Report argues recession adds risk for cargo firms

Drewry says that formal risk management is crucial in current climate.
Lack of inventory has been cited as a major risk for logistics firms in the current challenging conditions.
Lack of inventory has been cited as a major risk for logistics firms in the current challenging conditions.

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A recent report form Drewry Supply Chain Advisors states that the credit crisis raises the risk of cargo theft and the probability of company failure in the international transport and logistics community. A specific concern highlighted involves the consequences of goods seized by creditors while they are in transit.

Among the major risks suggested by the report were: lack of inventory; carrier delays and non-performance; cost volatility; congestion; environmental legislation; theft; mergers and acquisitions among service providers; bankruptcy; liability for loss or delays and fines for non-compliance.

The Drewery research note added that while many companies have formal procedures to manage some of these risks, many of the others are not part of any formal risk management policy.

"Drewry argues that international sourcing has introduced in global business more and higher risks related to transport and logistics, and that these risks are often more complex and more significant than in the past, but are still misunderstood," said Philip Damas, director of Drewry Supply Chain Advisors.

The report attempts to provide guidance on relevant corporate strategic risk issues, as well as advice on best practice, KPIs, contract terms and due diligence. For example, a major issue surrounds the prevalence towards 'lean' supply chains, which can - through outsourcing and buffer inventories - actually become more susceptible to risk. 

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