Believe it or not, most supply chain professionals think that insurance is not their responsibility to take. It’s very hard to predict when transportation risk will occur with extreme weather, theft, hijacked trailers, global crises, or cargo lost at sea. In fact, the annual global financial impact from cargo loss is $50 billion!
A 2014 survey done by the University of Tennessee Global Supply Chain Institute, gathered data on the types of risk mitigation techniques used by supply chain professionals. Below is a chart showing these techniques to avoiding supply chain risk.
Supply chain professionals assume that just purchasing insurance in general will help them recover from the risks and they overlook other opportunities to saving their supply chain. Here are some statistics that suggest your supply chain may be at more risk than you think:
- 52 containers are lost or damaged at sea each week, hence the $50 billion in cargo loss
- 76% of companies reported at least one supply chain disruption in the past 12 months
- 20% of companies who experience a supply chain disruption go out of business within 18 months
- 50% of claims for both domestic and international shipments are denied when supply chain professionals believe standard carrier liability is insurance
- Self-insurance lacks the advantage of pooled risks for catastrophic losses that threaten the existence of your business
- Nearly 90% of firms do not have a robust risk management process
- 100% of supply chain executives acknowledged insurance as a highly effective risk mitigation tool
You never know what to expect with these supply chain challenges and it’s better to prepare for a loss than to try to recover from one. Risk is seen in both global and domestic markets so it’s clear that supply chain executives believe insurance is a very effective risk mitigation tool.
There are many insurance solutions providers such as UPS Capital, who are willing to partner with supply chain professionals to find out what the risk mitigation approach that is best for you.
The MEP Supply Chain Optimization program is also a great approach in reducing risk, increasing visibility, and building stronger manufacturers. Find a local MEP center or get started today by contacting the MEP Supply Chain team.
For more on supply chain risk management, download the UPS Capital white paper here.