Everyone makes dynamic risk assessments each day, no matter your role or experience, whether you’re at work or at home. In fact, risk is anything that has the potential to cause harm – and for businesses it’s your bottom line that can take the hit. In logistics, without robust risk management procedures your supply chain could falter then fail when the unexpected happens.
Any risk manager will tell you that the unknown can seriously damage a cost-effective supply chain. So, identifying risk is the first step in securing your supply chain for long-term results. If we take a snapshot of cold chain logistics, for example, compromising a temperature controlled supply chain could risk hundreds of thousands in just a single high-value pallet. Business continuity, then, rests on your 3PL partner’s expertise in measuring, minimizing, and managing risk to your business for cost-effective and secure supply chain solutions.
According to ABN AMRO’s report, only 61% of logistics providers have a Plan B for a major breakdown in their operations – and under 50% of companies understood what the business implications were in monetary terms.
With Enterprise Risk Management (ERM) in place, your 3PL partner can align the risks to your growth. ERM is a dynamic, continual assessment of risk and control and, as such, low level performance has the ability to impact long-term, strategic direction.
With this in mind, a comprehensive business continuity plan forms the foundations for effective mitigation of threats to your product, reputation, and brand equity.
So, your 3PL partner should have these three strengths of risk management in place for end-to-end protection of your supply chain.
- Tailored Business Continuity Plans
Protecting your supply chain solutions is of paramount importance for ongoing results – even under the most adverse circumstances. To do this, the work starts before a retainer even begins. The risks are measured and assessed so a Business Continuity Plan – produced in-line with ISO standards and approved by insurers – is developed to guide a response for any significant incident or crisis.
In fact, here at Yusen we advise that all risks to your supply chain can be categorised in four ways for a direct and targeted approach:
- Physical loss or partial loss of warehousing and distribution
- Loss or reduction of workforce and resource
- IT, Security or Utility Systems failure
- Environmental disasters
With this done, Business Recovery Strategies then provide a step-by-step response to each scenario tailored to meet your specific needs.
- A Crisis Management Team to act quickly
A Crisis Management Team will then react to serious problems as they arise with escalation processes to implement the best supply chain solutions from your Business Continuity Plan.
To do this, they meet urgently to use relevant data from the affected job – such as racking configuration and expected delivery times – to tailor the most cost-effective approach for your needs. In each case, the fastest and most efficient solutions will be found to reduce the impact to your business.
For example, if perishable goods are at risk of compromise in cold chain logistics then a variety of fixes could be found. Product may be redirected to either a secondary Company location or direct to a customer, or may even be temporarily stored in temperature controlled transport instead. Either way, this would avoid the inefficiency and cost of maintaining a standby warehouse.
- High standards with Industry Accreditations
If you’re unsure about whether a potential 3PL partner has strong Enterprise Risk Management processes, then look for industry accreditations as a sign of their high standards.
For the pharmaceuticals industry, Good Distribution Practices (GDP) are a mark of globally-recognised standards of expertise. It demonstrates that certain risk has already been accounted for with consistent quality management throughout the supply chain.
In general, a 3PL partner with the ISO 9001 certification would also perform quality processes subject to external examination. As part of the accreditation, they would have had to communicate their risk management procedures for robust application across the business.
Managing supply chain risk doesn’t mean that everything will always go according to plan. However, with foresight and accredited practices, your 3PL partner will have the right infrastructure in place to protect your supply chain solutions from the unexpected.