge. This often results in unpaid carriers and lost freight. RCT has a strict no-tolerance double brokering policy.
4. Phantom Shipments: In this scheme, fake documents and invoices for non-existent shipments are created, and trick businesses into paying for services that were never provided.
5. Payment Fraud: Deceptive practices are used to manipulate payment processes, such as creating false invoices for services not rendered or with the intent to divert funds to unauthorized accounts.

Freight thieves are smarter than most would like, and in many cases, several of these fraud types are used in tandem to swindle all levels of a supply chain.

What can you do to Limit Exposure to Freight Fraud?

1. Train Employees: Educate your employees on recognizing phishing attempts and fraudulent schemes and teach them to use their instincts. If something feels off, it most likely is. Ensure they verify all financial transactions directly with the carrier or broker to avoid falling victim to payment fraud.
2. Verify, Verify, Verify:

• Always verify the credentials of brokers or carriers using trusted databases like Carrier411 or the Federal Motor Carrier Safety Administration (FMCSA) SAFER database. Ensure their DOT and MC numbers are legitimate and match their registration.
• Call warehouses, shippers, and forwarders repeatedly to verify names, phone numbers, and insurance information. Check this information against any documents, POs, PODs, Bills of Lading, and Invoices.
• Certify carrier insurance coverage vs. load value.

3. Document Everything: Keeping detailed records and closely monitoring shipments can prevent unauthorized access to freight and financial transactions.
4. Utilize Technology: GPS tracking and real-time asset monitoring systems can be implemented to watch over high-profile shipments. As a result, digital platforms can alert you to any suspicious activities during transit. The cost can be a pass-through but proceed with caution. Not all stakeholders will accept this expense or appreciate the Big Brother effect.
5. Conduct Regular Audits: Perform regular internal audits of your freight operations to identify discrepancies or unusual activities.
6. Secure Data Systems: Protect your data systems with strong cybersecurity measures to safeguard sensitive information. Diligently maintain these systems regularly.
7. Collaborate with Industry Peers: Work together with other industry players and law enforcement agencies to share information and intelligence about potential fraud schemes. Generally, this collaboration can help mitigate and prevent criminal activities.

Fraud is Suspected, Now What? 

If you suspect freight fraud, it is important to report it to local law enforcement, especially the U.S. Department of Transportation’s Office of the Inspector General. The Federal Motor Carrier Safety Administration has a comprehensive list of action steps we recommend following which includes notifying the insurance company.

Finally, by understanding these types of fraud and implementing proactive strategies, supply chains can significantly reduce their risk of falling victim to freight fraud. Use common sense, stay vigilant, utilize technology, and verify credentials to keep your operations secure.

The recent events of Hurricane Helene and the subsequent longshoreman strike have created a perfect storm of challenges for the shipping industry.

These disruptions will significantly impact both customers and carriers, leading to delays, increased costs, and logistical headaches. In this article, we’ll delve into the specifics of how Hurricane Helene and Longshoreman strike challenge shipping and explore how freight brokers can respond to mitigate these challenges.

Impacts on Shipping

Supply Chain Disruptions: Hurricane Helene has caused widespread supply chain disruptions. Key transportation routes, including ports, railways, and highways, have been closed or severely restricted. This has led to delays in shipments and bottlenecks, resulting in inventory shortages and increased lead times for customers.

Carrier Operations: Carriers are facing significant operational challenges. The storm impacted major highway and supply systems. This has forced carriers to reroute shipments, often leading to longer transit times, higher fuel costs, and pickup and delivery schedules.

Infrastructure Damage: The hurricane has caused extensive damage to infrastructure, including roads, bridges, and warehouses including the heavily traveled I-40 and I-85. This not only affects the immediate transportation of goods but also has long-term implications for logistics operations in the region. 

Increased Costs: Both customers and carriers are experiencing increased costs due to the disruptions. Carriers are incurring higher fuel costs and additional expenses for rerouting and delays, while customers may face higher prices for goods and services due to supply chain constraints.

Longshoreman Strike: The situation has been further complicated by the onset of a longshoreman strike at major ports. This strike has effectively shut down about 36 ports on the East and Gulf coasts, which handle approximately half of the goods shipped into and out of the country. The strike is exacerbating delays and congestion, leading to even longer lead times and increased costs for both customers and carriers.

How Freight Brokers Should Respond

Proactive Communication: This is the most important element of a Broker/Customer/Carrier relationship. Freight brokers should maintain open lines of communication with both customers and carriers. Proactively providing warnings, timely shipment status updates, and warning of potential delays.  The conversations are all about helping manage expectations and reduce uncertainty.

Flexible Routing Solutions:  It is time to be creative. By leveraging networks, freight brokers can offer alternative routing solutions to bypass affected areas. This may involve coordinating with multiple carriers and utilizing different modes of transportation to ensure timely deliveries.

Risk Management Strategies: Planning and implementing risk management strategies is crucial. Develop contingency plans with Customers, such as pre-positioning inventory in strategic locations or securing additional warehousing space to buffer against disruptions. Time is key. If loads are not hot, don’t rush. Take the time to look at all options.

Collaborate with Carriers:  The constraints on the market these events are creating are impacting Carriers as well. Communicate about shipments and destinations in advance. Form a relationship by making an effort to keep their trailers full.

