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Logistics Management

How can risk mitigation rank with your logistics management plan? Greater than 60% of senior executives identified risk management and risk awareness as key initiatives [1].

And it is not a secret why. In our litigious society, taking preventative measures in order that your workforce remains safe and secure, compliant with regulations, and using good common sense is vital to efficient supply chain management.

Consider a contractor that's hired to take out propane lines. The contractor hires a 2 person sub-contracting company to help you.

The sub-contractor forgets to look for the three gas lines prior to cutting, along with the two contractor employees suffer severe burns. Neither company has Workers comp or Employer Insurance. Who ends up on the hook for your damage involved? The lawsuit would go to the business who hired them; the controlling employer of the project is now held accountable, and ultimately ends up paying $3.42 Million to both cases.

Avoid Lawsuits

This type of lawsuit is perhaps all too common. It's the believe that supply chain management risk assessment and mitigation requires that you step back as well as a review your supply chain from your 36,000 foot level. It's time to returning to the basic principles, have a look at your weaknesses and strengths and make certain that most regions of your supply chain http://www.genio.com.my process are covered. Most of us do not automatically take into account the legal ramifications of getting a sub-contractor to help a reliable contractor of ours. Yet, as we see within the example above, accidents happen, and without a proper contractor prequalification beforehand, you cannot avoid the occurrence.

Contractor lawsuits are frightening. Inside the petrochemical business it's magnified because between 50-75% of the plant are contractor employees. When that much with the workforce outside immediate company supervision, it is not enough to believe compliance keeping the vehicle safe. In fact, perhaps the most common myth in logistics management is that contractors always follow OSHA requirements- that they'll be simply used on an undertaking, and that we can be assured that our liabilities are minimized.

Safety Training

Reality; however, is fairly the contrary. Suppliers and contractors often neglect to meet minimum contract Terms and Conditions, including safety criteria, when reviewed by the companies they work for. Why? If the contractor isn't needed to substantiate safety information, he/ she isn't motivated to do so. Nothing is stopping the contractor from bending your rules of safety.

The solution to mitigating risk within your supply chain management process is proper evaluation. Loss control in efficient contractor and supplier relationships is most effective when you:

1. Communicate

2. Evaluate

3. Select

4. Monitor

Communicate

Communicate expectations. When you award anything, ensure that you detail safety expectations with your logistics management contract using the supplier or contractor in mind. Clearly state your expectations along with the guidelines through which their work will likely be monitored. Hold regular contractor safety meetings, and remain up-to-date while using project and its progression to make sure alignment while using guidelines that you have executed.

Evaluate

Evaluate progress. Use objective criteria, like Insurance, Experience Modification Rate (EMR) and Total Recordable Incident Rates (TRIR) to discover how a contractor's performance is measuring up to stated expectations. Conduct supply chain management audits on subjective and objective criteria like written policies and past performance to make sure that that written protocols are being implemented. Rank your suppliers into low, medium and high risk categories according to their trades. This offers the particular power to measure the services performed and how the contractor has addressed proof that the safety program is implemented for medium and high risk trades.

Select

Select contractors based on qualification. After you have established the criteria by which contractors will likely be evaluated, be clear to contractors that all elements of qualification will likely be weighted knowning that costs are only one factor on which are going to judged. Select contractors as strategically as is possible and reward top performers with improved relationships plus more business if they'd like to demonstrate a separate power to meet your logistics criteria.

Monitor

Monitor contractors by using a real-time database. Enforce company-wide standards by continuing to keep a database of most contractors in a regularly updated format. The database must be shared through the organization to ensure that all necessary users can access contractor information (particularly qualification criteria and whether they currently meet requirements) at any time of the day. The database are able to produce reports and control information for data efficiency.

Using a viable contractor verification system definitely makes the difference. Think about the contractor that's injured by another contractor while calibrating scales. Unlike the example we discussed above, the business now chooses to employ a prequalification system. Both contractors are properly insured along with the correct insurance endorsements are in place. The lawsuit is relating to the contractors, as is the settlement. Both contractors have no right of claim against the company, as the prequalification system collected and verified that both contractors had the required insurance coverage. The company has zero liability with no responsibility to pay.

The payoff will probably be worth the time and effort. It is no surprise why so many executives identified risk mitigation as being a top goal for organization in supply chain management. Caused by contractors meeting regulatory and contractual requirements is reduced risk and expense savings. Instant information sharing and qualification data available as a result of monitoring contractors which has a real-time database helps to ensure that your contractors are verified, the workforce remains safe, and you really are adequately protected against lawsuits. Contractor verification is really a win-win process for both you and the contractors you employee, and it is crucial in effective logistics management.