The Montgomery Ruling and Carrier Validation | Episode 70

Hello and welcome to Banyan Technology's Tire Tracks. And today we have a wonderful guest in, Tony Yarrell, who is a member of the Overhaul team. And in a minute here we're going to have Tony introduce himself and talk a little bit about overhaul and create context for this meeting. So today we really want to focus on the impact of a recent legal ruling and how it really ties into our need to be that much more diligent and really how we are aligning with the right carriers in this industry to protect no longer just our goods and the goods of our client but also our legal exposure as well.

And as always in the freight industry, the world changes and evolves. And this recent ruling uh has had a bit of an impact on all of us. And we look forward to sharing thoughts and really some information today that we think is very, very pertinent. So with that, let me introduce you to Tony. And Tony, welcome to Banyan's Tire Tracks. I'm Brian Smith, CEO of Banyan Technology. And we're going to spend the next 20-25 minutes with you really kind of touching on this topic, the risk and really frankly some very good and available technology to help you navigate these new concerns. And with that, I'll turn it over to Tony.

Tony, welcome. And tell us a little bit about you and a little bit about overhaul.

Thank you, Brian. Pleasure to be here and appreciate the opportunity to speak with you and Banyan Technology, your audience. And we always appreciate the Banyan partnership at overhaul. My name is Tony Yarrell. I am the Senior Vice President of Key Account Management at Overhaul. That means that fortunately myself and the global key account management team get to work with our customers to ensure our solutions and our strategy, meet their needs.

And for your audience that do not know about Overhaul, you can find us at over-haul.com. We are a risk management organization for the global supply chain. Fundamentally, we use information from the supply chain to understand risk to cargo to escalate to brokers, carriers, drivers or a customer in the event of risky behavior. And also, we are an organization that enables condition monitoring for coal chain and many other areas. We have an intelligence team that help the market understand global supply chain risk. And we look forward to speaking with you individually as well. Thank you very much, Brian.

Great. Great. Thanks, Tony. And thank you as well. You guys have been a great partner. And I know many of our clients are valuing the integrated services and what we're able to access through your platform. Getting to today's topic at hand, the infamous Montgomery ruling. Can you summarize briefly for the audience what was decided in this ruling and the stakes it's kind of raised for our broker clients.

Without being an attorney, I'll do my best to interpret it. I've certainly done some research on it in order to have good conversations with our customer base. But fundamentally, this increases accountability for transportation sourcing to brokers, logistics providers and potentially shippers. We've heard that too.

Unfortunately, in 2017, there was an accident where a gentleman lost his leg with a carrier named Caribe that had been sourced by CH Robinson. And there had been some precedent where brokers were not held as highly accountable as we anticipate them now to be through the 1994 Federal Aviation Authorization Act. And that really left a lot of the accountability with the actual transportation carrier themselves instead of additional stakeholders in the supply chain. And the Supreme Court made a ruling, a procedural ruling that basically said that others in the supply chain can be held accountable.

And this comes at certainly a challenging time for the transportation market because you have freight tightening, you have less capacity that is available. Like in Texas where one of Overhaul's dual headquarters, they've rescinded thousands of non-domicile truck drivers over the last, I think, nine months, possibly more.

You have freight tightening, you have increasing fuel cost, you have price pressure from shippers, and then you have really cargo theft, which is one of our specialties that is not the theft itself but preventing it and recovering stolen goods. But that certainly received a lot of attention. The freight fraud has increased exponentially since COVID due to more available marketplaces for cargo thieves, freight fraud, chameleon carriers and other things.

We have this ruling that says that other folks in the supply chain can or will be held accountable in the future for sourcing. And then you also have a combined market problem of cost as well as cargo theft. All of that. I think, those combined. And the Montgomery Caribe ruling was based on safety but that also envelops in kind security in my opinion because those two are related where you're trying to prevent risk.

And the Motus FMCSA, they have the safety rating in there. And we use that as part of our carrier evaluation. But there's a lot more attention in the supply chain for upstream accountability for the performance of carriers and drivers.

No doubt. No doubt. And I think the Banyan client base, just over half our clients are freight brokers and freight management organizations. And the concern that they've raised since this ruling is what used to be procedural upfront. There was a carrier approval process, initial carrier validation and maybe a periodic check in and update of their internal records against their approved carrier list internally.

