Supply Chain Expertise and Technology Blog by TMC, a division of C.H. Robinson

How a TMS Sheds Light on the Dark Side of Global Trade

TMS Global Trade
Transportation management system (TMS) solutions have many applications but here’s one that is often overlooked even though it is gaining in importance: rooting out costly corruption.

The Foreign Corrupt Practices Act (FCPA), a U.S. federal law, was enacted for the purpose of making it unlawful for state entities to make payments to foreign government officials to assist in obtaining or retaining business. The anti-bribery provisions of the FCPA have applied to all U.S. persons, legal entities, and certain foreign issuers of securities. These anti-bribery provisions also apply to foreign firms and persons who cause, directly or through agents, an act in furtherance of such a corrupt payment to take place within the territory of the United States. Violation of the FCPA can result in multi-million dollar fines and serious reputational damage for organizations that are implicated in these crimes.

As multinational companies continue to grow, so does their exposure to corruption, especially in suspect countries. Many organizations lack the transparency as well as the compliance processes they need to detect and address this type of risk. A large enterprise can spend $500 million to $3 billion annually on international freight transportation, yet be unaware at a corporate level of the day-to-day transactions that underpin these operations. Their primary focus is delivering products to customers on time and in full.

Even diligent companies can find it difficult to police the transactions that are vulnerable to corruption. For example, in some countries shippers and carriers routinely do business without recourse to formal contracts. These “handshake” agreements can conceal corrupt practices. The fragmented nature of the freight industry can also mask bribes and other misdemeanors such as aiding and abetting cargo thieves.

Ironically, the intimate and long-standing relationships that often exist between shippers working at various tactical levels—such as warehousing and planning—and carriers are prone to corruption. Operating in a highly competitive commodity market, carriers might be tempted to find alternative ways to ensure customer retention other than providing excellent service, particularly where they are well established and not closely monitored.

How can organizations respond to these threats and remain vigilant at the tactical level?

A global TMS platform operated by a neutral logistics manager with highly skilled analytical professionals who work as a dedicated extension of the shipper’s staff is one answer.

Such a solution provides macro and micro supply chain visibility across regions, continents, countries, and local areas. Critically, a global TMS platform also improves business process compliance (e.g., check calls to confirm carrier compliance while products are in transit, or direct connections between carrier GPS systems and the TMS to keep a close eye on load locations). These technical capabilities significantly reduce corruption-related risk and are available today.

For example, a corruption tactic that is sometimes used is to invoice a shipper for loads that were never transported. It’s much easier to uncover this type of scam when a TMS is used to analyze freight movements. Another method deployed by criminals is to inflate overcharges based on fuel bills or demurrage charges, which are not being verified or approved before invoices are issued. Again, aberrations like these are much more visible when the operation is being scrutinized with the help of TMS analytics.

TMS platforms cannot and should not replace risk management and/or compliance strategies. Complying with the FCPA needs to be part of your global corporate culture at all organizational levels.

However, TMS technology can stem monetary losses in your supply chain and help you to avoid the likelihood of substantial penalties if anti-corruption regulations are being violated—whether or not you are aware of the risks involved.

- Director, Europe, Middle East, Africa (EMEA)
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