1 Understanding & Managing Supply Chain Risk

2 Why its Important to You4500 charges laid in NSW Company fined $19.3 million 45 Directors have been charged. 90 Police Investigations in Vic Personal Fines And Company Fines

3 If a body corporate commits a relevant heavy vehicle offence,One in All in!!! If a body corporate commits a relevant heavy vehicle offence, each director of the body corporate, and each person concerned in the management of the body corporate, is deemed to have also committed the offence. Victoria Road Traffic Act Part

4 Why its Important to YouContracting out Prohibited (1) A term of any contract or agreement that purports to exclude, limit or modify the operation of this Part or of any provision of this Part is void to the extent that it would otherwise have that effect. Victoria Road Traffic Act Sect 191 You can NOT contract your way out of your liability So even if you don’t have transport but contract them – your still liable!

5 Section 1 – So What is CoR?

6 Section 2 – What is Chain of Responsibility?What is CoR? The correct term is actually Compliance and Enforcement (Chain of Responsibility). However it is most common in the East States of Australia for it to be referred to as Chain of Responsibility. In Western Australia, they usually refer to it as Compliance and Enforcement or simply C&E. Be careful though – WA has very different legislation to the Eastern States of Australia.

7 What is Chain of Responsibility?Section 2 – What is Chain of Responsibility? What is Chain of Responsibility? CoR requires that all commercial vehicles over 4.5 tonne travelling on roads comply with the legislation, and applies to: Weight or total vehicle mass; Vehicle dimensions: length, width and weight; Driver fatigue and working conditions; Vehicle suitability and maintenance; and Load restraint. Applies too: All commercial vehicles 4.5 tonne and above, Except in WA where is applies to any vehicle used for hire and reward – that could mean even a motor bike in WA. (Pizza and Farmers)

8 Objective of CoR LegislationTo increase public safety on the roads To protect public infrastructure To create a level playing field by penalising “cheating company's” To provide a safer industry for Drivers Sobering Facts Transport drivers 16 times more likely to die at work than others. Truck drivers account for 25% of all work related deaths. To encourage parties to the road transport task to adopt active risk management strategies to prevent breaches of applicable road laws.

9 Section 2 – Who does CoR apply too?

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11 Drugs & Alcohol & Health (DAH) Training Equipment suitability Areas of application Load restraint Mass Management Dimensions Fatigue Speeding Drugs & Alcohol & Health (DAH) Training Equipment suitability Equipment maintenance Documentation systems Subcontractor Assessment Operational Infrastructure _____________________________________________________________________________________________________________

12 What does this mean to you?Your actions or in-actions may contribute to a road law breach You are required to take Reasonable Steps to Predict & Prevent road law breaches All councils and employees are affected by CoR issues and are required to prevent accidents occurring CoR relates equally to inbound & outbound vehicles _____________________________________________________________________________________________________________

13 Driving & Driver fatigue Mass and dimensions Transport OperatorWho is covered Consignor / Consignee Loading & Restraining Driving & Driver fatigue Mass and dimensions Transport Operator _____________________________________________________________________________________________________________

14 Section 3 – Components of CoR

15 CoR Requirements Predict and Prevent Inaction as culpable as ActionYou need to demonstrate a System Your contracts and behaviour do not encourage a Road Law breach You need to be able to PROVE your Reasonable Steps Defence

16 You are just as culpable for your inaction as you are for your action!Inaction and Action You are just as culpable for your inaction as you are for your action! “Under the new regulatory framework, those other parties in the transport chain who by their actions, inactions or demands put drivers and other road users at risk and gain unfair commercial advantages may also be committing an offence and be liable to substantial penalties.”

17 You are also Prohibited fromSection 4– Interpreting Chain of Responsibility You are also Prohibited from Whilst the law requires you to take reasonable steps to prevent your conduct from causing or contributing to a breach, it also prohibits you from: Making demands that you know or ought to know would cause a breach; Entering into contracts that you know or ought to know would cause, encourage or give an incentive for a breach; Coercing, inducing or encouraging breaches, and Passing on false or misleading information that could cause a breach.

