What is Logistics Risk

According to Accenture Survey, Seventy-six percent of companies participating in the “Accenture Global Operations Megatrends Study – Focus on Risk Management,” describe supply chain risk management as important or very important.

In Australia, Logistics Risk is a far greater threat to businesses due to the increasing regulatory threats, such as Chain of Responsibility( CoR ).  CoR threatens the very finanical viability of a business with punitive fines both to individuals and directors, already over 4500 charges have been laid.

Many businesses are now seriously investigating how they conduct business and how they engage suppliers and contractors in order to reduce logistic risk.

And LATUS is at the forefront of helping Australian businesses identify new methods of reducing logistic risk.

So What is Logistic Risk?

Definition of logistics:

Logistics – The science of planning, design, and support of business operations of procurement, purchasing, inventory, warehousing, distribution, transportation, customer support, financial and human resources.

Definition of Risk:

Risk – A probability or threat of damage, injury, liability, loss, or any other negative occurrence that is caused by external or internal vulnerabilities, and that may be avoided through preemptive action.

Logistics Risk

Initially we need to clear up what “logistics” is, many people think logistics is about trucks, that is far from the case, in referring to the definition of logistics above it is noted that transportation plays a small part in logistics. Then referring to the definition of “Risk” it also covers many areas but more importantly than the risk areas they may be avoided by preemptive action.

All business has some level of risk and the task of business is to minimise the risk and maximise the profit. In most cases risk is addressed through insurance, initially physical insurance such as Fire, theft, business interruption, public liability etc. then there are the personal insurances such as life cover, health, professional indemnity, key man etc. However there are many areas that are uninsurable such as safety and most company put in comprehensive systems to reduce risk to an acceptably legal level.  Interestingly we have to review safety systems every 3 months to ensure they are working and even our insurances are reviewed when claim occur to keep the costs in control.

However there are numerous areas of “Logistics Risk” that are never really addressed.  The business is established and what occurs becomes “that’s the way we have always done it”!

Logistics Risk is about identifying the risks in a logistics system such as:

  • Skills and knowledge
  • Interface Efficiency
  • Utilisation and optimisation
  • Inventory and supply
  • Human resources
  • Compliance and safety
  • Finances, Profit and market share
  • Regulatory Compliance
  • Chain of Responsibility
  • Dangerous Goods Regulatory risk