Who needs Logistics Insurance?
Logistic is the backbone on which Supply chains are driven. With increasing operating cost involved in the delivery of goods, logistic service providers find it very essential to have knowledge of the operational field and how things work on the ground. Instead of avoiding interdependence, firms now focus on exploiting different forms of interdependence, for the purpose of economizing in terms of efficiency and effectiveness.
With collaboration comes risk, and any breakdown in the supply chain (logistic) would affect the way logistic companies provide value as an intermediary to bring goods from producers to consumers. So it is vital that we understand the risk involved & provide for adequate protection.
Read on more to find out how we can protect your risk…
Why do Logistics businesses need insurance?
Logistics refers to the management of the flow of goods and supplies involving information, data and documentation between two entities or points. In any logistic contract or supply chain network, you will not find one single service provider being able to manage the entire chain of activities. You can have a lead logistics service provider who will further tie up with and manage other service providers to provide a single window service to the client organization. At all levels, a lot of components of logistics get outsourced by these service providers to contractors and local players. A good example will be online purchase from e-commerce websites… the platform business will tender the delivery contract to a local main contractor (eg Singpost), whom the latter will out-source to smaller delivery companies like ninja van/ roadbull/ Gogovan for in-country deliveries.
The degree of logistic management depends greatly on the geographical coverage the logistic service provider is operating in. For global operations, it involves the drawing up the operating plans, requirements, and specifications for the services and, in turn, choose the best service provider in each segment or function for each of the locations and thus manage to provide the entire gamut of logistics services to the customer.
Global operations will typically involve freight forwarders, whom are those agencies who consolidate the cargo shipment, arrange for onward freight using either land, air or sea transportation modes. The cargo is then passed on to local delivery companies, transporting the cargo via inland-transit to the point of designation.
Due to the massive explosive e-commerce market in recent years, we have witnessed the emergence of new entrant logistics companies serving in the Singapore market.
What claims could Logistics Businesses face?
1. Loss/damage/theft of cargo
While delivering electrical goods for clients, rain accidentally gets into your delivery vehicles and damages the components. You must now compensate your clients for the damage, or the will sue you.
While shipping goods overseas, the ship that is carrying your cargo gets attacked by pirates. Your cargo is stolen and your clients are demanding to know how you will compensate them for their loss.
2. Lawsuit by client because cargo was not delivered properly
You contract out a delivery for $500,000 worth of industrial goods to a third-party logistics firm. They lose your clients’ goods. Your client holds you responsible and sues you for negligence. You now face a lawsuit for $500,000 plus hundreds thousands more in legal fees.
3. Employee injured while operating transport vehicle, or delivering cargo
Two of your employees get into an accident while delivering your customers’ goods. They suffer broken bones and cuts that require surgery. They file a Work Injury claim against your business under Singapore’s Work Injury Act. You are now legally liable to pay for $30,000 in medical expenses and lost wages.