TT Talk - TT Brief: Warehouse risks

TT Talk - TT Brief: Warehouse risks

Following the successful inauguration of the TT Brief series of guidance documents in 2021, work continues to expand the range of resources available in this format. Targeted at the operational workforce, these documents seek to provide visually arresting, pithy messaging to support toolbox talks and good operational practices. The upcoming series explores various elements of warehousing risks.

Warehouses are a fundamental component of the global supply chain, whether it be short or long-term cargo storage, modal interchange or to facilitate more involved activities such as re-work or co-packing. Arguably, warehouses have become an increasingly important node, as supply chain actors reconsider just in time supply chain models, adopting a more conservative approach, near shoring and generally holding increased stock at the point of production or market.

Warehousing activities naturally bring a host of familiar operational components together in one location and are not without risk. Some actors in the supply chain will have been forced to demonstrate agility over the last two years, perhaps embarking on new or increased warehouse capacity requirements to meet evolving business needs. Those exploring warehousing operations however, should not be complacent and develop an understanding of the associated risks.

The forthcoming series of TT Brief guidance documents identify key risks, providing succinct visually led guidance to mitigate identified risks, ranging from choosing a suitable warehouse to controlling flood and fire risks.

Considering differing perspectives in risk

Initial practical considerations for establishing a warehouse will inevitably relate to location, proximity to transport networks, size, availability of labour and rental prices and/or land costs. The first and most important decision will be whether to own or lease the property. There will likely be considerable differences in responsibilities - and therefore liabilities to maintain and repair the warehouse - resting on this decision. When entering any contract, it is critical to understand your obligations fully to mitigate risk.

When entering any contract, it is critical to understand your obligations fully to mitigate risk

A consideration of growing importance is that of climate change, risk of exposure to weather related losses and likelihood of flooding. A less obvious consideration might be the activities of other storage units or facilities adjacent to the intended operation. Are there contamination risks or risks associated with incompatible cargoes to take into account?

Once a location has been selected, security is going to be another pillar of risk to consider. According to TT Club and BSI’s global cargo theft report for 2020, thefts from facilities and warehouses significantly increased over earlier years, accounting for around 25% of recorded thefts. This trend varies by country and region and is influenced by varying levels of both procedural and physical security measures.

While there are more obvious physical measures such as perimeter fences, CCTV and barriers, effective security measures also include procedural aspects such as ensuring due diligence when hiring personnel, issuing security badges, issuing company uniform and information security. There is no one size fits all solution to warehouse security and much will depend on the cargoes being stored and the frequency of cargo movements.

So much is about people

Industry statistics illustrate an uncomfortable number of bodily injuries sustained in the warehouse environment. There are many moving components in play and the advent of automation introduces complex safety challenges. Creating a safe environment can not only reduce the risk of injury to the workforce but also increase efficiencies and reduce incidence of cargo damage.

Control of personnel as well as visitors and contractors is a fundamental step to sustaining safety. Understanding who is on site, when and why, restricting access to areas where they do not need to be, and ensuring adequate induction training is provided, will all assist in mitigating risk. Segregating people and handling equipment effectively is another important challenge in operational zones. 

Consider the array of risks

A further risk, brought sharply into focus in Beirut in August 2020, is that of abandoned or stagnated cargo in storage. Due diligence and careful management of cargo stored is a prudent strategy. 

TT has highlighted previously the potential damaging effects of flooding incidents. The associated losses can be far reaching; water is unforgiving and has the ability to penetrate and damage just about any area or commodity. Flood water is inevitably dirty, which increases the likelihood of damage. Additionally, in many cases where local sewers have been flooded the water can be unsanitary which further elevates the seriousness of the damage and the risk to health.

While contracts might provide a degree of protection, one should be mindful of local weather trends and ensure risk assessments remain current and all practicable steps are taken to mitigate risk. Just because more rain fell in a short period than any other recorded, might not be a certain legal defence, if you cannot demonstrate a risk assessed approach to strategic decisions. 

Finally, warehouse fires are amongst the more significant claims in terms of both cost and operational impact. The primary causes of warehouse fires include electrical failures or malfunction, hot works, maintenance related issues and poor enforcement of no smoking policies. Many incidents can be avoided entirely by periodic risk assessment, effective maintenance and training, enforcement of policy and good housekeeping. Due diligence relating to the cargo being stored and understanding the potential risks they present is vital. 

Whether you own or lease your warehouse and the equipment used in and around them, due consideration should be given to fire risk. If you are leasing a warehouse, it should not be assumed that these responsibilities rest with the landlord. Indeed, in many instances, the maintenance and repair of a warehouse will be the responsibility of the lessee. 

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If you would like further information, or have any comments, please email us, or take this opportunity to forward to any others who you may feel would be interested.

Mike Yarwood

TT Club

Date08/03/2022