18 Section 4 – CoR Penalties

19 Total maximum for all offences = $2,787,500Penalties CoR 1- RSA penalty Units x33 = $386,100 2 -RSA penalty Units x12 = $351,000 3- RSA penalty Units x7 = $409,500 4- RSA penalty Units x 2 = 23,400 5 -RSA penalty Units x 2 = $11,500 6 -RSA penalty Units x3 = $175,500 7 -RSA penalty Units x7 = $409,500 8 -RSA 191ZB 500 penalty Units x19 = $1,111,500 Total 85 Charges Total maximum for all offences = $2,787,500 _____________________________________________________________________________________________________________

20 Case # 1 Company Director will “Live with shame” after fatal smash –A County Court Judge has told a company director he would have to live with the shame of failing to ensure a truck which killed a motorist had effective brakes. In sentencing 59-year-old South Gippsland man Lance William Jobling, Judge Leo Hart said the May 2002 crash on the West Gate Freeway off ramp had left Jobling in dire financial circumstances, on medication and with post traumatic stress disorder. Mr Jobling was convicted and fined $20,000 and ordered to undertake 200 hours of unpaid community work. Company directors have clear responsibilities under the Occupational Health and Safety Act, as do employers. They must ensure they fulfil their obligations and act on information they have concerning safety.” “In terms of the transport industry, this is the second major prosecution in as many months." With a criminal record he could no longer hold a position as Director Case # 1 Company Director will “Live with shame” after fatal smash – A County Court Judge has told a company director he would have to live with the shame of failing to ensure a truck which killed a motorist had effective brakes. In sentencing 59-year-old South Gippsland man Lance William Jobling, Judge Leo Hart said the May 2002 crash on the West Gate Freeway off ramp had left Jobling in dire financial circumstances, on medication and with post traumatic stress disorder. Mr Jobling was convicted and fined $20,000 and ordered to undertake 200 hours of unpaid community work. He pleaded guilty to three counts under the Occupational Health and Safety Act 1985. Company directors have clear responsibilities under the Occupational Health and Safety Act, as do employers. They must ensure they fulfil their obligations and act on information they have concerning safety.” “In terms of the transport industry, this is the second major prosecution in as many months." With a criminal record he could no longer hold a position as Director

21 Case # 2 Canberra Transport company, Allbulk Landscaping Supplies Pty Ltd, was convicted and fined a total of $130,000 at the Shepparton County Court on March 24 after pleading guilty to two Occupational Health and Safety Act charges after a crash near Cobram killed four people. The truck’s driver was gaoled, but the company was charged as it required the driver to work excessive hours without adequate breaks. "Our message to these people is that they will be held accountable in the event of a serious safety incident” "While most in the industry are striving to meet their legal and moral obligations some do not. "Failing to ensure trucks are properly maintained puts drivers and other members of the public at risk. If you cannot carry out this basic task, you should not let your vehicles on the road” Case # 2 Canberra Transport company, Allbulk Landscaping Supplies Pty Ltd, was convicted and fined a total of $130,000 at the Shepparton County Court on March 24 after pleading guilty to two Occupational Health and Safety Act charges after a crash near Cobram killed four people The truck’s driver was gaoled, but the company was charged as it required the driver to work excessive hours without adequate breaks. "Our message to these people is that they will be held accountable in the event of a serious safety incident or when they are visited by WorkSafe "While most in the industry are striving to meet their legal and moral obligations some do not "Failing to ensure trucks are properly maintained puts drivers and other members of the public at risk. If you cannot carry out this basic task, you should not let your vehicles on the road

22 Fine(s) for corporations/Councils + 200 – 400 hours community servicePenalties CoR Fines for Multiple offences Mass Dimensions Restraint Loading Data/information access Corporate Accelerator Can be up to 5 times base Fine(s) for corporations/Councils + 200 – 400 hours community service _____________________________________________________________________________________________________________

