What are Logistics Risks?

Transportation, warehousing, and inventory management are fraught with risks at all levels. For a successful buy-sell transaction or vice versa, all risk factors must be considered, managed, and countermeasures executed, leaving no room for error.

However, logistics management and execution of its various functions are not easy tasks. Each step has to be handled with care. Achieving zero-error performance might not always be possible, but every step should be taken to aim for this.

Supply chain disruptions happen when logistics management and task execution are not synchronised and, in some cases, when unexpected events occur.

Supply chain disruptions can have far-reaching and disastrous consequences. Besides delays in deliveries, it can affect product quality, create shortages or excess of stocks, and upset warehousing and storage capacities.

Also, projects may often be delayed, their overall costs shoot up, and strategies go off track. Frequent disruptions can affect an organisation’s reputation.

Risks associated with transportation and storage are the most common in logistics. Breakdowns and failures can be prevented to a large extent by proper planning and having backup plans in place.

What are the Main Logistics Risks Faced by Businesses Today?This can be quite an exhaustive list, but let’s review the main risks that logistics organisations face.

Supply Risks

Relying on a sole supplier might have its benefits, but imagine if they suddenly decide to turn off the supply. Having one or two backup suppliers who can be relied on in such situations can help to a certain extent.

Maintaining good supplier relationships can go a long way toward ensuring uninterrupted supplies. Suitable software with strong forecasting techniques helps produce reliable figures that can, in turn, help the supplier plan production accordingly. This helps prevent stock-outs and overstocks.

Transportation Issues

Transportation is the backbone of the logistics industry. Without it, the physical movement of goods, whether for buying or selling, can never be complete. Arranging the correct type of transport for moving the required quantities is crucial in avoiding transportation risks.

However, transportation depends on many factors, such as cost, the quantity and quality of goods being moved, journey distance, proximity to ports and railway yards, and others.

Goods can spoil or deteriorate with time if mishandled during transport and storage. Temperature-sensitive goods must be transported in the right containers, and refrigerators or temperature-controlled containers help to maintain the quality of the goods transported.

As in warehousing, goods are mainly transported under ambient, chilled, or frozen conditions, depending on the type of goods. Accurate storage temperatures, as the customer prescribes, must be followed during transportation to prevent spoilage and deterioration.

For example, grains are often transported under ambient conditions. Fruits and vegetables are transported over long distances in chilled containers, while meat, fish, and poultry are transported in refrigerated containers.

Most of the transport today involves multimodal containers. Reputed transport operators handle multimodal transport arrangements efficiently. Eventualities such as equipment breakdown, alternate routing, staffing, labour issues, etc., are often considered by these operators while planning the transport of goods.

Handling and Storage Risks

Technologically advanced warehouses for the storage of temperature-sensitive products are common these days. They are designed to store such products at the required temperature, humidity, and other conditions that ensure their quality, texture, etc.

Warehouse operators have to ensure that the vehicles used for transporting goods to customers, containers, Material Handling Equipment (MHEs), and their warehouses are maintained and serviced correctly at the prescribed intervals to avoid breakdown.

Security Risks

Modern multimodal containers are mostly theft- and pilferage-proof. Similarly, modern warehouses are designed to prioritise security. In addition to security personnel, cameras and sensors are installed at critical points to deter pilferage, theft, and unauthorised access.

Labour Issues

Labour supply can be unpredictable, and unexpected labour unrest can sometimes irreparably upset logistics operations. Logistic organisations must remember this and always have alternate measures in place.