TT Club, a specialist liability insurance provider for the international freight and logistics industry, emphasizes that focusing on often overlooked aspects of supply chain operations can significantly mitigate risks in the processes.
Effective control of systemic stockholding, order flow, and other inventory management processes is essential, according to TT Club. Analyzing past claims related to cargo theft in warehousing and distribution, TT Club has found that risks to goods increase in environments characterized by confusion and disorganization. Therefore, adherence to systematic processes is crucial.
Inventory management is so central, says the company, that it defines the very system by which effective organization is maintained. Minimizing errors and ensuring traceability throughout the supply chain is vital for promptly uncovering discrepancies.
“A failure to exercise such systematic control can have enormous risk consequences for security, reputation and contractual liabilities. Inventory management is an aspect of the supply chain that often runs quietly in the background until something goes wrong. Small issues can quickly turn into large and costly errors if they are not observed and rectified,” stated Josh Finch, logistics risk manager at TT Club.
The ultimate goal is to provide full visibility of goods as they move through the supply chain. A well-designed system should accurately reflect all physical movements of goods and focus particularly on instances where visibility and, consequently, traceability break down. This often occurs when users do not follow the correct processes, but operations should also address where process gaps lead to traceability breakdowns.
“Stock that is not traceable is at risk. It may be stolen or may simply go missing, making it difficult to determine where the failure has occurred. It is crucial therefore that supply chain operators responsible for managing inventory seek to maximise traceability throughout the entire journey of a particular item of stock,” explains Finch.
Moreover, the consequences of poor inventory management can be severe, extending beyond the cost of cargo loss to potentially damaging commercial relationships. Effective inventory management is crucial in fostering a security culture within the supply chain. It should enforce procedures, maintain traceability, and respond to discrepancies efficiently, resulting in a secure and streamlined supply chain operation.
