In international trade, it is important to get your goods from origin to destination safely and on schedule. More often than not, your goods travel halfway around the globe to reach your customers and this is when they are most exposed to risks - while crossing borders and changing hands.
Any loss, damage or delay to your shipment will adversely affect your customers that put their trust in your business, and ultimately your business’ reputation and bottomline. On the other hand, proactive management of risks in logistics will set your business for success and bring you more opportunities.
Post Covid Supply Chain Realities
In the post-Covid world, supply chain chaos and disruptions have become the new normal. Businesses worldwide have been rocked by fuel price hikes, port congestions and capacity shortages across all modes of transportation. This has exposed the fragile nature of the modern supply chain systems and practices across the globe. For businesses shipping internationally, building resilience around risk management has become a competitive advantage.
What Are The Typical Risks In International Shipping?
Some of the typical risks associated with international shipping include:
● Loss or damage to the goods
● Shipment delays
● Unexpected costs arising from storage or additional handling
● Rate volatility
● Compliance issues e.g. violation of customs regulations
● Pilferage or theft of part or whole of the goods
● Accidents, injury, death
● Acts of God such as Covid-19 lockdowns
Liability Limitations
Carriers have limitations to their legal liabilities when transporting your goods. That means in the event of damage or loss to your cargo, you are unlikely to be compensated for the full value of your goods. For example, in case of loss, damage or delay to your cargo, air carriers’ liability under Montreal Convention is limited to 22 SDR or roughly 30 US Dollars per kilogram, regardless of the market value of your goods. Similarly, CMR Convention limits the liability of road carriers to 8.33 SDR per kilogram. Such limitations make it obvious that you need an extra layer of risk protection for your shipment.
Strategies For Managing Risks
1. Take on cargo insurance
Considering the liability limitations of carriers for loss and damage, it may be a good idea to purchase an ‘All Risks’ cargo insurance policy for your shipment. This is the most common risk management strategy for high value shipments and a better alternative to declaring a higher value for carriage, which could be complex and expensive, depending on the carrier.
2. Track your shipment
Cargo can be offloaded, misrouted or otherwise mishandled during transit. It could be down to capacity issues, wrong instructions or miscommunication between carrier and handling agent. Most reputable carriers provide in-transit visibility through their website so be sure to track your shipment from time to time.
3. Pack and label your cargo appropriately
Export packing must be of sufficient quality to ensure the safety of your goods during transit - protect your cargo from all types of weather, shocks and vibrations during handling, loading/unloading at transit points, etc. Attaching appropriate labels to your cargo will also increase the chances of your cargo being handled properly as it travels.
4. Palletize your cargo
Shipping loose is never a good idea, especially when your goods have to make transit stops on a long route. The less the number of units, the less likely your cargo is to be lost or damaged in transit. The benefits of cargo unitization far outweigh the costs when you consider the added protection it provides during transit and warehouse handling.
5. Make clear communication a top priority
Providing complete information and clear shipping instructions to your forwarder will minimize the chances of your cargo being mishandled. Never leave your shipping agent guessing things on their own, make every effort to disclose all cargo facts and lay down your shipping requirements in writing. This will not only allow your logistics provider to perform at their best but also create solid evidence in your favor should any disputes arise down the road.
6. Get your paperwork right
The quality of your paperwork is crucial for your goods to safely make it across international borders. Properly executed documentation should help you avoid unnecessary delays and undue storage costs upon arrival at destination. Make a point of sending a Pre-Alert to your destination forwarder before you send off your goods. Doing so will afford you the time to make necessary corrections if required and reduce the likelihood of your shipment being delayed or rejected. Good paperwork will also ensure that your business remains compliant with customs regulations and save you the trouble of potential penalties.
7. Exercise due diligence when shipping dangerous goods
Failure to properly pack, label or declare dangerous goods can have serious consequences, not only for your shipment but also other goods traveling in the same vessel / aircraft, not to mention the people in charge of physically handling the goods. For example, fires caused by hazardous materials such as lithium-ion batteries during transit or in storage are not an uncommon occurrence. Liabilities for your business arising from such cases can be quite serious. Working with licensed DG specialists is the way to go when you ship hazardous goods.
8. Leverage Technology
Shipments can be misrouted or mishandled along the way, resulting in cargo loss, damage or delay. It can be quite frustrating to locate the missing pieces or prove negligence when things come down to that, especially when third parties such as ground handling agents or warehouse staff are involved. Consider using cargo security devices such as track/trace GPS devices, shock/tilt watches, locks or tamper proof seals as an added layer of security for high value shipments. This is especially useful when your goods travel long distances through multiple transfer points.
9. Train your staff
Increase risk awareness across your organization by training your employees in risk management. Understanding risks and acquiring risk management skills will help employees become better risk managers. This should help you to better manage risks and reduce your company's risk exposure.
10. Trust your cargo to supply chain experts
Partnering with a reputable, experienced freight forwarder can help minimize the risks in your supply chain. Pay attention to the following when selecting a freight forwarding partner:
● Insurance coverage: does your freight forwarder have adequate liability insurance coverage?
● Quality management: does your logistics provider use appropriate handling procedures in place? The best players in the field adhere to quality standards such as ISO 9001:2015.
● Professional qualifications: is your forwarder qualified enough to handle specific types of shipments, e.g. live animals or dangerous goods? Don't be shy to ask for proof of qualification such as certificates or licenses.
● Relationship to carriers: make sure you are dealing with cargo agents with direct relationships to carriers - the more agents you have to go through, the less efficient your supply chain becomes in terms of time and costs.
Conclusion
No matter what or where you ship, the risks inherent in the shipping industry need to be managed well. Recently evolving risks such as Covid-19 lockdowns or Russia-Ukraine military conflict mean supply chain risk management requires a hands-on approach, and should never become just a box ticking exercise. At Xscale, risk management is integrated into our business processes at all levels. And that applies to how we handle the goods that you trust us, from pick up and main carriage to safe delivery to final destination.
About Xscale
Xscale is a logistics and supply chain management company headquartered in Singapore. We operate out of our hubs in Singapore, Tashkent, Frankfurt and London, providing a complete range of logistics and procurement services to businesses around the world. We combine our global network, industry expertise and highly competent professionals to work alongside our customers and solve their supply chain challenges. Contact Us if you require any assistance.