Friday 28th Oct 2016 - Logistics Manager

Supply chains suffer from trade expansion

The growth in end-to-end logistics services and the greater complexity of long-distance supply chains are increasing risks for logistics operators, often in areas that are imperfectly understood. This warning to logistics service providers was delivered by the leading transport mutual TT Club at a recent conference in Antwerp.

Speaking at TOC Europe, Alan Wilkins, business development director of TT Club, highlighted the insurance provider’s concerns regarding the heightened risk profile for logistics operators.

Global trade expansion has put enormous pressure on all involved in the supply chain, including ports and shipping lines as well as logistics operators, to boost throughput by every available means. As a result, said Wilkins, there was a greater risk of service disruption or of countenancing unsafe working methods than had been the case when operational demands had been less intense.

The growth in outsourcing has resulted in the arrival as logistics service providers of businesses that have not historically operated as supply chain managers, said Wilkins. He evidenced examples of shipping lines, ports and warehouse operators taking on supply chain activities outside their traditionally-recognised core businesses, and warned of the need to evaluate liability risks in these new activities carefully and professionally.

“Although the risks of national and international carriage, warehousing and distribution may not have changed with the development of logistics, the obligations undertaken by the logistics service providers certainly have,” said Wilkins. He warned logistics service providers to ensure both that their customers were providing clear and complete data and setting realistic goals and that their operational competencies were sufficient to fulfil their contract obligations. Commenting on the current trend towards mergers and acquisitions in the transport and logistics industries, Wilkins said that an impact on risk can arise where the company has not thought through the integration of staff and the slow take up of company procedures by the newly acquired business. “We have a number of instances where the flow of goods to particular facilities has expanded too rapidly, following acquisition, so that the original staff (adequate for the original volumes) quickly became overloaded. The operation can then get rapidly out of control,” he said, “as the company struggles to correct the previous errors while also running and coping with the increased cargo flow.”

In addition to his cautions to logistics providers to carefully examine their risk profiles, if necessary with professional external help, he acknowledged the arguments that the insurance industry needed to “get back into step” with the transport sector’s needs. “As the supply chain industry looks to eliminate separate profit silos, insurers cannot stand aside from such developments and only offer separate policies for the various different segments of the transport business,” he said.