23 Commercial Benefits Penalty ordersPenalties CoR Commercial Benefits Penalty orders Retrospective commercial benefit X 3 Licensing and Registration Sanctions Driver Licence Registration Supervisory Intervention Orders – (e.g. Schedulers/despatches/planners) Systematic or persistent offender Prohibition Orders _____________________________________________________________________________________________________________

24 When is a system not a System?An objective was to create a Risk Management approach to Chain of Responsibility by parties in the Chain. The Magistrate fined the transport operator in excess of $1.25m and ordered Scott’s to pay the costs of NSW Road and Maritime Services (RMS) in the amount of $100,000. The fines were issued to the company, and to Peter Anderson (Manager) and Ray Scott (Director of Scott’s Group of Companies) personally. In handing down the fines, the Court observed that Scott’s policies and procedures governing speed management were inadequate and, in particular, noted that its Driver Induction and Training Handbook was: “.... unlikely to be read, understood or acted upon by a driver The Court was critical of the company’s failure to act in response to a string of speeding offences which had been brought to its attention.

25 CoR applies equally to inbound and outbound loads.Section 2 – What is Chain of Responsibility? Important CoR aspects CoR includes everyone who is involved across the supply chain in vehicle road transport 4.5 tonnes and over, (except WA where it applies to all commercial vehicles). Compliance with CoR legislation is the ability to demonstrate that “Reasonable Steps” have been taken. “Reasonable Steps” means that actions have been taken to prevent or predict a breach. CoR applies equally to inbound and outbound loads.

26 Section 2 – What is Chain of Responsibility?Important CoR aspects Using sub-contractors or out-sourcing transport does NOT remove the CoR obligations. It is incumbent on a business to ensure that a subcontractor has procedures in place and can demonstrate compliance with all the regulations under the Chain of Responsibility act.

27 Section 4 – Interpreting

28 What are “Reasonable Steps”Section 4– Interpreting Chain of Responsibility What are “Reasonable Steps” To comply with the CoR you must be able to demonstrate that you have taken “reasonable steps” to prevent a breach from occurring in your workplace resulting from one of your or your employees’ activities. The National Model Legislation only allows for a Reasonable Steps defence to be used for minor breaches.

29 Demonstrating Reasonable StepsSection 4– Interpreting Chain of Responsibility Demonstrating Reasonable Steps In order to demonstrate that you have taken reasonable steps some actions you can take include: Identifying and assessing risks; Taking steps to eliminate, manage or prevent the risk; and Monitoring and reviewing risk management processes. Prove it

30 Examples of Reasonable StepsSection 4– Interpreting Chain of Responsibility Examples of Reasonable Steps Participating in the development of an industry code of practice; Use of accreditation schemes where your processes and procedures are audited for compliance with the Legislation; Reviewing your business practices; Changing your commercial arrangements and including CoR clauses in all Contracts; and Adopting a risk management approach to CoR

31 Have you taken Reasonable Steps?Section 4– Interpreting Chain of Responsibility Have you taken Reasonable Steps? Audit survey September 2014 Eastern states 205 companies surveyed Summary of respondents # % Total Companies Surveyed 205 100.0% Companies with complete responses 138 67.3% Companies with only incomplete responses 21 10.2% Ones with no responses 46 22.4%

32 Have you taken Reasonable Steps?Section 4– Interpreting Chain of Responsibility Have you taken Reasonable Steps? Compliance level Summary of responses # % Total Companies with complete responses 138 100.0% Achieving a high level of compliance 0% Achieving a borderline level of compliance 18 13% Companies non-compliant 120 87%

33 Have you taken Reasonable Steps?Section 4– Interpreting Chain of Responsibility Have you taken Reasonable Steps? Australian Design Rules (ADR) Have vehicles undergone ADR surveys? Recent survey results of 60 vehicles assessed to ADR 37% failed ADR compliance requirements and Road Worthy requirements

34 Silver Lining

35 Most companies install CoR over their systems Section 4– Interpreting Chain of Responsibility Silver Lining Most companies install CoR over their systems This is a “band aid” approach A cost to the business Installing a system/culture within the business This will reduce costs Case Studies

