Picking up the pieces

1 February 2007
More news

01 February 2007

The Napoli disaster, which left shipments washed ashore, highlights the perils of delivery by sea. Antony Barton looks at what buyers can do to minimise the risks

When cargo ship MSC Napoli ran aground last month, initial concerns focused on the leaking oil and the dangers of hazardous materials washed ashore.

Another worry, however, was for the businesses that saw their consignments washed up on the beach or hauled away by scavenging locals.

"It was extremely bad luck for everyone concerned," says John Perera, consultant marine surveyor with insurance group Royal & SunAlliance. "But if you are relying on receiving goods by sea then you must have a fall-back plan and plenty of stock in reserve. If you are working on a 'just-in-time' supply chain then you are in for a big shock when replacement stock takes another four or five weeks to arrive."

He adds that buyers who rely on sea cargo should check the policy in their insurance and set aside a sum for a possible salvage operation. In such cases, the buyer must contribute a figure based on the value of the goods they had on board. If this is not paid then the salvage firm will not release the goods and the insurers will not compensate the buyer.

The best risk mitigation, Perera advises, is having several supply bases around the globe. A product may be cheaper to import from China than from Turkey but a sensible buyer would source at least some of the supplies from close to home.

Dr Helen Peck, senior lecturer in commercial and supply chain risk at Cranfield University, says it is also important to investigate the shipping practices of these suppliers. "I know of a UK fruit importer for a large retailer that was shocked to discover its entire produce from South Africa arriving in the same shipment," she says. "Although the importer sources from different suppliers, all the suppliers used the same freight company."

With so many factors putting products at stake, other forms of delivery may be more reliable. But Ian Oliver, operational buyer of fabrications and castings for Rolls-Royce, claims this is not the main reason he largely uses air freight.

"The selling point is speed," he says. "It's arguably more risky to send cargo by sea but storms also ground aircraft. You can't prevent these things but I think this incident has put risk mitigation to the front of people's minds."

Buyers clearly have a responsibility to investigate the risks associated with delivery. But should those affected by the MSC Napoli incident have realised that the ship ran aground off Singapore six years ago and was probably a high risk?

"No, you take that on trust," says Perera. "That is why you use reputable shipping companies."

The most buyers can do is ensure the containers are cargo-worthy when they depart and that the shipping company they use is a trusted carrier, as was the case with the MSC Napoli.

"The best advice to anyone importing supplies is to act as if they are uninsured," Perera warns. "They should think of themselves as the personal owner of the goods when they make any decision."

SMfeb2007

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