MITIGATE THE RISKS TO YOUR LOGISTICS OPERATIONS
11/01/2012
With the recent focus on survival rather than growth companies need to be able to identify risks in their total supply chain and be able to manage any potential threats to their own business. One potential risk area is currently in outsourced logistics, including transport, warehousing, fulfilment operations and distribution; just a few of the many diverse activities currently outsourced to Logistics Service Providers (LSPs).
With more and more companies, including LSPs, struggling for survival there is an increased risk of continuity of supply. There is also a danger that the in-house skill and expertise (let alone the physical infrastructure) no longer exists internally within an organisation as so many parts of the infrastructure have been outsourced resulting in internal “de-skilling”.
The answer to mitigating this risk is not necessarily to bring logistics “in-house” as this would require substantial time and investment in physical resource and up-skilling the internal workforce through large scale training and recruitment programs. The answer is however to ensure a better and detailed level of understanding of the current LSP service and how it operates and also of the overall LSP market. This higher level of understanding will enable the businesses to quickly identify what expertise is available and where to react quickly to supply chain demands should the current LSP be unable to continue. It will also enable a company to identify the early warning stages of potential issues and where possible to work with the LSP to overcome them.
How quickly a company can get back to ‘business as usual’ in the event of their primary LSP going out of business depends on how effectively it can put into action a business continuity plan.
In this case it will require investment into a specialised internal Logistics risk management team to work very closely with the current LSP to understand every aspect of their operations and capabilities, and also of the LSPs own disaster recovery or business continuity plan. A small percentage of money saved in previous years by outsourcing logistics should now be integrated into the expenditure budget to facilitate these measures.
It may not be the ideal time to invest, except where the investment could protect your business and enable you to react quickly and efficiently to unavoidable changes in the supply chain.
