Global Supply Chain Risk Management
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Supply Chain Risk Management Atlanta RIMS – February 2016 Aaron Howes Vice President, Risk Management & Insurance [email protected] O: 206-674-3408 Leigh Rittenhouse Regional Risk & Insurance Manager – Mid Atlantic [email protected] O: 704-329-5308 Nathan Mallory Director, Risk Management & Insurance – The Americas [email protected] O: 206-834-8030 AGENDA 1. Who is Expeditors 2. Supply Chain Overview – How Int’l Freight moves 3. Tips to better understand your Supply Chain risk - Terms of Sales - Shipping Patterns – Trends in Logistics Industry - Freight Carrier limits of liability - Freight Carrier Standards of care / loss control - What’s new in cargo tracking - Cargo Insurance © 2015 Property of Expeditors International of Washington, Inc. and its subsidiaries. Reproduction by written authorization only. 3 FOUNDED EXPEDITORS INTERNATIONAL OF 1979 WASHINGTON INC. GLOBAL HEADQUARTERS Seattle, Washington REGIONAL HEADQUARTERS London, Dubai, Singapore & Shanghai PEOPLE Over 15,500 Employees Worldwide 2014 REVENUE $6.6 Billion Traded on NASDAQ Fortune 500, S&P 500, NASDAQ 100 Company OUR NETWORK 110 COUNTRIES SERVED | 253 LOCATIONS | 79 AGENT LOCATIONS The Americas Europe Middle East, Africa, Asia Pacific 90 Locations 63 Locations Indian Subcontinent 62 Locations 9 Agent Locations 29 Agent Locations 38 Locations 5 Agent Locations 36 Agent Locations EXPEDITORS CARGO INSURANCE BROKERS INC. • Wholly owned subsidiary of Expeditors International • Specializes in cargo insurance, claims advocacy, and supply chain risk management services • 25 Full time cargo claims administrators • Manages > 23,000 Claims • Strong relationships with all major cargo insurers • Strong relationships with major freight carriers • Founded in 1994 © 2015 Property of Expeditors International of Washington, Inc. and its subsidiaries. Reproduction by written authorization only. 6 QUIZ © 2015 Property of Expeditors International of Washington, Inc. and its subsidiaries. Reproduction by written authorization only. 7 HOW MOST INTERNATIONAL FREIGHT MOVES ORIGIN TO DESTINATION PORT & CUSTOMS INTERNATIONAL FACTORY TRUCKER CONSOLIDATOR DRAYMAN HANDLING AGENTS TRANSIT CONSIGNEE TRUCKER DE-CONSOLIDATOR DRAYMAN PORT & CUSTOMS INTERNATIONAL WAREHOUSE HANDLING AGENTS TRANSIT Risk *The process of getting goods from Origin to Destination Involves many parties © 2015 Property of Expeditors International of Washington, Inc. and its subsidiaries. Reproduction by written authorization only. DO I HAVE ANYTHING ON THAT SHIP? • Am I at risk for the cargo on that ship? • What are my terms of sale? • INCOTERMS – International Commercial Terms • International Chamber of Commerce – 1936 • Incorporated into many purchase and sale contracts. Guidelines to help define each parties responsibilities. • Define risk transfer point. © 2015 Property of Expeditors International of Washington, Inc. and its subsidiaries. Reproduction by written authorization only. 11 © 2015 Property of Expeditors International of Washington, Inc. and its subsidiaries. Reproduction by written authorization only. 12 SHIPPING TRENDS • Fewer Air shipments more Ocean Shipments • Cost control - Procurement • Longer transit • Higher concentration of value • Large ships MSC – Oscar @ 19000 containers (TEU) • Potential for larger losses / Greater business continuity impact © 2015 Property of Expeditors International of Washington, Inc. and its subsidiaries. Reproduction by written authorization only. 13 COST PRESSURE FOR SHIPPERS VS. CONCENTRATION OF RISK • Risk management philosophy tells us to avoid concentrations of risk that would result in a fundamental impact on the organization in the event of a loss • Logistics focuses on streamlining, and gaining efficiencies through leveraging volumes • These two pursuits can land in direct conflict © 2015 Property of Expeditors International of Washington, Inc. and its subsidiaries. Reproduction by written authorization only. 14 CONCENTRATION OF VALUE © 2015 Property of Expeditors International of Washington, Inc. and its subsidiaries. Reproduction by written authorization only. 16 CARRIER LEGAL LIABILITY 1 7 FREIGHT CARRIERS LEGAL LIABILITY • The dollar amount freight carriers are liable for if proven liable for damage while cargo is in the carriers possession • Carriage of Goods by Sea Act (Ocean) • Hague Visby (Ocean) • Warsaw Convention - Montreal Protocol (Air) Varies by mode of transportation • Ocean • Air • Trucking/Warehousing © 2015 Property of Expeditors International of Washington, Inc. and its subsidiaries. Reproduction by written authorization only. 19 QUIZ © 