The last few years have provided a number of opportunities (if that’s the best expression) to test what happens when disaster strikes at the heart of just one link in today’s convoluted supply chains.
Flooding in Thailand, the Japanese earthquake and tsunami, and a number of other disasters left companies across the world struggling to make products available to their customers and remain profitable.
With that in mind, does your company have adequate supply chain insurance to cover against all eventualities?
How Much Supply Chain Insurance is enough?
Of course there might always be circumstances in which insurance won’t protect your organisation. However, by taking steps to access the following four insurance types, you will at least be protected against the most likely scenarios:
Cyber insurance: Who would have thought the day would come when supply chain insurance would be needed for electronic information? However, losing control of your ecommerce platform or your customers’ personal data can have effects just as damaging as physical losses. Cyber insurance has hence become an essential part of every supply chain insurance portfolio.
First-party commercial property insurance: A good first-party commercial property insurance policy will cover your company against supply disruption resulting from loss or damage, not only to your own facilities, but also to those of upstream suppliers and downstream customers.
Cargo insurance: Containers fall off ships all the time, truck hijackings and trailer thefts are commonplace. To make sure you can recover inventory losses resulting from such events, your supply chain insurance portfolio should certainly include cargo coverage.
Trade disruption insurance: Neither first-party commercial property or cargo insurance will protect your organisation from a supply chain interruption caused by supplier bankruptcy, workers’ industrial action in the country of your supplier, or similar event; unless that event somehow results in suppliers’ property damage or the loss of goods-in-transit. Trade disruption insurance therefore, should be sought to plug the gaps left by the other two instruments.
Secure the Broadest Coverage
When shopping around for the insurance products you need to cover your own company, it’s critical to try and secure policies that also protect you against events befalling first or second tier suppliers and customers, wherever they may be located.
Supply chain insurance is not cheap and when things are peachy in your supply chain, it’s easy to wonder at the justification for premiums. It only takes one significant event though–one which you didn’t see coming and which impacts the supplier of your supplier (or the customer of your customer) in your own country or elsewhere, for your insurance investments to reveal their true value.