36 Failing to meet compliance standards Internal “Fix” high costSection 4– Interpreting Chain of Responsibility Case Study #1 – Base Case Company “X” Poor customer service Product shortages Performance only making 7% of target Average late days = 9.1 Delivery variance 124 units to 1704 (target 1000) “Freebies” to placate irate customers Failing to meet compliance standards Internal “Fix” high cost Increased overtime for drivers Increased overtime for planning staff Increase in administrative cost

37 Case Study #1 – Research phaseSection 4– Interpreting Chain of Responsibility Case Study #1 – Research phase Company “X” Gap Analysis highlighted significant failures Poor route planning Poor customer intelligence gathering Delivery performance impacted by poor scheduling Poor training Variations to process

38 Improved planning and schedulingSection 4– Interpreting Chain of Responsibility Case Study #1 – Outcomes Company “X” Improved planning and scheduling Consistency Training Systems Improved customer data collection Actually asking “hard” questions Recording and analysing results Improved honesty Advising customers of what actually can be achieved Internal honesty about performance levels Ensuring consistency

39 Case Study #1 – Outcomes Company “X” Reduced costs by:Section 4– Interpreting Chain of Responsibility Case Study #1 – Outcomes Company “X” Reduced costs by: $250,000 P.A. per site (Avg) 9 major sites $2.25m P.A. Symptomatic outcome CoR Compliance

40 Inventory/Revenue leakageSection 4– Interpreting Chain of Responsibility Case Study #2 – Base Case Company “Y” Inventory/Revenue leakage Deliveries not recorded and charged Returns Re-entry into warehouse inventory Failing to meet compliance standards Internal “Fix” high cost Secondary docket system Control staff Control system

41 Case Study #2 – Research phaseSection 4– Interpreting Chain of Responsibility Case Study #2 – Research phase Company “Y” Product counter movements Futile movements Lack of real information for customers Miss information to customers Assumption of customer requirements

42 Consolidation of capability dataSection 4– Interpreting Chain of Responsibility Case Study #2 – Outcomes Company “Y” Consolidation of capability data Determination of logistics chain capacity Definition of logistics chain capacity Publication of logistics chain capacity Matching sales to Logistics Chain capability Maximising capability Not over exceeding capacity of Logistics Chain Logistics Chain communication Open communication within logistics chain members

43 System development cost $135k Reduced costs by: $605k P.A. Section 4– Interpreting Chain of Responsibility Case Study #2 – Outcomes Company “Y” System development cost $135k Reduced costs by: $605k P.A. Net saving year 1 = $470K Symptomatic outcome CoR Compliance

44 What do you need to do?

45 Primary Components Chain of Responsibility Awareness Load Restraint Mass Management and Dimensions Fatigue Management Speed Control & Management Driver Health Drugs & Alcohol Equipment Suitability Equipment Maintenance Documentation Subcontractor Control & Assessment Operational Facilities Corrective Action System

46 Primary Steps Policy Procedure Training Implementation Application

47 Elements Matrix CoR Item Policy Procedure Training Implement ApplyChain of Responsibility Awareness Load Restraint Mass Management and Dimensions Fatigue Management Speed Control & Management Driver Health Drugs & Alcohol Equipment Suitability Equipment Maintenance Documentation Subcontractor Control & Assessment Operational Facilities Corrective Action System

48 Heuristic – Magic 2 Hour RuleIf there is an investigation and you can find all the answers and documentation within 2 hours, it is likely you will be left alone. If you can't then a further investigation will often ensue. See Checklist

49 Where do you sit? - ChecklistReview each component Versus each step If you have everything in place with all documentation then score 9 If you have little or nothing in place then score 1 If between the two make an assessment and select a number.

50 Do you know your risk exposure? Remember It is incumbent on companies to have in place auditable systems that demonstrate to authorities their compliance with legislation in an ongoing and consistent manner! Do you know your risk exposure? Don’t wait for a prosecution to find out!

51 Mike Wood 1300 008 386 www.latus.edu.au [email protected]Logistics Risk Specialists Melbourne - Perth – Brisbane - Kuala Lumpur - Johor Bahru