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Logistical risks

Logistics risks are transportation, warehousing, shipping, and inventory management risks, as well as management risks at all levels, including management risks associated with logistics functions and supply chain operations.

The consequences of risk events can be divided into two groups depending on the moment of risk event fixation, which can be divided into explicit and hidden ones. Explicit risk events are detected immediately after the occurrence. For example, if the delivery delay is identified at the time of breakage or unplanned vehicle delay during delivery, then measures taken to offset the effects of such a risky event may prevent most negative effects.

The main sources of risks in the supply chains of companies are: planning processes, product acceptance processes and supplier discipline, storage and cargo processing processes, transportation management.

Factors influencing major logistical risks:

  • insufficient cross-functional coordination of divisions;
  • diverse information support;
  • low level of automation of management tasks;
  • long cycles and low adaptability of the planning system.

Summary logistics risk classification:

  • commercial risk - disruption of deliveries, lack of availability of goods on time, violation of deadlines, non-fulfillment of financial obligations of supply chain counterparties (logistics system);
  • risk of loss of property due to natural disasters, unfavourable transportation conditions;
  • risk of loss of property due to strikes, mass unrest, hostilities;
  • Safety and fire risks;
  • Risks of theft (in particular in warehouse and transportation operations);
  • environmental risks (incident with the product or mismatch of its properties with the package, which may cause damage to the environment);
  • technical risk - failure and failure of vehicles and, as a result, possible delays in delivery of goods and increased probability of other risks;
  • risks caused by low qualification of counterparties in the logistics system - negligence, loss of documents, their delay, etc.;
  • Risk of civil liability from damage to third parties.

The most critical groups of logistical risks include:

  • Planning risks - errors in the forecast of consumption, supply plans, late reporting of serious changes in demand to those responsible, problems of cross-functional coordination, long supply cycles that prevent timely adjustment of purchase plans.
  • Transportation Risks - Delay of Material Resources and Finished Goods During Transportation (Transit)
  • Storage risks - expiration of shelf life of stored material resources, detection of damage, loss of material resources in warehouses, absence of material resources in fact (if present in reporting documents) at the moment of demand initiation (request from internal consumer).
  • Supplier interaction risks - lack or lack of material resources at the supplier, violation of shipment dates, delivery of poor quality, incomplete or inappropriate in product characteristics.