Identifies the main strategic and operational risks in international logistics and supply chains with solutions to guard against a growing problem.
This Report is essential reading for anyone involved in planning, managing and procuring international transport and logistics services particularly if you are engaged in co-ordinating channel partners.
Risk Management In International Transport And Logistics analyses major areas of risk in the supply chain:
Lack of inventory
Carrier delays and non-performance (all transport modes)
Transport and logistics cost volatility
Transport congestion
New environmental legislation affecting logistics
Mergers and acquisitions among service providers
Cargo theft
Liability for loss or delays
Bankruptcy of transport providers
Fines for non-compliance, sometimes running into millions of dollars
Recession has heightened the level of risk in transport and logistics. Failures among vendors and the threat of cargo theft is heightened, while moving products from offshore locations to final markets has always held specific business risks - adding pressure on exporters and importers to tighten up risk procedures.
Logistics buyers and managers have a functional responsibility to manage risks in their departments. The US Sarbanes-Oxley Act, 2002 makes senior management directly accountable for risk procedures and assessment. Activities can be outsourced… responsibility cannot.
Drewry’s Report examines different types of risk:
Process risks – those that can affect workflow, material, information and money.
Risks associated with assets and market risks - that come from the infrastructure and assets associated with or use that infrastructure, whether the assets are fixed or mobile.
Organisational risks – associated with organisational structures and relationships between networked organisations that may also cross sectors and industries.
Macro-environmental risks – including political crises, natural disasters, terrorism and economic risks.
Accepting risks exist
Drewry focuses on why risk needs to be managed in a systematic way. Predicting and removing all risk is impossible; however, responsibility for risk management is becoming enshrined in law at the corporate and individual level. The Report provides a guide for those setting out on the risk management road, and for those who want to validate or refine their existing approach and scope of risk management.
Risk assessment
A whole section of this Report surveys a full spectrum of risks – from basic operational through asset deployment, to cross-sector relationships culminating in macro-economic risk.
This is followed by an examination of how risk assessments can be made, looking at the different methodologies; some with firm foundations in science and statistical analyses, others based on ‘common sense’ approaches.
But the underlying theme is to look beneath headline risks and into the detail: the specific threats to supply chains, their probability and significance; the relationships between cause and effect and determining the appropriate trade-off that each and every shipper is constantly making between risk and price.
Responding to risk
The Report goes on to deal with how to respond to risk (risk mitigation, risk avoidance, risk transfer and risk retention) providing shippers with more practical assistance to either set them down the path of a risk-management strategy or create a measure to benchmark existing strategies against. The Report provides the proven methods of responding to specific risks in transport and logistics, including vendor checks and Key Performance Indicators.
Lean vs agile
A familiar but no less important aspect is ‘lean’ supply chain and ‘agile’ supply chain. Lean supply chains, coupled to lean manufacturing, can become more vulnerable to risk factors. As one shipper commented recently at a supply chain round-table: ‘The leaner you are, the bigger the inventory risk’.
If the supply chain becomes longer (due to outsourcing the supply or manufacture of certain parts and products) this vulnerability can increase. For example, stock-outs can extend lead times beyond customer tolerance. The unpredictable needs to be built into planning so there is supply chain slack – or buffer inventory – itself anathema to the ‘lean’ ethos.
Drewry’s Report covers this topic and much more with analyses and insights to help transport and logistics managers deal with the multiplicity of risks they face and for which they may be held to account.
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