And once you as a broker and you move into a more dynamic environment, which, right, it's their end customers, our collective end customers, are looking for immediate response to rates and carrier pickups, etc. And then coupled what you said of the tightening of available carriers, there's concern amongst "Hey, I've got to get a quick response." There's less carriers out there. If somebody's ready to grab the load. Now I've got to double down on my diligence of am I picking an acceptable carrier with an acceptable safety record.

And along the transaction of validation points along the way. The carrier I booked with, when they come to pick up the load at a remote location, is that the actual carrier that I booked the load with? And I'm not telling you anything new. And I think it would be helpful to the audience to talk about some of the tools and resources that Overhaul has to help your clients along this journey. And Banyan as an integrated partner, some of our clients are using these very services today. There's a problem out there. And at the same time, we want the audience to know there's a real solution that's available as well.

Yes. Well, I think we'll get to the overhaul response to the market challenge of validation and verification in a moment. But I just want to go back to that quick response idea that folks need to be on the ball and validating and acting quickly. I think when you talk about acting quickly, you now have to act quickly with due diligence.

Getting that load booked and trying to get everything confirmed within a very short time frame, you have diminishing returns on being quick when that load is stolen or if it winds up in an accident, right?

Yes.

And so I think from that perspective, quick is always relevant. Moving at the speed of business. But you need to do it at the speed that supports the due diligence for future records as well as who's moving the cargo right now.

From an overhaul perspective, we've really for a long time seen the entirety of the move of cargo and all of the risk that goes along with that. And what I mean by that is a lot of folks often associate overhaul with shipment is prepared, trailer is stuffed, and IoT is embedded. And then we begin to monitor.

What we've really done over the last two years is shift left of the pickup and start to create the ability to validate in two different ways who's going to pick that cargo up. And that's just on like a software perspective. There is fraud watch, and that uses Motus, and check safety, and insurance and all those different items. And from a desktop exercise with an integration with the TMS or with someone providing us the information, we can help validate who is going to pick up that cargo. And what are their qualifications to do so? Insurance certificates. Like I said, safety rating.

You also have – and I think what's different from an Overhaul perspective is the ability to get dock level action as well. So you can sit in Chicago and see that a carrier is picking up in Los Angeles. And from your desktop, you can approve or uh not approve that carrier for that shipment. But then also at the dock level you have the ability to tell the person releasing that shipment whether or not either from your desktop or enabling their activities if that is the right person as well or right carrier.

On top of that, they say sometimes your cargo is stolen even before it's picked up. A few weeks ago, we launched the driver verification app. And this is an application where the driver is able to take a picture of themselves to be authenticated within a geofence near the origin so they're not doing this. We've seen international crime groups that have enabled cargo theft and some of this paperwork that goes along with the pickup or delivery. You have to be inside the proximity geofence. You have to validate. You have to take a selfie. And then that that origin can validate who is going to be there as well.

I think one more thing that we've done just from a left of pickup perspective is the secure bill of lading initiative as well. And so what that is, cargo thieves unfortunately can modify bills of lighting. And those BOLs, sometimes the destination doesn't have a view into what was originally shipped, what that documentation is. And now through a proprietary process, we can have a customer scan the bill of lading at the origin and then that can be accepted, declined or accepted with discrepancies at the destination so they can see what was shipped and what was received. And that creates a lot of efficiencies from a claims process, from an accountability process as well. Those are just a few of the things that we're trying to do to help the supply chain have a more robust part and layered presence.

So, Tony, before you touched on one thing that I want to get to, I want to talk a little bit about the infamous topic of AI. Because I also think for the audience, some of these tools are also available. As much as you think how am I going to implement this myself, there are resources out there. And we'll talk about an AI agent that has become popular on our side of the fence, which is really asking the pickup location to go out and take pictures and feed them back into the platform as a form of verification as well.

I'll give you a minute to think about some AI applications. I know Overhaul is doing some fun things on that front. For folks that say, "Hey, this stuff's all great," give me one or two or three things we should be doing today fundamentally. A new tech partner, a new tech application is great. But during this interim period, are there two or three things I could or should be doing right now as part of my procedures that you would say, "Hey, really out of the gate, here's a couple things that would be easy to implement. Forget the technology piece. But you and your team should be doing X." What does that look like to you?

Without technology?

Yeah.

Yeah. It's hard initially in my thought process because we have so many tech layers. But from a physical validation of carriers. And I think from a brokerage perspective it's a challenge because you might need to hire anyone but you have a core of who you use and you trust and verify. And that goes back to the fundamental of always auditing what you expect, right?

