The high number of processes in the supply chain turn logistics companies susceptible to risks that can be mitigated or avoided through prevention. Action plans require coordination from all departments (from finance to legal and purchasing), but they are vital to developing a culture of prevention throughout the entire business.
More logistics businesses understand the importance of monitoring, measuring, and controlling the deficiencies, failures, and contingencies in logistics. They need to use a system that identifies potential risks (the factors that affect business operations), assesses and assigns priority to risk (sorts risks according to their type, severity, frequency, and speed), prevents and solves risks (contains solutions to improve operations), and revises the operations to determine if the risks have changed.
Measures logistics companies should implement to prevent risks
The risks in the logistics sector come in various forms. Organisations can adopt a couple of prevention measures to keep risk at bay and minimise their liability. Here are the measures all logistics businesses should implement.
Identify and evaluate current risks
Take a critical look at your company to identify the areas with risk exposure. This technique unveils potential operations disruption factors and allows you to manage them to prevent any issue.
Prioritise by impact and probability
You cannot cover all scenarios, so your goal is to priorities potential risks according to their likelihood to happen. When you do it, estimate the brand and the financial impact they may have. For each of these possible risks, develop a mitigation contingency plan. Focus on the most likely and highest-impact risk possibilities.
Purchase insurance
Insurance is essential in many facets of business, and it’s crucial in the logistics sector. The first thing you need to understand is that carrier liability isn’t the same thing as insurance. It would help if you protected your cargo in transit and stored in warehouses against damage and loss, no matter the mode of storage or transportation. It would be best if you also got bobtail insurance because it covers driving trucks without a trailer for commercial purposes. When one of your commercial truck drivers experience an accident without a load or track, this policy covers the expenses.
Diversify suppliers
Don’t rely on a single source of products or services. It’s best to source from low-cost companies worldwide, but ensure that the suppliers don’t make your supply chain vulnerable. Establish secondary suppliers from different regions to minimise risk and ensure that you have a backup plan. Just think how many companies had to close their operations due to pandemic because they couldn’t source their supplies from China.
Ensure supplier quality
Suppliers can impact your brand’s reputation and cost you money. In addition to diversifying suppliers, you should also ensure you collaborate only with respectable companies that provide the best products and services in the industry. Look for reviews, check how they treat their employees, verify how they source materials and interact with other partners. Run financial due diligence to make sure you engage in a long-term partnership with a reliable company.
Risks are unexpected events, and most time, it’s challenging to measure the possible consequences. But adopting the above measures can help you protect your company.
