How the government can help improve the U.S. supply chain

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The U.S. DOT asked for comments and feedback on 13 questions about how the government can help improve the U.S. supply chain. We took the time to submit the following comments:

 

Re: Docket: DOT-OST-2021-0106

Dear Administrator:

I am a former general counsel a trucking, logistics, and warehouse provider, now serving trucking, logistics, and shipping clients in private practice. Please accept my comments below in response to the America’s Supply Chains and the Transportation Industrial Base docket request for comments.

As the agency considers how best to ensure the U.S. develops and maintains the strongest supply chain in the world, I encourage the agency to consider the following general comments as well as specific comments in response to the docket request for answers to certain questions:

General Comments:

  • Less is more.
    1. The supply chain does not need more regulation, nor more mandates. There are many good existing laws impacting the supply chain and its stakeholders. Those laws need to be enforced consistently to ensure everyone plays by the rules, and even more importantly, can confidently operate knowing those are the rules and will be the rules long term. One of the biggest frustrations my clients face is the whiplash nature of changing regulations and changing interpretations after each local, state, and federal election. Each change costs workers and industry significant time, money, and resources to comply, and that takes away investments in people, safety, and innovations.
  • Allow stakeholders choice.
    1. Mandates of any type remove choice, and can stifle innovation, and hurt progress. They should be used sparingly and left primarily to safety matters. Incentives on the other hand can be effective, but mandates that eliminate thousands of owner operators (when those same owner operators could choose any of thousands of employee driver openings without the mandate), and mandates that force technology adoption that is not appropriately tested, and so on curb innovations in the supply chain. Allow workers to choose unionization, employee but not unionization, or independence. In an industry as big and diverse as the supply chain there is room for every worker and business to choose the relationships that work for them. Enforce the strong laws that already exist to punish bad actors; limit further restrictions on choice and mandates.
  • Focus government efforts on 3 areas: safety, infrastructure, and efficient movement of people and goods.
    1. It is criminal how many deaths occur on America’s roadways each year. The vast majority are caused by passenger vehicles. Every stakeholder in the supply chain, including passenger vehicle drivers, shippers, carriers, brokers, workers, equipment and technology providers, and government agencies need to do more. Government needs to do more with the data it has available and that are available in the industry to prevent bad actors from joining the roadways, and remove bad actors from the roadways. This means lowering speeds of all vehicles (passenger included) on the road; this means increasing the safety technology in all vehicles (passenger included) and excluding that technology from the calculus of independent contractor status in misclassification claims; this means updating data collection and analysis methodologies to devote enforcement resources to the right actors; this means increasing training requirements for new drivers; this means more aggressively removing driving privileges from bad actors; this means investigating shipping practices that push the boundaries of safe driving, and more.
    2. The government needs to get serious about funding all infrastructure and prioritizing the efficient movement of freight and people. This includes continually funding roads, waterways, air travel, and so on. This cannot be the can kicked down the road each year. More funding is needed to ensure our ports, roads, rails, waterways, airports, etc. are consistently maintained and updated. Funding sources need modest escalators/de-escalators to adjust with inflation, and funds need to be dedicated to infrastructure. The fuel tax has been a tremendously efficient funding source for highways for decades, but its effectiveness is waning because of changing technologies. The government needs to move to new funding sources (ATRI has a good idea on how to efficiently address electric vehicles) for all modes and needs. This includes funding cybersecurity and other security efforts for all modes in the supply chain.
    3. The government should consider adopting an office of supply chain, not as a regulatory body, but as something akin to the NTSB. The office should monitor the supply chain across all modes, key materials and inputs, key stakeholders, etc. The office should conduct research on issues impacting the supply chain. The office should gather data from industry and workers, and act as a reliable information source for industry, workers, and policymakers to help shape funding, policies, best practices, and so on. The office should have grant making authority to research and test theories and ideas. The office should be a leading voice, not regulatory body, on supporting the U.S.’ effort to develop and maintain the most efficient and most resilient supply chain in the world for people, information, and goods.

