The 10 best solutions against your logistics risks

We have already seen in our blog what are some of the main threats to the logistics risk management of companies. Problems such as the growth of inventories, natural disasters, quality failures, theft and economic instability are some of the enemies that keep those responsible for the planet’s supply chains up to sleep.

But it will be of little use to know the problems if we do not also have the solutions at hand. For this we have collected the preferred solutions of companies for their logistics risk management, according to a report carried out by the University of Tennessee.

Top 10 Risk Management Solutions
1.- Solvent suppliers

Suppliers are, by default, one of the biggest sources of uncertainty and potential problems. Delays, quality defects, economic problems… Suppliers also have that unpredictable nature of something that we cannot control one hundred percent (although we do have to measure the quality of the service they give us). However, despite all these problems that can occur, many times providers are looked at first when it comes to reducing costs, and this encourages the appearance of such problems. On the contrary, achieving a good range of suppliers will be one of the best aids for your logistics.
2.- Reduce times

The more time your entire supply chain needs, the more risks you will have and the more difficult it will be to react in time when something happens. On the contrary, compressing its duration allows you to fix it in less time if something goes wrong, as well as making it easier to locate failures. A stock out when it takes three days to be able to supply the product again is much less serious than one in which it takes three months.
3.- Visibility

The visibility of the supply chain -that is, having information available in real time about what is happening with your merchandise- is another solution that has to do with detecting problems before they explode and, therefore, solving them with fewer costs and consequences. It is one of the favorites, since it is increasingly easier and cheaper to achieve this visibility.
4.- Global logistics competence

If our supply chain covers several countries, we must ensure that the logistics services we have in all of them are of high quality. There is nothing wrong with working with operators that are limited to a specific country or territory, and it may even be the best solution when that specialization provides us with great quality. However, when it comes to going out we must do it with all the guarantees. Your logistics away from home is as important as the one you offer near you.
5.- Predictive models

Summarized in a saying: “prevention is better than cure”. Developing predictive models and constantly refining them is what allows us to know the logistics needs that we are going to have with enough time and with the necessary safety margins. Predict demand, know our delivery times, our production capacities, etc.

6.- Air cargo

At the opposite pole to the previous point we find air cargo and the rest of urgent services when we use them to solve an incident. It is important to indicate that these resources must be the last-minute emergency button, since we are always going to pay a higher cost than normal transit. However, it is also useful to have solutions on hand for when forecasts fail and problems present themselves without warning.
7.- Add inventory

Inventories are subject to two opposing tendencies: on the one hand, the desire to reduce them as much as possible to reduce costs and, on the other, the possibility of increasing them to mitigate shortage problems. Companies are investing more and more resources in trying to determine what are the minimum quantities necessary to improve costs without jeopardizing the integrity of the supply chain.
8.- Internal or nearby suppliers

It is clear that a problem is less of a problem when it happens 30 kilometers away than when there are 30 countries between us and the provider. Until not long ago, the boom in relocations made it urgent to take production away from the companies’ hometowns. However, this process has slowed down in recent times and many companies are rethinking the location of strategic suppliers. Having the different suppliers widely dispersed is an additional logistical difficulty.
9.- Reserve funds

Most risks carry the threat of extra costs. For this reason, the option of increasing reserve funds and being able to resort to them in case of need is another possibility when it comes to mitigating possible harmful effects. Whether it is due to having to rebuild a facility, having to repurchase merchandise that has turned out to be defective, or due to a customer defaulting, increasing solvency can get us out of more than one quagmire.

However, the higher the reserve funds, the more money we will have tied up in the company. That is why this alternative appears relegated to the penultimate position in the preferences of the companies surveyed.
10.- Acquire insurance

In last place, to the surprise of the authors of the study, appears the acquisition of insurance, with a score of 4.5 out of 10. Something striking considering that as much as we want to prevent and reduce the chances of problems appearing, we never we will be able to completely eliminate our risks. And covering your back with insuraance, despite its economic cost, can be essential both on a day-to-day basis and in the most extreme cases.

The report also highlights how the most technologically advanced a priori solution of all those mentioned -the use of predictive models- is valued at the same level as the one that involves less development, optimization and innovation in logistics terms: contracting air shipments. or other express ways to deal with delays. That is, go to the easy resource of extra cost rather than apply a technological innovation.

In any case, it is important to remember that all these solutions are not exclusive. The best thing is, after a good analysis of the particular risks we face, to design and implement personalized solutions depending on both our specific needs and the resources we have available.

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Khaterine William

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