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Wood dominos falling over to represent the breaking of links in the supply chain of world economics for the article by Rick Callaway, www.hosprop.com

Insuring Against Risks in Manufacturing, Distribution, and Supply Chain disruptions

Commercial insurance policies such as contingency liability insurance can protect against supply-chain risks for manufacturers and suppliers.

After 6 days, the giant container ship stuck in the Suez Canal was finally freed today (March 29, 2021) by the rising tide and much work by engineers and tugboats, after blocking 376 ships in both directions. According to CNBC News, “The shipping crisis, now in its sixth day, has added to anxieties over the global supply chain which had already been impacted by the coronavirus pandemic. Each day of blockage disrupts more than $9 billion worth of goods, according to Lloyd’s List, which translates to about $400 million per hour.”

Supply chain disruptions

Global supply-chain is awakened by the vulnerability of disruptions like this that have domino effects. 

Events foreseeable or unforeseeable can cause severe business losses, unless manufacturers, distributors and suppliers are adequately insured with contingency liability insurance policies and other coverages. 

Contingent liability policy – supply chain insurance 

If a business relies on vendors and the supply chain to provide parts, materials and services, any disruption can jeopardize the business. We offer protection specifically for insuring against any risk from the supply chain.

Types of manufacturing supply chain risks

“Supply Chain 247” released a list of the 25 biggest common risk factors for the manufacturing supply chain from previous years. The following are not an exhaustive list:

  1. Disruptions in distribution, shipment of finished products or parts and materials can impact supplier relationships and raw material prices 

The blockage in the Suez Canal causes many ships to go a different and longer route that has a high risk of piracy. The added fuel cost and risks can cause prices for shipping to go up. 

Disruptions to the flow of goods through a supply chain can result from natural disasters, cargo theft, grounded flights, and quality control. If a product component is defective, a business could face legal or regulatory violations. Operations can be halted if supplies are not delivered. Prices of raw materials can also increase, resulting in raising the cost of production and forcing prices of final products to go up, which can damage reputation and lose businesses and market share.

  1. Globalized manufacturing processes, labor concerns, technology and competition  

In this globalized economy, when a supplier or a manufacturer moves their operations to another country, the cost of raw materials and production will be impacted. 

When speed of change is vital for companies to adapt and survive, businesses with unionized workers will not be able to lay off employees quickly when needed.

Fast evolving technology renders many small companies obsolete if they fail to innovate in globalized competition which is often monopolized by a few big brands.

IT security reaches has cost billions every year. Companies large and small are all exposed to hackers and risk losing money, trade secrets, and reputation.

The use of IoT and other technologies for operation automation, equipment monitoring, and better connecting systems can increase cyber-security threats that could put a company’s physical assets, intellectual property, and more at risk. 

Collaborative robots, or co-bots, work collaboratively with workers. Co-bots’ failures or malfunctions can expose manufacturers to liabilities for product defects, personal injury, or property damages.

  1. Changes in international economic policies; currency risk; IP protection

Changes in international trade agreements such as Brexit, the trade war with China, tariffs on imported goods from the EU can impact importing and exporting, manufacturing and distribution. Companies seeking a lower cost supplier to control increasing costs may be exposed to product defect liability and supply chain disruption risks. 

Changes in exchange rates impact both the cost of raw materials and production if suppliers, manufacturers, and customers are in different countries. 

Intellectual property (IP) infringement, including patents, trade secrets, trademarks, and copyrights, costs manufacturers and IP owners billions of dollars every year. As supply chains and networks grow globally, the risks of IP theft grow too.

  1. Governmental regulations; national macro economic environment

Federal, state, or local regulations, such as California’s recently mandated paid COVID sick leave, or the potential federal minimum wage laws may increase costs for doing business for many companies, and affect the supply chain. 

The risk of inflation which may impact the price of goods and services, buyers’ behavior, labour market, and the overall economy.


  1. Direct to consumers model shift liabilities to manufacturers; product recalls; intellectual property infringement 

COVID-19 has popularized direct to consumer (DTC), bypassing wholesalers and retailers, but has also exposed manufacturers to risks related to handling customers’ credit card data, shipping, product labeling, etc. 

Implementing a product recall is expensive, additional costs in fines, lost sales, litigation and reputation damages can hurt even more. Insuring against such risks for manufacturers can be a wise and prudent investment that can save tons of money down the road.

We are the Extra-milers to protect businesses and properties

The Rick Callaway Team is known as the Extra Milers in protecting your business, employers, employees, and assets. We leave no stone unturned to get you the best deal. No under coverage. No overpricing. Fast turnaround, and most of all, we have board level business acumen for understanding your business operations and customizing coverage.  Please call us for a free consultation:  925-788-5558 or email us at: rcallaway@pdins.com.

The above is partially based on a summarized version of the following: 

https://www.clearrisk.com/risk-management-blog/the-manufacturing-supply-chain-top-10-risks-to-consider

https://viewpoint.libertymutualgroup.com/article/10-critical-risks-shaping-the-manufacturing-industry-in-2019/

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