 

  • Prevent unnecessary state and local regulation.
    1. The federal government should use its powers to encourage and prohibit state and local governments from passing laws that impede on the federal government’s role as the lead (and sole) governing body over the safe, efficient movement of people and goods in the U.S. supply chain. This includes encouraging, and where necessary requiring, local governments to allow the creation and maintenance of safe truck parking; the prevention of state and local mandates and labor and employment laws that eliminate the freedom of shippers, carriers, brokers, workers, and unions, to create and maintain the working relationships that work for them; and so on.

Specific Feedback to Certain Docket Questions:

  • Major bottlenecks.
    1. Obvious major highway bottlenecks are in major metro areas such as Atlanta, Orange County, etc. I encourage the agency to review ATRI’s list of major bottlenecks published each year based on surveys of drivers and carriers. Our nation’s highways are in desperate need of updating and expanding, but the agency should not disregard the need to update our locks and dam systems, our ports, and each type of infrastructure for the various modes of moving people and goods. Funding cannot go all to one type of infrastructure but should go in proportion to freight and people movement.
    2. While I do encourage utilizing ATRI’s list of major bottlenecks, the government cannot ignore critical infrastructure corridors for certain products. For example, the government must ensure food, ingredients, health care products, and other life sustaining materials can smoothly move from farm/plant to table, even when it does not pass through major metropolitan areas. If the government only prioritizes major metropolitan areas because of cost-benefit-analysis work, the nation will leave itself vulnerable to issues with critical supplies coming from less populated areas.
    3. Further, the government needs to make sure the infrastructure is flexible and resilient enough for first responders to do their excellent work in the face of natural disasters.
  • Current and future shortages and limitations of cargo handling equipment.
    1. Supply chains excel when they are balanced. When there is a balance of drivers, loaders/unloaders, storage facilities, loads, dock availability, ship availability, and so on supply chains hum. Today’s supply chains are dramatically unbalanced. Sky high freight demands, labor, facility, and equipment shortages, as well as painfully aged infrastructure and a lack of national policy make for a severely unbalanced system, and that imbalance exacerbates each individual problem.
    2. An office of supply chain management created by the government to monitor balance issues, and help industry stakeholders (not govern, or require, but rather serve as a researcher, information source, and liaison among stakeholders), can help foresee dramatic imbalance issues, and encourage stakeholder behavior that restores balance (e.g., encouraging/incentivizing the restoration of discarded chassis instead of building new chassis that may take longer and lead to future unused equipment; encouraging operating hours that align/compliment the efficient operation of each step in the supply chain).
  • Warehouse capacity and availability, and other 3PL service provider challenges.
    1. Warehouses, distribution centers, and carriers serving those facilities face many challenges, including two notable ones. First, local attitudes, and therefore local zoning laws, make building new facilities, expanding old facilities, or converting facilities difficult, if not impossible. Consumers want the goods they buy, but they do not want trucks, vans, and warehouses in their towns. In a push for more environmentally friendly, sustainable supply chains with shorter trips we need more facilities, including more facilities closer to consumers. Second, these facilities need adequate safe parking so drivers can take their mandatory HOS breaks, meal and rest breaks, and general rest breaks. More safe parking helps drivers avoid driving when tired, helps drivers avoid rush hour traffic, and most importantly, gives drivers a more humane working experience because they know they are safe while parked. Local zoning officials need to be open to new, expanded, and converted warehousing and distribution center space with sufficient safe parking.
    2. 3PL service providers face many challenges, but arguably its largest legal challenge is its unknown responsibility and liability when it comes to motor vehicle accidents. Federal and state laws are clear motor carriers are liable to the public for accidents the carriers cause. However, states are divided on whether 3PLs – brokers – should also be held liable for motor vehicle accidents caused by carriers they arrange for shippers. The supply chain industry, top to bottom, needs certainty as to whom is liable to the motoring public when carriers cause motor vehicle accidents. It stands to reason the parties actually in the accident should be liable, not up and down the ladder parties that do not hire drivers, and do not operate vehicles.
  • Major risks to resilience.
