TT Talk - Club speaks on logistics risks

Speaking at the Terminal Operators' Conference TOC 2005 held recently in Antwerp, Belgium, Alan Wilkins - the Club's Business Development Director - highlighted the risks that transport companies are being increasingly asked to accept in the name of logistics and supply chain management.

Too often companies, under pressure to boost throughput by any available means, were agreeing to take on jobs for which they had inadequate experience, training or even personnel. The growth in outsourcing has resulted in the arrival of businesses offering to provide logistics services although they had no history of supply chain management. Alan warned that companies taking on supply chain activities outside their traditional core business needed to evaluate very carefully and professionally the liability risks in these new areas.

"Although the risks of national and international carriage, warehousing and distribution may not have changed with the development of logistics, the obligations undertaken by the logistics service providers certainly have" Alan said. He warned logistics service providers to ensure both that their customers were providing clear and complete data and setting realistic goals and that their operational competencies were sufficient to fulfil their contract obligations. "Certainly TT Club has seen claims examples involving companies signing contracts that they were either unprepared for or ill equipped to handle," he observed.

Commenting on the current trend towards mergers and acquisitions in the transport and logistics industries, Mr Wilkins said that an impact on risk can arise where the company has not thought through the integration of staff and the slow take up of company procedures by the newly acquired business.

"We have a number of instances where the flow of goods to particular facilities has expanded too rapidly, following acquisition, so that the original staff (adequate for the original volumes) quickly became overloaded. The operation can then get rapidly out of control," he said, "as the company struggles to correct the previous errors while also running and coping with the ongoing and increased cargo flow."

In addition to his cautions to logistics providers to carefully examine their risk profiles, if necessary with professional external help, Alan acknowledged the arguments that the insurance industry needed to "get back into step" with the transport industry's requirements.

"As the supply chain industry looks to eliminate separate profit silos, insurers cannot stand aside from such developments and only offer separate policies for the various different segments of the transport business," he said.

Alan's remarks echoed comments by the Club's deputy chairman Mr Bernd Menzinger, in an interview at the transport logistic symposium in Munich, when he pointed to an integrated logistics operator's insurance cover as the way forward for the industry.