Title: Cargo Risk Management Corporate Programs Reducing Risk Through Knowledge Management
1Cargo Risk Management Corporate
ProgramsReducing Risk Through Knowledge
Management
2Cargo Risk Management
Cargo risk management is the identification,
analysis and control of risk within the
transportation environment. The impact of a cargo
loss in todays competitive business environment
extends far beyond the amount that may be
recoverable through an insurance claim.
Effective cargo risk management contributes
significantly to a businesss efficiency,
reputation and results.
3The Global Cargo Environment
- Global Security Threats
- Expanding Global Trends
- Complex and Extended Supply Chains
- Increasing Compliances
- Accumulation
- Multimodal Transfers
4Cargo Risk Management
Focus is prioritized and inter-dependencies addres
sed in accordance with client specific risks and
business impact analysis.
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5Cargo Risk Management
- Primary transit lanes links
- Intermediate ports storage
- Political weather routing
- Changing business activity
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6- Transit Chain Intermediate Ports Storage
Risk summary Transshipment at intermediate
ports is a common activity even on many of the
most popular world trade voyages. In many cases
cargo owners may not be aware of the intended
voyage schedule and large volumes of goods in
transit may be subject to anonymous handling and
unknown or unplanned storage exposures.
- Risk management strategy
- Establish nature and extent of existing
processes - Identify weak links and investigate /
develop viable alternatives - Identify, document and analyse procedures at
key locations - people, machinery. - Review intermediate location security and
cargo tracking protocol - Establish appropriate notification process
parameters for duration or accumulation - Develop workable disaster and capacity
contingency plans
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7Cargo Risk Management
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8- Packing - Design Construction
Risk summary The quality, integral strength and
overall robustness of packing is a primary risk
factor for all goods being transported as cargo.
Lack of commitment to the packing design process
and inherent inefficiencies in the construction
of packing units can lead to serial damages to
cargo in transit and the potential of additional
costs involved in redesign or other remedial
actions.
- Risk management strategy
- Establish cost effective and fit-for-purpose
packaging approach - Ensure suitable packaging medium (type
strength) in relation to product - Establish appropriate sizing dimensions for
effective unitisation - Evaluate impact of brand marking of shipping
outers - Validate expertise, experience and track
record of packing designers/manufacturers - Ensure appropriate packaging to withstand
known or expected transit conditions
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9Risk summary Well designed packaging can be
rendered ineffective due to improper or careless
assembly techniques and procedures. Poorly
managed and monitored packing assembly, stuffing
and closing processes can lead to inefficiency in
the production line, an increase in unaccountable
or inventory losses and an increase in the
susceptibility of the goods to even the most
minor of in-transit disturbances.
- Risk management strategy
- Review the level of packing integration
within the manufacturing process - Validate efficient combination between manual
and automated assembly processes - Establish correct and efficient process for
assembly, filling and closing - Review effectiveness of closing and sealing
mechanisms and their application - Ensure use of appropriate infill material and
method of application - Review packing staff competencies and
applicable training standards
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10Risk summary Marks and numbers are intended to
categorically identify a cargo throughout the
transportation process. Inappropriate or poor
marking can lead to shipments being badly
handled, mis-routed or lost and can also alert
cargo thieves to the contents of particular
packages.
- Risk management strategy
- Establish compatibility between branding
requirements and risk management strategy - Ensure that labelling strategy complies with
operational legal needs - Investigate application and viability of
using blind and /or decoy marks and numbers - Review point and method of marking - ensure
secure and effective procedures - Establish effective usage and profile for
International handling symbols - Consider the application of other special
instructions or marks to improve risk
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11- Packing Supply Chain Process
Risk summary Interruption to the packing supply
chain process or the presence of anomalies/
faults in the chain, create operational pressures
that can lead to the implementation of incorrect
packing procedures. The efficient functioning of
the packing supply chain and associated
maintenance of quality and timescale requirements
are integral to the delivery of an effective
cargo risk management strategy.
- Risk management strategy
- Evaluate effectiveness of goods inward
packing provided by raw material suppliers - Review reception, integration and
consolidation of pre-packed components - Establish efficient integration between
production line processes and packing activities - Review post production consolidation
processes for fully packed goods - Establish effective contingency plans for
packing resource failure (labour materials) - Consider packaging recycling options in line
with corporate or legal requirements
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12- Packing Regulatory Controls
Risk summary Correct identification of and
compliance with all regulatory packing controls
that apply to cargo during the intended transit
is essential to avoid unnecessary delays and
deviations, and the possibility of confiscation.