Having that engagement understanding without any tech layers, having that relationship with those carriers to know that nothing's changed in their insurance, nothing's changed in their safety rating. But it's a really hard question to answer without having documentation because that's part of the due diligence, right? Actually, non-tech layer.

I would also say from a gate guard perspective at the warehouse distribution centers updating those folks on who to expect and creating standards for what they should see. There was a cargo theft a few days ago. And we ask our customers to take pictures because it helps law enforcement when they're on the ground on what to identify, because we talk about these chameleon carriers and changing identifiers on tractors and trailers.

From a non-technology perspective, I would establish with gate guards what to look for on a tractor and trailer. It's not acceptable to have uh DOT numbers that are taped on or placards that are taped on with shipping tape. Those are identifiers. We also had one recently that had the license plate zip tied on, which clearly you take some snips and take that off and put on your next license plate, right?

Identifying at the origin because it's so vulnerable right now what to look for. And then I would say third is also the dock workers. Are they asking the drivers that are going to move your high consequence cargo the right questions and at least level setting expectations? Right? If something happens down the road or on that particular shipment, is there a checklist of what you asked them and that they validated and signed? I think those could be very good non-tech solutions to level set good practices or folks that are away from the office that are on the tactical level handling the freight.

For sure. For sure. And I think those are – we certainly at Banyan have a pension to kind of run towards the technology side of things. And sometimes the most practical are – you mentioned – I think I was talking to Ron Green from your team and who has some wonderful experience, and he says, "Sometimes as simple as just keeping the guards updated on current protocols, processes, procedures, kind of prevention before it starts." So, no doubt about it.

I'm glad our answer's along, because he's a really bright guy.

Let me jump over to AI a little bit. I know on the Banyan front, we are actually working with the overhaul team right now on refining some agents that clients can deploy on a proactive basis. Certainly, on a non-AI, we will be rolling out actually an AI agent that will proactively use geofencing. Certainly, working with your platform that already has alerts built in if somebody gets outside the geofence. But also, is tracking progress along an approved route and against really projected, now current projected arrival time versus what it should be. And creating alerts to at least put you in a position to say is this worthy of investigating?

And agents exist today for the audience that allows automatic where the AI agent will contact the driver directly. As well as alternative could be the terminal as applicable, etc., depending on the progress that the truck is making. I just point this out is there are very consumable AI agents out there today that also can assist as the goods move down the line to its destination.

Yes, there's tracking and geofencing. There's also solutions out there where the agent will jump in based upon actual versus projected, and either alert you and/or take action within the agent technology as well. There are other supporting mechanisms out there as you plan out your strategy both upfront and then through the load.

Tony, maybe you could share a little bit on some of the things that are coming up that Overhaul as you look out through the balance of the year between current market conditions and greater sensitivity maybe because of this ruling and how Overhaul is addressing some of that.

Yes. I can talk about it from a monitoring perspective, and then also some of the photos and things that we take of that nature and ask our customers to do so, but from the way we leverage AI many different ways. But from a service perspective on the software platform side for monitoring, we're leveraging AI to help watch officers monitor.

We do believe in a human-in-the-loop in order to provide resolution or to talk to a customer maybe about a carrier that has made their way into the platform and is unauthorized. So we have service professionals that help our customers with that. But then also on the watch officer side, we have AI helping us escalate incidents and transit and helping to automate the next thing that a watch officer needs to do.

Each customer has a customized workflow. They are able to have that calibrated to expectations when they start with overhaul. And then AI is working behind the scenes to say what's happening with this shipment, where is it stopped, is it in a high-risk area, and what should the watch officer be doing next? Because those minutes become critical in the event that there actually is a theft. And they also become critical when we want to let the supply chain know that everybody's watching, right? AI has taken a big role into accelerating our monitoring efficiency. How quickly we can respond?

On the carrier validation and the right folks coming on site that high consequence shipper might expect, we have RiskGPT. And that is uh a service where we're looking for those photos. When we go back to talking about the gate guard and the placards, RiskGPT is looking at those photos to make sure that they make sense. And that Brian Smith Trucking was expected to show up, and Brian Smith Trucking is the one that has the placard on the driver's door, and that all the additional information match.