    1. The last 18 months have highlighted the myriad of major risks facing the supply chain. Cybersecurity threats, natural disasters, material shortages, labor shortages, over-regulation, tariff wars, combat wars, health disasters, any of them and all of them significantly disrupt the supply chain, and only the largest, most sophisticated shippers and providers have the resources to build enough resiliency in their supply chains to withstand the risks. The government should create and maintain an office of supply chain to support industry’s efforts to build and maintain supply chains resilient against these types of risks. This office could work with industry cyber defense firms to share data, strategies, ideas, programs, etc. to fight cyber threats. This office could work with other agencies to prioritize infrastructure initiatives that support the efficient movement of freight and people. This office could work with industry to push more data sharing and data compatibility across freight modes to increase efficiencies. This office could be a leading research and policy developer, akin to the NTSB, to help sister agencies develop or revamp policies to help increase the resiliency and efficiency of the supply chain.
  • The effects of climate change on transportation and logistics infrastructure.
    1. Climate change has dramatically increased the pace of innovation to reduce emissions in the supply chain. Vehicles themselves have received a lot of attention, prudently so, but more attention needs to be given to why vehicles must idle in the first place. Why do trucks sit for hours at ports and rail yards? Why do vehicles sit in traffic for hours? Why do vehicles sit at shipping facilities for so long? What can be done to reduce the idling? Reducing idling will not only help the environment, but it will also lead to greater job satisfaction (who enjoys sitting in a vehicle, stuck in line somewhere?).
    2. Before fuel winners and losers are picked (e.g., electric, CNG, LNG, hydrogen, etc.), the government should make sure options are being thoroughly tested and explored, and the unintended consequences of each are fully vetted. The best outcome for the environment is likely a freight and people supply chain infrastructure that utilizes a variety of fuel sources, not just one.
  • Technology standardization issues.
    1. In time greater standardization of data structures, and other technology-related items will benefit the supply chain and help it operate more efficiently. However, the industry is currently going through a technology revolution with significant investments and energy being poured into making improvements. The government should not force a standard too soon and stifle innovation.
  • Workforce challenges.
    1. This is arguably the greatest challenge facing the supply chain – finding, developing, and retaining quality talent to staff the millions of jobs up and down the supply chain. The industry lacks enough drivers, dock workers, warehouse workers, technicians, and office employees to operate efficiently. To the shipping community the supply chain has often been viewed as a cost center, not a value-add, and therefore every effort has been made to reduce expenses as much as possible, pressing down rates and pay throughout the industry. Add to that, many in the industry face opposition from local communities wherever they go. Towns ban new truck parking facilities and warehouses because they do not want trucks in their town. Distribution centers ban truck parking and ban drivers from using office bathrooms because they fear slip and fall lawsuits on their property, and do not want drivers in their facilities. Government regulations (e.g., California’s AB5 law, New Jersey’s new anti-independent contractor legislation, etc.), attempt to ban drivers from being operators and pursuing their dreams of independence in a safe way despite the hundreds of thousands of employee truck driving jobs available to any driver wishing to be an employee. Government regulations, plaintiff lawyers, and government agencies discourage any new business from forming by adding more regulations, more penalties, and more theories of liability, rather than encouraging and supporting new businesses and innovative ideas.
    2. The best thing the government can do to help alleviate workforce challenges in the supply chain is to refrain from further regulation and new interpretations. The industry is suffering whiplash from 10-20 years of back-and-forth regulation and interpretation at the state and federal level on labor and employment matters. Workers and industry can operate at their best when they know the rules are the rules, everyone follows them, and they do not change every two years.
    3. The government should focus instead on educating employers and workers on the resources available to help them grow and develop. The government should focus on educating the workforce about the career opportunities in the supply chain (something an office of supply chain could do), and more importantly, the government should help the industry educate the public about the future careers and skills needed in supply chain. Few industries can match the innovation and technological disruption going on in the supply chain today, and the public needs to know about the great career opportunities. The days of driving dirty old trucks for a month at a time are dwindling. Supply chain is an industry of technology and innovation more and more every day in the trucks/trains/ships, in the office, in the warehouses, and in the repair shops.
  • Current barriers to supply chain performance.
    1. The most critical barrier to supply chain performance is a lack of steady, adequate funding. The USG needs to stop kicking the can on infrastructure funding. More is needed to ensure our ports, roads, rails, waterways, airports, etc. are consistently funded. Funding sources need modest escalators/de-escalators to adjust with inflation, and funds need to be dedicated to infrastructure. The fuel tax has been a tremendously efficient funding source for highways for decades, but its effectiveness is waning. The government needs to move to new funding sources (ATRI has a good idea on how to efficiently address electric vehicles) for all modes and needs. This includes funding cybersecurity and other security efforts for all modes in the supply chain.