Detention of goods in transit, not only causes
delay but also may expose cargo to unplanned and
potentially unsuitable handling and temporary
storage conditions.
- Risk management strategy
- Identify restrictive legislation relating to
packaging in transitional destination - countries and ensure compliance
- Ensure that packaging materials meet the
legal requirements of the destination country - Consider max / min parameters (weight
dimension) for key modes of transport - Ensure adherence to international
transportation requirements for hazardous cargoes - Establish effective methodology for disposal
of spent inbound packing materials
13Dangerous Goods
- The movement of dangerous or hazardous substances
frequently calls for highly specialized transport - operations, special packing, marking labeling.
Failure to comply with stringent regulations
affecting - documentation and stowage can lead to very severe
penalties and endanger the safety of ships,
aircraft, passengers crew. - Before the movement of any dangerous substance
the shipper is responsible for - Commodity Identification Accurate description of
the article or substance - not - trade or brand names
- Consultation With core reference manuals for
the particular mode - transport i.e. IMDG, IATA, CFR 49, etc
- Classification Allocation of the appropriate
Class no. UN no - Compliance With regulations covering packing,
marking and labeling. - Completion Of the appropriate Dangerous Goods
Declaration - The carriage of dangerous goods is a highly
specialized subject and detailed advice must be
sought
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14Cargo Risk Management
- Loading stowage techniques
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15- Handling Stevedore Services
Risk summary The manual handling of cargo
continues to be common practise throughout the
transportation process. Many manufactured and
consumer goods are at least handled manually or
mechanically by stevedores at the beginning and
end of the transit chain. Stevedores are
responsible for ensuring that cargoes are handled
safely and for maintaining security of
information - particularly for high value
shipments.
- Risk management strategy
- Review employment policy and implementation -
casual labour, long term contracts - Evaluate track record - losses, criminal
events, insurance cover, contractual terms - Review levels of competency and training
standards - Evaluate employee vetting procedures
including update procedures - Identify specialist experience and evaluate
applicability to specific requirements
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16Cargo Risk Management
Unit Tracking
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17Risk summary Due to their easy and rapid
manipulation, palletized cargoes are often
subjected to high-speed mechanical handling and
the associated impact of sudden acceleration and
deceleration in both the vertical and horizontal
axis. The global variance in quality of
mechanised handling equipment (normally fork-lift
trucks) and competency of operators, exposes
palletized cargoes to numerous physical contacts
during the normal transportation process.
- Risk management strategy
- Ensure pallet quality (materials
construction) meets operational requirements - Establish effective selection procedure for
correct pallet type - Review pallet sourcing strategy - cost,
quality availability - Ensure selection of correct pallet size for
maximisation of cargo space with reference - to mode(s) of transportation
- Establish effective methods of cargo
consolidation to pallet
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18- Unitization Ocean Containers
Risk summary The most common method of ocean
transit, around 7 million containers transited
the US last year, ocean containers, in their
various forms offer convenient benefits such as
standardization and intermodal capabilities. A
knowledge of dynamic forces affecting any
particular mode of transport will allow shippers
to anticipate cargo movement and plan securing
arrangements
- Risk management strategy
- Select the correct type of container
consistent with product characteristics - Ensure equipment integrity and sea worthiness
- Employ adequate / satisfactory securing
methods and devices (bracing blocking) - Prevent uplift by using tie downs and fill
all void spaces - Seal the container doors with approved ISO
sealing devices
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19Cargo Risk Management
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20- Logistics - Documentation
Risk summary Documentation and the information
that it contains represent very real security
considerations for all shipments of consumer
goods and particularly for high value
consignments. As the flow of electronic
information increases, the need for enhanced
awareness should be considered as carefully as
the demand for increased operational efficiency.
- Risk management strategy
- Analyse the information chain to validate
access control and security procedures - Establish secure and efficient authority and
approval levels for key documentation - Review document processes, office of issue
and method of issuance - Review existing document authentication
methods - Identify secure and acceptable cargo
descriptions for use on all documentation - Avoid surplus documentation and unnecessary
multiple access to information
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21Cargo Risk Management
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22Cargo Risk Management
- Transportation Security - Facilities
Risk summary At many times before, after and
during transit, goods and commodities maybe
stored (or staged) for lengthy periods. Due
consideration should be directed towards the
safety and security arrangements at these
numerous storage depots and sites.
