What does ‘supply chain’ mean, anyway?
When we talk about the ‘supply chain’, it sounds straightforward – just the path a product takes from manufacturer to consumer, right? But the reality is much more complex. Your business might be involved in multiple supply chains, playing several roles at once, and those roles come with responsibilities you may not even realise.
Understanding the supply chain in its entirety is crucial for your business – and it’s essential for complying with Chain of Responsibility (CoR) laws for heavy vehicles in Australia.
What is a supply chain?
At its core, a supply chain is the network of businesses, processes, and resources that work together to create and deliver a product or service to a customer. Each step adds value to the product and brings it closer to the end user.
As Stephen Lakey, Director of the Supply Chain & Logistics Association of Australia (SCLAA), explains: “Supply chains include everything from getting the raw materials to the factories, to finished goods, to distribution centres, to logistics providers, and finally to the end customer. Even retail is part of it, as is procurement. Supply chains are wide and varied, and they differ across industries.”
While a supply chain in the healthcare industry may look very different from one in the construction or automotive industry, they all share the same goal – getting products to customers efficiently, safely, and in a way that keeps costs down.
It’s important to remember that no business operates in isolation. Each company is a part of other businesses’ supply chains as well. You might not even realise how many supply chains your business touches – or how many roles you take on in those chains.
Let’s say you’re the CEO of “Australian Steelworks Ltd”. This could mean that:
As a raw material supplier, you provide processed steel to construction companies.
As a manufacturer, you make automotive parts from raw steel.
As a distributor, you manage warehousing and distribute steel products to retailers.
As a customer, you buy iron ore from mining companies to manufacture your products.
As a subcontractor, you provide specialised steel sections for large infrastructure projects.
Aaron Louws, Supply Chain Technical Manager at CoRsafe, highlights this complexity: “A lot of businesses don’t realise how interconnected they are. You might be part of multiple supply chains, fulfilling different roles in each, and that has implications when it comes to your legal responsibilities.”
Logistics: The backbone of the supply chain
The terms ‘supply chain management’ and ‘logistics’ are often used interchangeably, but in reality, logistics is just one link in the supply chain – albeit an incredibly important one.
“Logistics is so important that it’s even in the name of our association,” Stephen says. “That’s why we’re the ‘Supply Chain & Logistics Association of Australia’. I remember having the discussion with people, ‘Well, isn’t logistics just part of the supply chain? Do we need to call it out separately?’ But logistics is the part of the supply chain that gets the right product to the right place at the right time. Without it, the whole supply chain breaks down.”
Logistics involves domestic or international transportation, warehousing, inventory management and coordination across all these functions. When done right, it reduces costs, speeds up delivery times and ensures that customers receive their products as expected. When done poorly, on the other hand, it can lead to delays, higher costs and dissatisfied customers.
As businesses grow and supply chains become more complex, companies often turn to external logistics providers to help manage the flow of goods. This is where various logistics models come into play.
First-Party Logistics (1PL): The business handles all logistics internally. It owns and operates its own fleet and manages everything from transport to warehousing. This is common in smaller, simpler operations.
Second-Party Logistics (2PL): The business outsources transportation but manages other logistics functions like warehousing itself.
Third-Party Logistics (3PL): The business outsources both transportation and warehousing to a third-party provider. As Stephen points out, “3PL is hugely popular in Australia because it allows companies to focus on their core strengths while leaving logistics to the experts.”
Fourth-Party Logistics (4PL): A 4PL provider takes control of the entire supply chain, operating from a ‘control tower’ – a central hub – to optimise processes and improve efficiency. “4PL is a lot more strategic,” Stephen says, “and it usually involves a logistics provider monitoring and managing everything from procurement and production to final delivery in real-time.”
Fifth-Party Logistics (5PL): The most advanced model, often involving the use of cutting-edge technologies such as AI and blockchain to monitor wider supply networks, not just individual supply chains.
“The difference between 4PL and 5PL is quite nuanced,” Stephen says. “Even for me, I see a clear distinction between 3PL and 4PL, but the line between 4PL and 5PL is less clear. But when you look at 5PL providers, you typically see that they’re using emerging technologies to manage incredibly complex and sophisticated global logistics networks, in order to mitigate potentially significant disruptions to the supply chain.”
Each logistics model provides different levels of outsourcing and control, and Stephen says businesses need to choose a provider that best suits their needs based on their supply chain complexity.
“My advice is not to get too hung up on the terminology,” he says. “Don’t assume you need a 5PL provider because 5PL has to be better than 4PL, which has to be better than 3PL, and so on. It’s about finding the right fit for your business and what you’re trying to achieve, so you’re not investing more than you need to.”
