Mitigating Risks in the Shipping Industry


Roughly 90 per cent of world trade is transported across the high seas, firmly anchoring global industry and supply chains’ dependency on shipping.

Gargantuan ships lugging enormous volumes of cargo across the world’s well-chartered marine highways give an image of steady and sure transportation. This is in contrast to aviation, where concerns about the vulnerability of flying were compounded by the tragic events of 9/11.

However, all businesses have risks.  The shipping industry is no exception and there are several factors that should be taken into consideration.  Safety, problem resolution, timely delivery,accurate delivery, lost merchandise, fees, taxes, and insurance are some factors that should be examined when dealing with the shipping industry to minimize as many risks as possible. 

When dealing with a business, the pros and cons should be weighed.  In shipping the advantage is the ability to buy anything from anywhere in the world and get it delivered to your door with no more effort than a click of the mouse.  But the cons include all the risks and possible additional fees surrounding your purchases.  Delivery problems include lost items, damaged merchandise, delayed delivery and misrouted goods. 

At times, there is good cause for delivery problems.  Natural disasters, wars, terrorism, and cargo theft are reasons for losing or delaying shipped items.  Accidents including shipwrecks, truck, plane,and train crashes are common, accounting for lost, delayed or damaged goods.  However, because of the potential shipping risks, insurance is available to cover costs.  Before choosing a transportation carrier,examine the insurance terms to ensure losses are covered via refund or replacement.  Determine if there are any additional costs associated with insurance coverage and if the offered coverage is sufficient.  The benefits of choosing well-known and reputable carriers are clear in such cases since most established shipping companies have a solid reputation based on good service. 

Another common reason for shipping delay is human error.  Supplying insufficient or incorrect information regarding sender or receiver may cause a delay or loss of an item.  The item shipped per the instructions but the incorrect information given caused it to be routed to the wrong place.  Tracking information is useful in such circumstances so the items can be re rerouted to its intended recipient.  Consumers should be aware of expected delivery time and track purchases accordingly.  If an item is reported as delivered, most shipping companies can track the item to determine the cause of its loss.

Knowledge of fees is important when dealing with shipping companies.  Examine all the policies thoroughly to determine the possibility of additional charges.  In order to receive merchandise, consumers often pay fees in excess of the expected cost. Disreputable shipping companies take advantage of this.  Typically, taxes are not included in the shipping and handling costs so verify this with the carrier.  It is also important to understand how the charges are assessed.  Per weight, per value, and flat rate fees are common. 

Knowledge is the key factor in minimizing risks associated with shipping.  If the risks are understood, information can be obtained to ensure they are dealt with properly.  Ensuring all policies and procedures are clearly documented and understood will help reduce risks.

Mitigating against risk in marine transport cannot be achieved by mirroring practices in aviation. In the case of increasing cargo screening, the sheer volume and diversity of sea cargo could make intensified screening a risk in itself, causing significant and unnecessary delays to transportation of goods.

Instead, more holistic efforts at improving supply chain quality through visibility, resiliency and flexibility of response mechanisms need to be explored. As risks on the high seas threaten supply chains across a variety of industries, shippers, carriers and governments alike need to jointly chart a passage through these stormy waters.

(References: World Economic Forum, Satellite Trans)

Sea News Feature, December 18

Baibhav Mishra
Author: Baibhav Mishra

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