Blog Post #6 – Fraudulence in the Supply Chain Industry

April 17, 2023


We have all dealt with one form of fraud or another in both our professional and personal lives.  Whether it be the sleazy used car salesman trying to sell you a 1995 Honda Civic with 300k miles on it for $20k, or your kid maxing out your credit cards on Fortnite V-Bucks, there are forms of fraudulence everywhere.  With the dawn of the internet and all the new ways of accessing information it has provided, both fraudulent activities, and awareness of them, have risen exponentially.  The supply chain, 3PL, and freight industries have always been wrought with fraudulent activity, and both of those aforementioned factors have affected this unfortunately prominent part of them. 

Freight Brokers are an important part of the logistics and supply chain industries (not to toot our own horn or anything), and as with any prominent industry, there are scammers abound.  The most common form of fraudulent activity in the freight brokerage industry is double brokering.  According to the TIA, double brokering is defined as when a carrier accepts a load and then re-brokers it to another motor carrier.  While this practice is illegal, it is still extremely common.  Speaking personally, our company has to deal with attempts at double brokering from carriers and other brokers multiple times a week, some obvious, some not. 

The process of double brokering typically starts when a freight broker is hired by a shipper to find a carrier to transport their goods. The broker then reaches out to various carriers and negotiates a price for the shipment. Once a carrier is selected, the broker provides them with the details of the shipment, including the pick-up and delivery locations, as well as the agreed-upon price.

One of the main causes of fraudulence in the 3PL industry is the lack of regulation. Unlike other industries, the logistics industry is largely unregulated, making it easier for fraudulent companies to operate undetected. This lack of regulation also makes it difficult for customers to determine which logistics providers are trustworthy and which are not. 

To combat fraudulence in the 3PL industry, companies must do their due diligence before selecting a logistics provider. This includes conducting a thorough background check, checking references, and verifying the legitimacy of the logistics provider’s business.  In addition, customers should insist on written contracts that clearly spell out the terms of the agreement, including pricing and services provided. This can help prevent misunderstandings and false billing. 

Finally, customers should closely monitor their logistics providers to ensure that they are delivering the services they promised. This can include tracking shipments and conducting regular audits of billing statements. 

In conclusion, fraudulence in the 3PL industry is a serious problem that can have far-reaching consequences for companies that rely on logistics providers. To protect themselves, companies must take steps to ensure that they are working with trustworthy logistics providers and closely monitor their activities to prevent fraud. 


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