What’s your responsibility?
Depending on your role/s in the supply chain, you may be required to undertake various transport activities – and that means you may have certain responsibilities under the Heavy Vehicle National Law (HVNL), which regulates the operation of heavy vehicles in Australia, except WA and NT.
Under HVNL, everyone who has influence or control over a transport-related activity is responsible for managing the risks related to those activities.
The transport-related activities specifically highlighted in HVNL are:
Employing a heavy vehicle driver (Employer)
Engaging a self-employed driver of a heavy vehicle under a contract (Prime contractor)
Directing the control and use of a heavy vehicle (Operator)
Scheduling the transport of goods and passengers in a heavy vehicle, or schedule a driver’s work and rest hours (Scheduler)
Consigning goods for transport by a heavy vehicle (Consignor)
Receiving goods delivered by a heavy vehicle (Consignee)
Packing or assembling goods for transport in a heavy vehicle (Packer)
Managing a premise where five or more heavy vehicles are loaded or unloaded each day (Loading manager)
Loading a heavy vehicle (Loader)
Unloading a heavy vehicle (Unloader)
Importantly, more than half the CoR functions relate to people and businesses that don’t own or operate a heavy vehicle. If you play a part in sending or receiving goods via a heavy vehicle, whether or not you own the goods or the vehicle, you’re most likely a link in the CoR.
“Each party in the supply chain performs certain functions that align with specific CoR obligations,” Aaron explains. “And, just as a business can play multiple roles in the supply chain, it can also have multiple responsibilities under CoR.
“Where people are often confused is how they contribute to these transport activities. Someone in procurement may not consider themselves a ‘consignor’, but if they are involved in contractor selection, such as setting the contract terms or screening system, they have influence over the consigning activity.”
In a supply chain, for instance, the manufacturer is responsible for creating products from raw materials. They’re often involved early in the chain, sourcing materials and transforming them into finished goods.
But manufacturers often take on multiple CoR roles, such as:
Consignor: When a manufacturer arranges for the transportation of goods to a distributor or retailer, they become the consignor. They are responsible for ensuring the goods are properly packed, loaded and transported safely.
Loader/Unloader: Manufacturers that load their own goods onto trucks for transport are also loaders. This means they must ensure that the vehicle is loaded safely, without exceeding weight limits or compromising the vehicle's safety.
For example, a car manufacturer shipping parts to dealerships acts as the consignor, and if they load the vehicles at their facility, they also become the loader. The more transport activities they do, or ask others to do for them, the more they are responsible for.
Your primary duty
Confused yet? Well, don’t worry – the good news is that the Primary Duty is the same for all CoR parties, regardless of your specific role within the supply chain at any given moment.
This duty requires every party involved in heavy vehicle transport activities to proactively eliminate or minimise risks, so far as is reasonably practicable. This means:
Identifying and assessing risks: Recognise the risks that may arise from your transport activities, and determine the consequences/likelihood of consequences relating to those risks.
Implementing measures: Work out what safety measures are reasonably practicable, and implement them.
Monitoring effectiveness: Regularly ensure those measures are working effectively and make improvements as needed.
If a party fails to take these steps they can be held responsible. Liability applies not just for direct action, but also for inaction – failing to take appropriate preventative measures.
For instance, if your business creates unrealistic schedules that pressure drivers to breach fatigue or speed laws, or fails to properly secure loads, you can be charged under the HVNL.
Crucially, this duty cannot be outsourced/contracted out, or avoided through willful ignorance. Each party must actively manage risks and communicate with other CoR parties to ensure compliance across the entire supply chain.
“This is something that I suspect a lot of businesses don’t understand,” Stephen says. “They may think they’re washing their hands of their responsibilities when they sign a contract with a logistics provider, but you can’t contract out your primary duty – so you need to have systems in place to monitor safety and ensure compliance throughout your supply chain.”
When working with new business partners, it’s crucial to understand their operations and include safety monitoring measures in contracts. By implementing comprehensive safety management systems and regularly reviewing them through audits, you can identify risks early and address them before they lead to issues.
“When each link in the supply chain works together and does their part,” Aaron says, “the whole network becomes safer, stronger, and more efficient for everyone.”
©2024 Logistics Safety Solutions Pty Ltd (LSS) ABN 25 134 417 379. This article is general information only and provided without taking into account your particular objectives, circumstances and needs. While every effort has been made to ensure the information is accurate, its accuracy and suitability to your specific circumstances are not guaranteed. You should seek independent professional advice before acting on the information contained in this article. LSS bears no responsibility, and shall not be held liable, for any loss, damage or injury arising directly or indirectly from your use of or reliance on any of the information provided.