“We do see visibility as the key opportunity to mitigate risk and avoid unnecessary costs and charges that can come into play.”
Jeff Barrie has spent more than 25 years in the international freight forwarding industry, starting with Air Express International and BAX Global, for which he rapidly became part of the executive management team. He joined DB Schenker after the German company’s acquisition of BAX Global in 2006, when he was serving as senior vice president of global sales. Barrie continued to hold executive positions within DB Schenker, including senior vice president of sales for air and ocean worldwide from 2006 to 2011 and executive vice president for sales and sales planning worldwide from 2011 to 2017.
Before his appointment last year to CEO of DB Schenker USA, Barrie was the company’s senior vice president of global projects and oil and gas. The U.S. operation of DB Schenker, which he now oversees, includes more than 8,100 employees in 37 branches, 52 logistics centers and over 21 million square feet of warehouse space.
Barrie’s breadth of freight forwarding experience has undoubtedly shaped his intimate knowledge of the changing regulatory and trade landscape within the North American market. The Adam Smith Project recently caught up with Barrie to discuss myriad trade and regulatory compliance management topics faced every day by DB Schenker USA and its employees.
Q: DB Schenker is a large global logistics services provider with deep roots in Europe. However, North America continues to stand out as one of the largest import-export markets in the world. This trade is also subject to myriad U.S. regulations. Describe DB Schenker’s U.S. compliance structure and capabilities. What are your recent investments in this area?
A: We pride ourselves on having teams of very well-trained operational logistics people in the field. We also support these U.S. professionals with a centralized compliance team, who work together with operational experts we have in the key areas of our business, including export-import, land and brokerage.
The process we have with our centralized team is that anyone in the company can escalate any area of concern for internal review. The first step in the process is for them to reach out to their line manager for guidance and assistance. Everyone has the opportunity to take an issue or concern to the next level, and that can be done either via their line manager or, if necessary, directly to the compliance team.
This area has not been just a recent investment but rather an area we have invested heavily in over the past decade, and we will continue to do so. We have focused over the years on making sure that the regulatory updates are adequately transitioned into the organization, that we are focused on complying with any new initiatives and provide an online training schedule for employee education.
We have a layered approach to compliance that is governed globally. We also have a regional compliance group, so DB Schenker Americas has a head of compliance at the regional level, which is replicated in Europe, Asia, the Middle East and Africa. Also, there is a dedicated DB Schenker U.S. compliance manager who reports directly to me.
Q: With your many years of working in DB Schenker offices throughout the world, how does the U.S. market stand out in your view in terms of compliance with import and export control regulations compared, for example, to Europe and Asia? Do you find that compliance with U.S. regulations tend to have a far-reaching hand compared to other countries’ import and export control regimes?
A: As stated earlier, we have a layered approach as it relates to compliance. We have one compliance program that cascades into the organization from global down to the site level. In the U.S., one can argue that the government agencies in charge of trade have a more heightened sense of oversight than other countries. But I’d say from my point of view, the way that we see that now is sort of a means of protecting both the safety in the supply chain, such as the cargo and its contents, the people who work in that environment and also the environment itself. You can argue that it’s a U.S. topic, but we treat it as a global topic, with some unique requirements for the U.S. market.
When we look at the ongoing changes being made today to regulations and tariffs, there’s a variety of things we need to be acutely aware of, and not just on the regulatory side, but the changing geopolitical environment that can have an impact on all aspects of compliance. As such, we see the U.S. as an area where they keep an eye on those influences, and we need to recognize the importance of staying in line with these regulations and being prepared to work within this dynamic environment.
Q: How does DB Schenker USA’s import and export compliance program project its principles and regulatory oversight to the company’s numerous overseas offices to ensure those staff understand their roles and responsibilities when it comes to the compliance of handling U.S. imports and exports?
A: We have an essential role as a country organization to both escalate and create transparency upwards to the global group, as well as regional groups. With the governance model we have today, the global group gets together with the region and the country teams frequently. They update one another on changes or potential revisions we have on our watch list. This then gets put into a common set of transparent documents or SOPS (standard operating procedures), which are shared across the organization.
The other problem that we run into is obviously not everything applies globally, so we do have individual cases that are country to country or region to region that could be specific to a shipment or a single transaction. That can be more of a bilateral discussion between the compliance individual in a particular country, so the model we have today is governed globally and this creates the vehicle of transparency and the management policies around it. We think this model works effectively today.
Q: With the threat of additional tariffs and related uncertainty/repercussions that they invoke, how do companies need to rethink their supply chains and transportation strategies to compete more effectively? What has DB Schenker USA done to assist its U.S. customers with managing their cross-border trade against the tariffs implemented by the U.S., China and Europe?
A: Good questions and relevant. I would say it’s in an environment which has been to a certain degree predictable, but with a certain amount of activity that is happening faster, with less notice period, and less predictability than before.
For importers, the challenge is that they must evaluate the financial impacts of these changes on their businesses. These might include soft costs that can come into play in addition to the tariff costs. Are there options to then mitigate some of these risks that are being put into place? And how do they navigate this themselves?
