Accenture Academy Blog

A brief review of most supply chain textbooks and leading journal articles presents the government’s role as one that is shrinking while others completely ignore the topic. The decades-long efforts to deregulate the transportation industry, remove international trade barriers, and foster global supply chain activity are primary reasons why so little attention has been paid to the critical roles of government. However, the reality is that lawmakers and regulators are taking a more active role in the flow of goods in 2010.

People who favor small government may see this as an intrusion into private enterprise, but taking a total government hands-off approach could be disastrous. A case in point is the interception of US-bound suspicious packages that were shipped from Yemen on October 29th in a suspected act of terrorism. Thanks to the efforts of governmental intelligence personnel and air cargo authorities to intercept the packages, two potentially harmful incidents were avoided.

Also, piracy and cargo hijacking pose security challenges and supply chain disruptions that require government intervention. A total of 289 piracy incidents have taken place on the world’s seas in the first nine months of 2010, according to the International Maritime Bureau’s Piracy Reporting Centre. Individual companies—both the ocean carriers and their freight customers—have limited options for protecting and recovering their assets. They need the assistance of multi-government initiatives such as military task forces, intelligence gathering, and modification of maritime laws to understand, prevent, and respond to acts of piracy.

Various governments are upping their efforts in the areas of safety regulation. In the US, federal officials are rolling out the Comprehensive Safety Analysis 2010. This initiative is intended to improve trucking company compliance with safety regulations and reduce accidents. US Hours-of-Service regulations and the European Union Road Transport Directive have modified driver schedules to prevent fatigue-related commercial vehicle accidents.

There has also been move afoot to increase economic oversight of the transportation industry. Rail industry consolidation and ocean liner rate volatility are prompting government agencies to propose regulatory changes to protect freight customers. For example, the US Shipping Act of 2010 seeks to eliminate anti-trust immunity for rate discussion and places restrictions on vessel-sharing agreement, expands tariff filing requirements, and creates an 18-member private sector Ocean Shipping Advisory Committee with a 5-year term. While freight shippers laud the Act, carrier advocates believe that it would destabilize the ocean shipping industry, make vessel-sharing agreements all but impossible, and give the Federal Maritime Commission an intrusive regulatory role.

Finally, environmental regulation of supply chain–related industries is on the rise. Mandatory use of lower emission engines and fuels in the US, recycling requirements such as the Waste Electrical and Electronic Equipment Directive in Europe, and comprehensive sets of laws on air, water, and waste are being proposed in Asia-Pacific countries. This area of regulation will continue to grow, and companies must take proactive steps to establish more sustainable, clean supply chains.

Clearly, the pendulum has begun to swing in the direction of greater regulation over the supply chain. In my mind, the issue isn’t about regulation being “bad” or “good” per se. Rather this issue is one of effectively serving all interested parties—consumers, retailers, manufacturers, logistics service providers, governments, and the general public. Their competing interests must be served via a balanced approach to regulation that addresses the needs of each constituency group without becoming burdensome for others. Realistic cost-benefit analyses of proposed regulations must be conducted and include an assessment of how effectively they can be enforced. For example, the push for 100 percent inspection of air cargo for explosives sounds logical, but can it really be accomplished given the logistics involved, the cost of detection technologies, and the potential for inconsistent enforcement? Perhaps some less onerous measures would be more appropriate.

So what can you as a supply chain professional do? First and foremost, realize that increased regulation or re-regulation of transportation and other supply chain processes is the reality today. Second, stay informed about regulatory initiatives and changes. Ignorance is never an excuse. Third, let your voice be heard by taking a proactive role in the regulatory process. Work with your professional organizations and advocacy groups during legislative hearings and listening sessions to ensure that your positions and perspectives are captured. Finally, be prepared for change. Develop contingency plans for likely outcomes of the regulatory process so that you are not caught flat-footed when changes are enacted.

 

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