Leveraging Technology: Utilizing advanced logistics technology, such as real-time tracking and predictive analytics, can help freight brokers anticipate disruptions and make informed decisions. Follow local emergency management and governing organizations to stay the most current on closures and infrastructure limitations. This technology can also enhance communication and coordination among all parties involved.

The combined impacts of Hurricane Helene and the longshoreman strike have underscored the vulnerability of logistics operations to natural disasters and labor disputes. However, with proactive measures and strategic planning, freight brokers can play a pivotal role in mitigating the impacts on both customers and carriers. How freight brokers can respond will make a huge difference in carrier/client relationships. By maintaining clear communication, offering flexible solutions, and collaborating with Carriers, freight brokers can help ensure the resilience and continuity of supply chains during such challenging times.

 

Are you running into challenges due to Hurricane Helene or the Longshoreman strike, call us 440-441-7310.

January 2024 has most certainly come in like a lion or maybe a better description is a wrecking ball. Across the US, we have experienced some wacky weather to kick off 2024 from tornados, heavy and freezing rain, frigid temperatures, snow in all 50 states (yes Florida too), and today widespread fog! 

 

But how does all this winter weather impact your shipment and what tips does RCT Logistics give to be successful when shipping during the winter months?

 

Bad road conditions are always a concern in winter and are what usually cause delays. But there is more to safely shipping in winter. Here is a good article on why shipping in winter becomes more difficult. 

https://www.atsinc.com/blog/how-winter-weather-impacts-trucking-industry

 

RCT has been diligently working with shippers and carriers to be very proactive these last few weeks. Here are their tips for troubleshooting winter weather shipping.

 

• Practice foresight. Watch the weather and know the forecast along a route.
• Be flexible. The safety of the carrier and the shipment is most important. If Plan A isn’t safe, be ready to suggest Plan B. Discuss with the client and carrier preemptively postponing shipments out of an abundance of caution. 
• Open lines of communication and set expectations. Communicate often with the carrier, and provide timeline updates to the customer.
• Negotiate. In times of bad weather, the market pricing temporarily goes haywire. Advocate for a reasonable and fair price for all involved. Review pricing for any near future shipments and begin the proactive process again.
• Get feedback. What does your customer or carrier think could be improved? Learn for the next bad weather situation.

 

Does your freight broker act proactively?  Call RCT for a consultation today (330) 441-7310.

As Dr. Willy Shih from the Harvard Business School wrote in the Wall Street Journal, the supply chains that link producers of goods to consumers of goods can be intensely complex and difficult to understand. As long as supply meets demand, we don’t pay much attention to the supply chains whose function is to ensure that the basic principles of supply and demand exist. When, like they have for the past three years, things “gang agley,” we focus on those chains. Dr. Shih provides basic fundamentals for supply chains. To understand them is to succeed in the ever-more-complex science and art of logistics. Here’s Dr. Shih’s primer on the supply chain:

1. Supply chains are complicated, with ever-increasing layers of intricacy and scope.

Supply chains have two phases—a production side, where the final assembly of a product takes place, and a distribution side, where it gets to the buyer. The production side can be incredibly complex. That’s because some products have lots of parts—3,000 or 4,000 for a smartphone and as many as 30,000 for a typical gasoline-powered car.

On the distribution side, a supply chain might have steps that connect a manufacturer to a retailer, overseas shipping, passing through a trucking link on the way to a distribution center, and then on to the store. Distance adds even more convolutions.

      2.  Because demand is hard to predict, many producers use to just-in-time parts inventories. 

When parts suppliers are local, a condition Cleveland manufacturers experienced in the 20th century, this works. But we live in a global economy today with suppliers spread everywhere. The logistics of scheduling deliveries exactly when needed becomes much more complex. During and after the Covid pandemic demand spiked; bottlenecks disrupted international shipments of parts; gridlock hit continental logistics. Just-in-time was neither in time, nor just.

      3. Ordering more than needed makes shortages worse. 

Typically, a retailer or manufacturer only orders what is saleable or consumable until the next cycle begins. But sometimes a hot seller or short supply item appears, so the producer orders extra—just in case. Like Woody Hayes said about the forward pass, “three things can happen; two of them are bad.” Producers might succeed by carrying excess inventory, but it will probably contribute to even more shortages of key parts or more inventory than a producer can use.

     4. Longer supply chains equal more logistical problems.

Many distribution supply chains are very long series of steps. Getting a television from China to Cleveland means truck transfers in Asia, long sea voyages, numerous rail and truck transport. More congestion takes capacity out of the supply chain system. The more things back up, the fewer things move through.

     5. Bottlenecks are hard to spot because so few can see the whole picture.

People at different links in the chain only see problems upstream or downstream from them. A starkly visible problem of 100 ships idly waiting to unload – blame the Port of Los Angeles. The real bottleneck was in distribution centers close to the consumer, with labor and logistics shortages. Even when the port was running 24/7, there was no place for containers to go, no one to drive them, and no one to unload them.

Producing better products effectively and efficiently and offering those products to consumers at lower costs doesn’t work if you lack the logistical depth and support to collect the parts and distribute the goods.