Supply Chain Insurance
As an operating business it is in the best interest of all stakeholders that a strategic supply chain management plan is put in place so that when there is a catastrophic disruption in a companyâ€™s supply chain, various steps can be taken to minimize the risk.
So how does a business mitigate the risks imposed by a disruption in its supply chain?
First we address the risks that are associated with disruptions in a companyâ€™s supply chain. Disruptions in a companyâ€™s supply chain can come in various forms. Most of them will fall along the lines of:
- Political risks and labor unrests
- Mother nature and natural disasters
- Fire and power grid blackouts.
- Equipment breakdowns.
The next step is to put together a comprehensive supply chain risk management program that clearly outlines how a company evaluates its suppliers and responds to any disruptions in its supply chain. So that in the event of any unforeseen disruption in the supply chain, the company is well positioned to mitigate risk posed by that particular disruption and lessen the financial impact to the business.
The following questions will help you identify your suppliers and in turn lessen the risk of disruptions in the supply chain (Zurich Insurance, 2012):
- Do you know how your critical suppliers are, and how much their failure would impact your companyâ€™s profits?
- Have you fully mapped out your critical supply chain upstream to the raw material level and downstream to the customer level?
- Have you integrated risk management process into your supply chain management approaches?
- Do you have routine, timely systems for measuring the financial stability of critical suppliers?
- Do you understand your tier 1 production facilities and logistic hub exposures to natural catastrophes?
- Is supply chain risk management integrated into your enterprise risk management approach?
- Do you record the details of supply chain incidents and the actions you have put in place to avoid future incidents?
- Do you tier 1 suppliers have business continuity plans that have been tested in terns of their viability?
- Have you provided risk training to your supply chain management team?
- Is risk on the agenda at performance meetings with your strategic suppliers?
Zurich Insurance (2012), one of the leading providers for supply chain disruption insurance outlined what their risk assessments have discovered for various businesses:
- Identified two key 2nd tier suppliers that were in significant financial trouble.
- Recognized a higher loss potential of a supplier than anticipated by insured: USD $10 million vs. USD 1 Million.
- Discovered actual reliance on one supplier significantly greater than presumed: 70% vs. 20%
- Determined that a key component supplier and itâ€™s alternative were located in earthquake zone.
Talk to a Hallmark Insurance Supply Chain Expert today!
If you own cargo, you need property insurance. It all depends on the value of the load. Our expert brokers will advice on what is excluded when it comes to insuring and protecting your cargo load. Coverage can also be provided for marine business interruption and consequential loss insurance when in conjunction with the transit risk.
When you accept freight that is not owned you take on the risk the minute itâ€™s put on the truck or trailer and it does not stop until you have delivered. Cargo insurance can be complex and problematic. It touch many facets of contract law and gets complicated if the logistics chain involves multiple parties. Getting the right policy is critical to avoiding complex claims issues
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Warehousing is a property in transit coverage that has been kept at a location for over 30 days. It needs to have its own wording and should be back up with proper documentation from the insured. The terms and conditions are different than that of a standard BOL and contain limitation of the value. It is important that customer and the party warehousing the freight and the insurance advisor are all on the same page. Have a trusted advisor in this area is paramount. It is even more important to have the right limits to meet the maximum needs.
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