2015 Property of Expeditors International of Washington, Inc. and its subsidiaries. Reproduction by written authorization only. 20 CARRIER LIMITED LIABILITY All freight carriers have contracted legal liability amounts found in their tariff or bill of lading • Ocean Carriers: • $500 per Customary Freight Unit • Air Carriers: • 19 Special Drawing Rights per kilogram @ $28.00 USD / kg • US Truckers: • $.50 per pound – varies • No liability – acts of nature, terrorism, force majeure *Carriage of Goods by Sea act, approved April 16, 1936 © 2015 Property of Expeditors International of Washington, Inc. and its subsidiaries. Reproduction by written authorization only. 21 KNOWING YOUR FREIGHT CARRIERS LOSS CONTROL AND RISK MITIGATION TECHNIQUES How do you vet your freight Carriers? Loss Control The implementation of procedures to reduce or limit the probability of a complete or partial loss of an organization's physical assets © 2015 Property of Expeditors International of Washington, Inc. and its subsidiaries. Reproduction by written authorization only. 24 SERVICE PROVIDER MANAGEMENT Are you verifying ? • Security standards – CCTV – access to warehouse – alarms • Background checks • Where is your cargo over the weekend 70% cargo theft • Double / Triple brokering • Internet loadboards • Safety ratings • Adequate Insurance with a reputable insurer • Financial stability © 2015 Property of Expeditors International of Washington, Inc. and its subsidiaries. Reproduction by written authorization only. 25 SERVICE PROVIDER MANAGEMENT On -going monitoring of service providers performance • Go and visit your freight carriers – walk through the warehouse and office space • Periodic Quality Business Reviews (QBR’s) • Carrier performance can be assessed • On time performance / loss ratio • Low-performing service providers can be eliminated • Increase utilization of high-performing service providers © 2015 Property of Expeditors International of Washington, Inc. and its subsidiaries. Reproduction by written authorization only. 26 SECURITY AND VISIBILITY 2 7 INTERNET OF THINGS (IOT) IOT refers to the general idea of things that readable, recognizable, locatable, addressable, and/or controllable via the internet The pace of innovation is growing so rapidly that is it is becoming exponential as each year passes May 19,© 2016 Property of Expeditors International of Washington, Inc. and its subsidiaries. Reproduction by written authorization only. 28 MARKET TRENDS SENSORS IN THE SUPPLY CHAIN "Real-time monitoring data on product condition and product control capability enables firms to optimize service by performing preventative maintenance when failure is imminent and accomplishing repairs remotely, thereby reducing product downtime and the need to dispatch repair personnel.“ -Harvard Business Review © 2015 Property of Expeditors International of Washington, Inc. and its subsidiaries. Reproduction by written authorization only. 29 ENHANCED SECURITY/VISIBILITY SOLUTIONS Expeditors Command Center © 2015 Property of Expeditors International of Washington, Inc. and its subsidiaries. Reproduction by written authorization only. 30 WHEN WOULD I NEED ENHANCED SECURITY / VISIBILITY • New product launch • Prototypes • Highly desirable products • High value shipments • Capital equipment • What you define as a “critical shipment” © 2015 Property of Expeditors International of Washington, Inc. and its subsidiaries. Reproduction by written authorization only. 31 “ALL RISK” CARGO INSURANCE ALL-RISK CARGO INSURANCE Why do you need Cargo Insurance? Open Marine Cargo “All Risk” against physical loss or damage from an external source during transit. • International • Domestic • Small Package • Stock (Inventory in storage/in process) • Other creative coverages are available Exclusions © 2015 Property of Expeditors International of Washington, Inc. and its subsidiaries. Reproduction by written authorization only. 34 IN CONCLUSION – WHAT CAN YOU DO TO REDUCE SUPPLY CHAIN RISK Meet with your logistics team • Understand INCOTERMS you use – when are you at risk? • Evaluate shipping patterns – concentration of value • Know your freight carriers – standards of care • Assess shipments that need special monitoring • Evaluate Cargo policy May 19,© 2016 Property of Expeditors International of Washington, Inc. and its subsidiaries. Reproduction by written authorization only. 35 Aaron Howes Vice President, Risk Management & Insurance [email protected] O: 206-674-3408 Leigh Rittenhouse Regional Risk & Insurance Manager – Mid Atlantic [email protected] O: 704-329-5308 Nathan Mallory Director, Risk Management & Insurance – The Americas [email protected] O: 206-834-8030 .