The right approach to take is for all importers to understand their products, their origin and current landed costs. When the tariffs change or the [trade] rules change, they must understand specifically the impact on their product line. Once they identify which products will be affected, they then need to communicate with their engineering, regulatory, sourcing and compliance teams to evaluate what their options might be, one of which may include renegotiating models with suppliers. In some cases, we may start to see a sourcing of new suppliers in different locations as an opportunity to mitigate tariffs, up to and including local sourcing and near-shoring. We’re also seeing more customers leveraging FTZs (foreign-trade zones), in order to defer duty payments until consumption or avoid duties on good which are transiting the U.S.
Q: American shippers remain frustrated by the inefficient handling of container traffic in and out of the largest U.S. marine terminal gateways. Similar angst has increased among shippers attempting to drop off and retrieve their cargo shipments at the country’s largest airports. What programs has DB Schenker put in place in terms of systems and cargo-handling operations to deal with persistent seaport and airport congestion and help its customers to avoid costly demurrage and detention fees?
A: This has been an ongoing discussion at the Federal Maritime Commission and a topic among shippers and the freight forwarding community for a long period. The way we approach it is when we partner with our clients, we do see visibility as the key opportunity to mitigate risk and avoid unnecessary costs and charges that can come into play. It’s also about the ability to predict when things are not going as planned and then adapt with contingency plans to avoid any of the disruptions that could occur.
So we’ve invested and continue to invest heavily in the technology space to improve transparency in every transaction across the entire supply chain. This year, we began the launch of CONNECT 4, which is an online portal for our customers. They now have the ability to track and trace shipments seamlessly from door to door, not only for sea freight but for air freight and ground transportation as well. So again, transparency allows the client to work and partner with the service provider, to look for potential supply chain disruptions and have contingency plans ready when necessary to move cargo effectively to ensure there is no disruptions to the service they are enjoying.
From an air [cargo] perspective, I would say the big thing we have worked on has been increasing quite dramatically the amount of ULD (unit load device) activity that we have versus loose cargo. That gives us the ability to have much more control over the unit from origin to destination and recovery at airports. It also means that in many cases, we can get a faster gate collection from a carrier. We also work very closely and have a thorough process on carrier selection to make sure that we are working with carriers not only on capacity and price but also reliability and whether we can get a preferred position on the collection of cargo at their physical location.
Where possible, we have also looked for alternative airports that have lift. While it’s fair to say you can’t completely disassociate your air cargo business from the major airports, we can on occasion use alternative airports not only to help with the decongestion but also bring a higher value to our clients. Indianapolis, Rickenbacker, Newark, Orlando and Detroit are examples where we would say they are not our primary, traditional, air freight gateway cities, but where we have found very good solutions when partnering with these airfields.
Q: Describe DB Schenker’s current U.S.-Mexico border operational infrastructure. Since 3PLs are specialists at finding ways to overcome obstacles to trade, what has DB Schenker USA done in recent months to ease the supply chain burdens imposed on American shippers that source goods back and forth across the beleaguered U.S.-Mexico border?
A: Mexico is one of the fastest-growing markets in our Americas region. Last month, we had our entire regional leadership team from the Americas, including our global CEO in Mexico City, to explore our future growth in that market. I think it’s fair to say Mexico is a relatively well-developed country, but we still see plenty of opportunity for growth here as an organization. We look at industries where we have global competency and see ourselves as market leaders, such as automotive and aerospace, and Mexico is high on our list for these areas. Also, Mexico has an increasing wealth in the middle class and the demand for the consumer goods area has increased.
We also have to face the reality that from an infrastructure perspective, there are still challenges with Mexico’s airports and roads, and to a certain degree that’s what we have to live with at this point.
But we do feel Mexico has a tremendous amount of potential and opportunity for us. We are present in a number of the [U.S.-Mexico] border locations today, and we will continue to look for ways to increase our opportunities in this market through such activities as direct trucking services from Mexico into the U.S., as well as offering consolidation capabilities into and out of Mexico.
So at the moment I would say we are very focused on unique solutions for specific customers and trades and we see that as an area where we will continue to invest and grow our business.
Q: With the numerous challenges to U.S. trade, what’s your view of the U.S. market in terms of future growth and which industries do you expect will drive this growth? How is DB Schenker USA set up to capitalize on this growth?
A: One of the primary reasons I accepted the CEO position for the U.S. is that I am familiar with the market. I have been working in and outside the U.S. for the better part of my career. More importantly, I think the U.S. is still the largest consumer market on the planet and we have plenty of opportunities to grow here.
We are focused on our core businesses of air freight, sea freight and contract logistics. DB Schenker globally has a very strong brand in land transportation, which in the U.S. is under-represented, and we will look for ways where we can accelerate our position of participation in the ground transportation market.
When it comes to specific industry sectors, DB Schenker has a vertical market approach that, for many years, has done extremely well. We are very excited with our ongoing developments in the U.S. aerospace and defense industries, healthcare and the retail/consumer sectors. We have also been heavily invested in electronics for a number of years and are now involved in new areas such as cloud computing. We see our transportation and logistics business continuing to grow within these industries and by focusing on the right customers, we will participate in their success as well.
Another area of interest for DB Schenker USA is project cargo. For the past two years, I have worked with global projects and see that as an area where the U.S. organization is extremely capable. We have made major investments in the Houston market, and we will continue to look for opportunities to manage global projects from the U.S. market and expect it to be an area where we can accelerate growth in the coming years.