Disruptions within the global supply chain from the Coronavirus disease (COVID-19), including capacity constraints and security breaches, are compelling organizations to place greater focus on risk management. This is especially important when it comes to the increased risks of moving dangerous goods (DG) within the supply chain.
DG shipping adds requirements to an already challenging process, which must be addressed in order to maintain a smooth supply chain in today’s highly competitive environment. Unfortunately, organizations often put their operational efficiency, competitive agility, reputation and bottom line at risk by ignoring the necessary technology and training in place to ensure compliance.
Dangerous goods shipping challenges
Shipping DG can be complicated and time-consuming. Thousands of items are classified as “dangerous” or “hazardous,” and the regulations that govern their transport are complex, constantly evolving and can vary by country and transportation mode. The lack of regulatory harmonization makes it challenging for organizations to ensure all shipments, including labels, packaging and documentation are compliant. In fact, according to a Labelmaster global survey of DG professionals, 51% of respondents found it challenging to keep up with the latest regulations and 28% were not confident or unsure that they could ensure DG regulatory compliance across their organization.
Ensuring compliance is even more difficult for organizations with multiple business units or locations, which often have different shipping processes and lack consistency across the supply chain. This is especially true for organizations where senior leadership doesn’t understand the impact compliance (and non-compliance) can have on operational and financial performance. Many view DG management as a “necessary evil,” and as a result, don’t invest in the required resources, technology or training. So, it’s no surprise 25% of DG pros feel training at their company does not adequately prepare employees to comply with DG shipping regulations.
In addition, despite reliable, affordable and repeatable DG management technology solutions being available, many companies still rely heavily (or completely) on manual compliance processes that are overwhelmingly inefficient and highly susceptible to errors. This approach further compounds the challenges of shipping hazmat safely, compliantly and efficiently, and puts their employees, customers and business at greater risk.
Understanding the value of compliance and risk of non-compliance
With the dozens of tasks required to put a DG item into transport, significant inefficiencies, errors and delays can happen across each supply chain partner. And, when a hazmat shipment is stopped for failing to meet shipping regulations, it ends up stuck in customs, on the tarmac or at a port until the shipper can find a way to make it compliant. This can cost a business millions of dollars in fees, expenses and lost revenue, and result in late customer deliveries that impact customer satisfaction or damage customer relationships.
Because of the risk involved, organizations must recognize the true impact that DG compliance (or noncompliance) can have.
- Risk to balance sheet. Costs resulting from non-compliance can add up – from fees related to stopped shipments, to increased insurance liability following an accident, to the hidden costs of inefficient operations. One large distributor had more than 12 instances of penalties across its sites totaling over $1 million in fines.
- Risk to brand. Dangerous goods have the potential to impact public safety and the environment, and as a result, brand equity. So, when there is an incident involving DG, especially if it involves noncompliance with rules and regulations, this can create a negative sentiment – in the press, and most importantly, from retail customers, consumers and other business partners.
- Risk of stalling supply chain. Organizations cannot afford to let such simple tasks as incorrect shipping labels, incomplete documentation or other compliance-related errors impact customer service. Stalled shipments result in late deliveries and customer dissatisfaction and can ultimately lead to additional penalties levied by the customers themselves.
- The risk to competitive position. Businesses that have the infrastructure and processes in place to ship DG effectively can offer popular products that other companies may avoid, and be able to ship those products safely and faster than competitors. Additionally, reducing risk and streamlining supply chain processes can make a company more attractive to business partners and customers.
Using technology to improve processes and transparency
The risks of regulatory non-compliance are a constant concern for organizations responsible for DG packaging and shipping. That’s why, in today’s challenging business environment, organizations need technology like DG software that supports compliance throughout the supply chain.
· Drive supply chain efficiencies. DG software can automate and streamline the shipping process by producing documentation and validating shipments, packaging, labels and markings against the latest regulations. Templates and electronic signatures drive further efficiencies for organizations with repetitive shipments or that ship the same material from multiple locations. Diagrams for packing and markings provide visual instruction to further ensure employees across the supply chain are preparing DG shipments properly.
- Maintain a smooth supply chain. Compliance challenges slow down the process of getting shipments ready and out the door and even slow down transport. By taking steps to ensure compliance for labels, packaging, documentation and permits, companies can help ensure deliveries reach customers on time.
- Keep supply chain costs in check. Investing in automating DG shipment validation helps avoid fines, maintain lean operations, and identify more cost-effective solutions to ensure they’re not spending more than necessary on packaging or protection of goods.
- Improve supply chain transparency. DG shipping technology requires organizations to have more complete, accurate master data. This detailed information about a product’s components, makeup, dimensions, and origins not only helps those directly responsible for DG management, but also manufacturing and procurement, along with third-party logistics (3PL) providers, carriers, customers and other supply chain partners.
While technology can improve DG shipping operations significantly, it’s important to realize that even the latest and greatest solutions won’t work to their fullest potential without complete and accurate data or proper training for employees. It’s critical to invest in people, data accuracy and efficient processes to derive maximum value from technology.
Mitigating supply chain risk through effective DG management
Shipping and handling DG will only become more difficult as supply chains become faster, greater numbers of items become classified as dangerous and regulations continue to evolve. Whether a company sends a few DG shipments per month or oversees a complex, global supply chain, there’s a lot at stake by not taking a few necessary steps to ensure the safe movement of goods.
By making hazmat compliance a priority, investing in DG compliance technology and training, and implementing efficient and transparent processes, companies can be confident their operations teams are all fully compliant with the latest rules and regulations. This is a real competitive advantage and risk mitigator. All executive, management, operational and compliance levels must understand the days of merely “passable” adherence to compliance regulations are a thing of the past. Compliance is not optional; it is a major risk and success factor for your business.