I can also see – and I know that we're working on how to help our customers with all of this risk management data. I saw a network really that was impressive the other day of what we've done behind the scenes to try to tie together carrier relationships. If Brian Smith Trucking is picking up, who else in our network of monitoring and accountability have they been associated with over time? And that is in concept phase right now. But to see the architecture of us trying to say Tony Yarrell Logistics is going to hire Brian Smith Trucking. And who have they been associated with over time? Are they a known good entity in order to move high consequence cargo?

And I don't use high-value cargo too much anymore because the consequence I think is what matters. It depends. It's very subjective according to the customer base. On one side you can have precious metals that can have a dollar value that's different from a new product introduction. And the way that those customer risk appetite matches to that and how they want to authenticate the driver and carrier before it picks up. All of those can vary by organization.

Absolutely. That's a great point. And we've had some internal discussions. And sometimes it's high value but a lot of times, especially for the Banyan base which tends to be more B2B, the impact of a high consequence load being lost and the impact of especially for custom-made, forged materials, those kind of things that the replacement factor is huge. That's for sure.

And intellectual property too, right?

Yeah.

And even shipments going to countries or regions where they should not. That those are all impactful. It just depends on intellectual property and the subjectivity of the BCO.

Yeah, no question. Tony, as we kind of look to wind this down, I want to take a step back with the audience and say we've gone down this path of mitigation techniques or risk mitigation techniques. And the reason being is the concerns about cargo theft or nefarious drivers, etc. And we've seen the growth in that. And that's been well documented and concerned. And then this ruling, this legal ruling came out, and I think it's really kind of added to the sensitivity of this.

And our goal today to remind the audience is the tools are out there. There are real tools. And the days of validating a carrier upfront unfortunately in many ways are not enough anymore. And especially as you pointed out right up front is the way we're procuring our carriers. And that has become let's say the proliferation of that and the technology really is causing us to kind of rethink and really need kind of drive the business need to greater diligence upfront in carrier selection, carrier monitor monitoring and those micro steps along the way of driver validation, etc.

Tony, we appreciate certainly your insight and all the tools. And so I'll leave you with any closing comments on – for me it's when I get asked the question. I'll buy you a little bit of time here. What I tell people is don't wait until you have that full comprehensive plan. There's some bite-sized steps you can do along the way. And act now. Training of your team. We talked about the guards, etc. In your team itself.

And they don't have to be – we don't need to always use shocking negative examples, like a load doesn't have to be stolen for it to cause an inconvenience within the organization. I think slow our team down because we are under so much pressure to make immediate decisions and solve a problem so quickly. But I do think training is a big piece of this. And then I would say educated action. If you deploy a step or two once a month, once a quarter, 6 months later you've enhanced your process by six, eight steps along the way. And that's a very good thing for most organizations.

Yes. And I think when you talk about the six to eight steps, I think it's probably good to close out that risk is continuous and it's not perishable, right? I've been an advocate for folks in US and Canada to adopt the continuous risk mentality that our friends in Latin America have. If you talk to a risk manager in Mexico or Brazil, supply chain security, auditing and vetting is continuous. And it's built into the thought process of how they operate. It's not new or different. It's where is it and how are we doing it.

And so I think as we look at the increased expectations for accountability in the supply chain, your risk is not going to stay the same. And you talked about when you bring a carrier on board the initial vetting, that's no longer acceptable if it's a year-old relationship or a day old relationship. Weather conditions change can cause driver accidents. Insurance can change. It can even change by shipment too. Whether or not folks are paying their bills on that.

And then from a cargo theft perspective, they are getting more complex. They're polycriminal. This isn't the only activity that they're doing. They're gaining profitability and feeding other operations. From a cargo theft perspective, it's an arms race. And that's why I'm an advocate that goes back to the Latin American model where there's a new normal in the two countries. And we can learn a lot from our peers to the south.

Well said. Unfortunately, well said.

Thank you. Yeah. Thank you.

Well, Tony, thank you for joining us today. Again, Tony Yarrell, folks. And as we wrap up the podcast, you'll see come up on the screen will be contact information. And if you'd like to reach out to Tony directly, we'll provide that information here in just a moment.

And Tony, I thank you. I thank Overhaul for the partnership and really the continuous progress we're making in offering greater tools and resources to our mutual clients. It's been a great partnership. And I look forward to more. So, thank you so much.

Likewise. Thank you.

All right, sir. Have a great day.

You, too. Bye-bye.

Bye.