- Risk management strategy
- Evaluate location, environment and hazards
- Establish availability of local support
services such as fire and police protection - Review, analyse and validate external
physical and procedural controls - Review, analyse and validate internal
physical and procedural controls - Access controls
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23Cargo Risk Management
- Transportation Security Personnel
Risk summary A transportation security and
asset protection program may be adversely
affected by exclusive decision making processes,
poor communication, lack of employee awareness,
and internal management conflicts. People are key
in every respect.
- Risk management strategy
- Formalize procedures, plans,
accountabilities, contingencies and budgets. - . Seek management capture and executive support
- Promote interdependencies through shared
responsibilities and procedure manuals - Encourage employee participation through
skill enhancement and training - Conduct compliance monitoring and auditing.
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24Cargo Risk Management
- Transportation Security Transit Security
Risk summary The process of transporting cargo
from the point of origin to destination can be a
complex procedure involving, multiple modes of
transport, staging areas, warehouse and port
facilities, and national jurisdictions. Cargo in
transit is exposed to risk through, improper
handling, misplaced routing, theft and physical
damage. While the efficiency of the supply chain
has improved considerably, transit security
requires improvement.
- Risk management strategy
- Develop minimum security standards for cargo
trucks. - Develop minimum security procedures and
pre-alert systems for high value goods - Develop written plans to cover contingencies
such as breakdown and hijacking. - Agree minimum security standards and SOPs
with subcontractors. - Monitor compliance
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25Cargo Risk Management
- Transportation Security Federal Initiatives
- Maritime Transportation Anti-Terrorism Act
2002 - Customs-Trade Partnership Against
Terrorism (C-TPAT) - Container Security Initiative (CSI)
- Operation Safe Commerce (OSC)
- International Ship Port Facility
Security Code (ISPS) -
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26Cargo Risk Management
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27- Risk identification analysis
- Reduction of exposure losses
- Practical viable approach
- Risk transfer Vs risk retention
- Education and culture change
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28- Capital expenditure payback
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29maintain market share
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30- Distribution network planning
- Internal Vs external processes
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31- Internal cargo procedures
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32- Establish partnership with client
- Establish scope, objectives and milestones for
program
- Establish actions, responsibilities and
resources for program
- Establish review and measurement criteria for
program
- Review based development of program
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33Example Assignment
Manufacturer distributor of high value consumer
goods
1 billion global turnover
Turnover and profit decreasing in key markets
Loss of brand image
Cargo losses in excess of 2 million annually
Deteriorating relationships with insurers
Piece meal, re-active risk management not
effective
New market expansion in volatile areas
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34Example Assignment (exporting)
- TRANSIT CHAIN
- Unnecessarily complex
- Dependence on Hong Kong
- PACKING (China)
- Poor quality single walled cardboard cartons
- Low grade packaging tape
- Poor integral strength
- High profile markings
- HANDLING (China Hong Kong)
- Multiple manual handling
- Handling areas exposed to elements
- UNITISATION (Hong Kong)
- Lack of supervision
- Lack of security of information
- No container inspection procedures in place
- Multiple consolidation premises
- CARRIERS
- Multiple inland carriers
- Traffic poorly co-ordinated
- Multiple carriers
- No performance records
- LOGISTICS
- High percentage of consolidated shipments
- Multiple freight forwarders
- Poor communication channels
- Lack of incident tracking
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35Business impact analysis
Key operational issues
Practical considerations
Loss of market attributable to theft Brand image
impact Benchmarking Insurance premium Insurance
strategy Overall loss of market share
- PACKING (China)
- Poor quality cartons
- Low grade packaging tape
- Poor integral strength
- High profile markings
Lack of structural strength Breakage of cartons,
collapse of stow Exposure spillage of
contents Unnecessary advertising marks Lack of
security of information Theft on a grand scale
Change packaging Increase structural
strength Remove high profile marks
Carton availability and cost Alternative packing
mediums Strapping / securing availability and
cost Packing process efficiency Handling
characteristics - cost safety
2 million cartons per year Multiple third party
manufacturers Workflow process impact
Efficiency cost of H.K. operation Alternative
supply management options Redundant stock
policy Warehousing and consolidation Operational
need for LCL/consolidation FCL availability and
cost
Reduce number of consolidated shipments. Streamlin
e export transit chain Reduce multiple
handling Increase use of FCL
Supply chain management from H.K. Secondary
storage/stock piling Order processing subject to
strict time constraints
Agree Implement plan
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