    2. Another barrier to supply chain performance is a lack of barrier to entry. Becoming a motor carrier or a 3PL is too easy. Becoming a good motor carrier or a good 3PL is very, very difficult from a business standpoint, but from a regulatory standpoint it is very easy to become a bad motor carrier or a bad 3PL. A simple application, small filing fee, and virtually no oversight from the DOT, combine to open the industry up to bad actors that have no intention of operating safely, legally, or ethically. That ease of entry gives shippers voluminous service provider options and give them the leverage to push rates down so low carriers and 3PLs cannot afford higher pay to workers, more investments in safety, and more investments in security and resiliency. I do not encourage a return to the regulated days, but the barriers to entry should be raised to balance weeding out bad actors and giving new businesses the opportunity to enter and positively disrupt the industry.
    3. Local regulations (e.g., zoning, and other laws) act as barriers to one of the most critical issues: the need for more safe parking. Even as more driver assist/autonomous technology enters the industry, there likely will always be, or at least for the next generation will be, a driver in the vehicle. That driver and truck will need to park safely. Without safe parking we are putting drivers at the risk of injuries and violation while away from home, and we make the driving job much less appealing.
  • Critical assets and future availability.
    1. The industry would benefit from more sources of equipment. A resilient supply chain can pivot to other sources for containers and chassis when any given area is not producing enough. A resilient supply chain has many equipment providers that push each other and the industry to more innovation.
  • Technological practices currently being implemented.
    1. Data sharing is increasing rapidly in the supply chain. However, significant questions remain about data privacy, data control and ownership, individual privacy, the right to make money off that data, and data security. An office of supply chain could be a good resource for research, information sharing, and policy recommendations, but the government should tread very carefully into any technology regulation at this stage because of the enormous amount of innovation going on right now. The government should be careful not to stifle that innovation with premature regulation. At this stage government should focus on learning what data is available to the stakeholders in the industry, how that data can be shared and used positively, how it needs to be protected, and so on so that the government, perhaps through an office of supply chain, can offer best practice help, funding, and policy recommendations.
  • Actions DOT and USG can take.
    1. The DOT can reasonably, and responsibly increase the barriers to entry for motor carriers and brokers to try to weed out bad actors without making it too difficult for good actors and positive disruptors to enter the market. Examples could include modest increases in financial responsibility and investigation of the new entrant before authority is granted.
    2. State and local governments need to be encouraged to support safe truck parking, and responsible warehouse and distribution center expansion.
    3. All levels of government should limit regulation, especially further labor, and employment regulation so the industry can operate confidently that the laws and interpretations will not change dramatically election to election. Instead, government agencies should focus on enforcement of existing laws to weed out bad actors, to help well-meaning (but poor executing) employers improve, and to help protect employee rights.
    4. The USG should consider and adopt an office of supply chain that acts not as a regulatory body, but rather as a monitor, researcher, information sharer, and policy recommender to support the development and maintenance of an efficient, resilient supply chain across modes.
  • Other policy recommendations.
    1. First, prioritize getting a better understanding of the supply chain industry, including each mode, the stakeholders in each mode, the work life of the service providers, the shippers, the equipment providers, the technology providers, the professional advisors, the workers, and so on. The DOT and USG need to go beyond public comment requests and listening sessions to engage with all manner of stakeholders and gather a much better understanding of what is working and what is not working in today’s supply chain. Attend conferences, visit facilities, reach out, learn. More information gathered up close will help the DOT and USG formulate much stronger policies.
  • Recommendations for non-federal actors.
    1. The USG should recommend more investment in supply chains by all stakeholders – governments, shippers, service providers, equipment providers, and so on. That means investment in the infrastructure itself, technology that makes the supply chain more efficient and more resilient (this is already happening), and more pay to improve the human element at every stakeholder level (e.g., higher rates from shippers, higher pay from carriers and brokers, etc.).

I thank you in advance for your consideration of these comments and would be happy to discuss any of these further upon your request.

 

Kind regards,

Doug C. Grawe

CEO