Keep Your Supply Chain Covered - But Not Too Much
With natural disasters and their aftermath on the minds of supply chain officers everywhere, it’s perhaps not surprising that insurance companies have stepped forward eagerly with their own brand of solutions.
At a recent business insurance conference, speaker John D. Dempsey – a managing partner at Connecticut-based Dempsey Partners L.L.C. – evoked the specter of the 2010 Iceland volcano that shook the European air travel industry as an example of the perils of inadequate insurance.
It’s certainly true that a well-managed insurance account can help mitigate risk, especially when dealing with economies of scale – as most globally sourced logistics firms do. The question becomes how much of it you really need to run a first-rate supply chain. And frankly, volcano insurance doesn’t sound like the most intelligent way to do that.
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The fact is there are other solutions for mitigating risk in a logistics network that give you far better bang for your buck, like diversification of the manufacturing base and effective emergency management. Good insurance coverage should factor into risk mitigation, but it shouldn’t constitute it.
Still, keep a close eye on risk assessments, and make sure to cover your bases as best you can. You can’t have all the luck, but you can play the numbers – well.