An analysis from London-based TT Club, which provides insurance and related risk management services for the international transport and logistics industry, has revealed human error to be the main cause of supply chain claims.
TT Club said its research is based on an extensive analysis of claims totaling “over $120 million during the past six years,” which have reveled that “nearly 80 percent of incidents resulting in a claim were avoidable. The vast majority involved some form of human error. The overall breakdown of claims showed 63 percent resulted from operational causes, 33 percent from maintenance issues and just 4 percent were weather related.”
Laurence Jones, TT Club’s Director of Global Risk Assessment, pointed out that supply chain claims are rising and that globalization is undoubtedly intensifying the complexity and potential disruptions for transport and logistics operators.
He noted that the “Japanese earthquake and subsequent tsunami were a timely example of the widespread impact such an event can have on global supply chains away from the territory that suffered that catastrophe, and this was a warning most companies heeded.”
However, he also indicated that “some operators are still not changing how they manage supply chain risk, instead concentrating on improving operating efficiency and reducing costs, when they need to prepare their supply chains to withstand future events and the impact of resultant disruptions across the globe.”
At a recent freight industry forum in Hong Kong, Jones highlighted the human error factors that cause disruption throughout the global supply chain and spoke of opportunities for operators to save costs by tightening procedures to minimize accidents, breakdowns, delays and other risks.
“45 percent of the cost of claims resulting from operational factors was as a consequence of errors or faults in an operator’s systems or processes,” he stated. In contrast “straight forward theft” accounted for only “29 percent of operational claims.
“TT Club’s intention, by presenting this analysis, is to reduce loss and damage in freight movement by encouraging awareness among freight forwarders and logistics service providers of their ability to reduce inefficiencies in an increasingly complex, and often fragile, global supply chain,” Jones explained.
“In analyzing the causes of disruption, we seek solutions through the development of good practice for our industry,” he concluded.
The TT Club also announced that it will post its Annual Results at a press briefing on Monday April 16th, “together with further and more detailed risk and claims analysis, including case studies in a presentation entitled: “Quantifying Risk in the Supply Chain: Causes of Claims & Minimizing Their Effects.”
Source: TT Club
Ed. Note: Jones presentation is available on the Club’s website, or from ISIS Communications .