Making Regulatory Compliance Easier Through Behavioral Science

Navigating the complex web of regulations is a critical challenge for air freight forwarders. This article delves into how behavioral nudges can simplify regulatory compliance, reduce non-compliance risks, and enhance operational efficiency.

Regulatory Compliance in Air Freight

As an air freight forwarder, you must review hundreds of regulations and restrictions to move air cargo shipments quickly and efficiently and eliminate the risk of fines due to non-compliance. IATA’s (International Air Transport Association) regulatory compliance stipulates stringent requirements of air cargo from Dangerous Goods Regulations, contact details, loading/unloading equipment, to inspections of packaging, labeling, and documentation to identify any potential issues or discrepancies. Failure to comply with IATA's regulations could potentially lead to hefty fines or penalties imposed by regulatory authorities and ultimately, suspension of operations.

Everybody working in the air freight forwarding industry wants to comply with important regulatory orders but unfortunately, nobody likes taking one, let alone having the mental capacity every day to remember every little detail to ensure regulatory compliance. This is where the magic of nudging comes into play, a smart and easy air freight compliance solution you can try today.

Let’s talk about behavioral science in logistics.

A nudge is a subtle change in the working environment or the platforms of information that influence people's decisions without restricting their options. In a workplace, a nudge can be a simple reminder or a default option that induces a framing effect to help your team overcome inertias or habits that prevent them from performing in line with essential regulatory compliances. Here are some practical examples of behavioral nudges used by logistics companies to enhance compliance and efficiency:

- Visual Cues

Logistics companies commonly use floor markings to guide the placement of goods and direct traffic within warehouses. Visual cues such as signs, charts, posters, lighting, and floor markings help maintain safety standards and operational efficiency.

- Reminder Alerts

Automated alerts serve as reminders for compliance-related tasks. These can include equipment maintenance schedules or regulatory paperwork deadlines, ensuring that nothing is overlooked and compliance is maintained.

- Checklists

Visual checklists can be posted strategically to remind employees of safety protocols and operational procedures. This method is particularly effective in sustaining a high standard of compliance by making the required actions clear and constant​.

By embedding subtle cues into daily operations, companies can foster an environment where compliance becomes a natural behavior. Engage with real-world examples where behavioral nudges have shifted compliance metrics within the industry.

Overcoming Compliance Hurdles in Air Freight with Behavioral Science

As an air freight forwarder, cargo security and handling of hazardous materials are common compliance challenges in the industry. Ensuring cargo security from tampering and theft is a major concern. This involves strict adherence to security protocols, regular inspections, and the use of advanced tracking technologies to monitor cargo from origin to destination.

As an air freight compliance solution, freight forwarders should establish robust quality control measures to minimize potential risks. This includes regular inspections of packaging, labeling, and documentation to identify any potential issues or discrepancies. Read more about Navigating IATA’s Dangerous Goods Regulations from Pelicargo for a comprehensive guide.

What can go wrong if you are non-compliant?

Case Study: Undeclared and Non-Compliant DG Shipment.

An awfully expensive can of paint…

In 2017, popular online retailer Amazon received a fine of $91,000 imposed by the Federal Aviation Administration (FAA) after a 3.8-liter can of paint, which was not declared hazardous, leaked during transport. The subsequent investigation also showed that the employees of the company were not trained regarding DG shipments.

How behavioral science nudged into play…

In an effort to reduce the frequency of these occurrences, carriers such as USPS, FedEx, UPS, and DHL have published guidelines on the shipping of common retail products. In addition, The US PHMSA started an online awareness program called “Check the Box”.

▲ A reminder poster at a USPS location promoting regulatory compliance for customers.

▲ Hazmat compliance nudges from FedEx and the Department of Transportation.

Measuring the Impact of Behavioral Nudges on Compliance in Air Freight

To effectively set up metrics and KPIs to measure the effectiveness of behavioral nudges in compliance strategies within the air freight industry, it's essential to start by identifying specific, actionable, and relevant data points that directly reflect the outcomes of the nudges implemented.

An Implementation of a data-driven approach

Case Study: Digital Scorecards that Streamline Regulatory-compliance.

An excellent example of a company using data-driven insights to fine-tune its compliance strategies is Honeywell. Honeywell partnered with EY to develop a comprehensive compliance framework, which included a digital scorecard.

This scorecard consolidated various compliance metrics into a centralized view that allowed for better communication with senior leadership and continuous improvement in their compliance practices. This approach not only streamlined the monitoring of compliance-related activities but also enabled Honeywell to proactively manage risks and enhance its overall compliance stance.

The implementation of such a data-driven approach involves setting clear benchmarks for performance and regularly reviewing these metrics to ensure that they continue to align with business goals and compliance standards. It is crucial to have a flexible system in place that can adapt to changes in both internal processes and external regulatory requirements.

For our fellow air freight forwarders…

In the air cargo industry, using KPIs to monitor regulatory compliance significantly reduces the time and costs associated with non-compliance issues. Implementing targeted KPIs allows companies to identify and rectify compliance problems faster, minimizing financial penalties and operational disruptions.

The metrics should be closely tied to the operational goals and compliance requirements of the business. For instance, metrics could include the rate of accurate hazardous material handling, the timeliness and accuracy of customs documentation submissions, or the reduction in compliance-related incidents.

Transportation Management Tools for Freight Forwarders

Transportation Management Systems (TMS) such as CargoWise, Magaya, and Shipthis integrate nudging into cargo shippers’ daily logistics operations. Air freight forwarders can also adopt and leverage Pelicargo’s service to streamline the air freight booking process by matching freight forwarders and airlines with cargo efficiently.

Furthermore, IATA has also implemented IMX (Integrated Management Solutions), a platform that provides an efficient and cost-effective solution for regulatory management that helps you collect, manage, and analyze quality and safety data. You can also refer to TACT Air Cargo Solutions launched by IATA for air cargo tariffs and rates, schedules, and compliance information.

Conclusion

Nudges work like useful little reminders and prompts that, with the magic of behavioral science, significantly boost regulatory compliance in air cargo shipment handling. With a decent implementation of data-driven reward systems and KPI metrics, your freight forwarding team can benefit greatly from enhanced compliance adherence and communication. Adopt a smart and easy air freight compliance solution today.

Primary Research & Draft : Ken Miao

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