Shipping risks refers to the gamut of potential obstacles relevant to the shipping industry. The medical industry tries to avoid wrong diagnoses, electrical engineers attempt to steer clear of technical bugs and writers from all walks of life loathe writer’s block. Shipping companies as well has their own industry-specific risks, the most basic of which are described in this blog post.
Risk 1 – Weather Delays
Weather delays are applicable to both local and international shipping and can include “problem regions,” such as those experiencing pervasive hurricanes or known for earthquakes. Unfortunately, back yard America is also vulnerable to the forces of nature, and something as simple as Iowa’s winters can pose a serious problem for shipping companies. According to the Security and Exchange Commission’s Quarterly Report for the quarter ending November 30, 2000, “Our fiscal third quarter will also be negatively affected by the recent severe winter weather in much of the U.S., causing increased costs for de-icing, overtime and redeliveries.”
The problems experienced in 2000 were far from a one-time fluke. On September 23, 2008 FedEx commented in a news bulleting titled Service Disruptions Continue to Hurricane Ike regarding that storm’s effect on shipping procedures. The bulletin read that “some services are limited because of continued power outages and local access restrictions. The level of service customers can expect will vary depending on local issues, so delays or disruptions are possible.”
Hurricane Ike purportedly affected pickup and delivery services to and in Alexandria, Beaumont, Bryant, College Station, Corpus Christi, Hobby, Houston, Lake Jackson, Longview, Lufkin, Texarkana, Tyler and Victoria, Greater Monroe, Greater Shreveport, Houma, Lafayette, and Lake Charles, Greater Eldorado, and Mobile; cities and regions in Texas, Louisiana and Alabama.
Risk 2 – Piracy
Drifting more into international waters, piracy and terrorism take a toll on the shipping industry. Even liner vessels, such as roll-on/roll-off vessels, universally considered to be lower risk ships due to their high freeboard and faster operating speeds, have been the perpetual target of Somali pirates. The World Shipping Council website states that the, “issue of piracy against merchant vessels poses a significant threat to world shipping. In 2011, there were 439 pirate attacks and 45 merchant vessels hijacked worldwide. The report also states that, “As of spring-2012 there have been more than 51 attacks off Somalia (121 worldwide), 11 hijackings off Somalia (13 worldwide), and over 158 hostages taken off Somalia. Currently, 12 ships and more than 170 seafarers are being held hostage by Somali pirates for ransom.”
Risk 3 – Lost merchandise
This is one area where we have to hand it to shipping companies. According to several studies, such as one carried out by the University of Florida, FedEx misplaces about 0.55% of its shipments, with UPS losing about 1.2% – not so bad! Of course, these statistics don’t make it much better when whatever particular item has been lost is expensive, such as this disgruntled blogger’s negative experience with FedEx. His blog post is titled FedEx Lost My $1500 Package from Dell, posted on August 31st, 2011.
knowledge.allianz.com states that the “losses of ships are on decline. While back in 1910 one ship in every 100 was lost this rate has improved as at 2010 to around one ship in every 670. The map shows the hotspots of losses over the last 10 years” and displays a world shipping loss map.
Risk 4 – Trucking Accidents
According to the Rochester PI Law website, “Research shows that within a two-year period ending in November, there were 288 injuries or fatalities related to FedEx truck accidents. The study didn’t look at each individual incident and who was accountable, but the number is enough to show that trucking accidents are undoubtedly a threat on roads throughout the country.”
Doing a Google search with the keywords “fedex truck accident” and “UPS truck accident” both yield several pages of results.
Risk 5 – Human Error
Accidents related to human error is one large category with a score of subcategories related to the aforementioned risks. However, human error also includes:
- Untimely and inaccurate delivery
- Damaged merchandise
- Misrouted goods
- Insufficient protection against cargo theft