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Survey on risk management in the logistics industry

The mind-set has not changed ...

Michael Huth29.10.2015, 15:09

My colleague, Dirk Lohre, Professor at Heilbronn University, and I have been conducting empirical research in the logistics industry since 2008. Out intention has been - and still is - to monitor the status of risk management in logistics companies, to identify trends and developments, and to give recommendations to companies.

This year (2015), we have carried out the 4th survey on risk management in the logistics industry. And - to put it in a nutshell: The situation, i.e. the degree of application and also (and even more important) the mind-set of logistics service providers regarding risk management has not changed. That is the main result of this year's survey - and you could stop here, if you are not interested in any details.

If you, however, would like to get a more detailed idea of what the status of risk management in this industry is, please do carry on ...

Before we look at results, let me give you some numbers on the survey: The online questionaire used for the survey was available from March to April 2015. The survey was promoted using social media channels (xing.com) and by our media partner EuroTransportMedia Verlags- und Veranstaltungs-GmbH. 73 companies have answered our survey.

Figure 1: Top 5 future risks for logistics companies

Figure 1: Top 5 future risks for logistics companies

Let us look at some selected results. First, we were interested in the top risks from the perspective of logistics companies. Figure 1 above shows future risks and the percentage of companies that see those risks within their personal top 5 risks (multiple answers were possible). As in our previous studies, human resource related risks are seen as the top future risk. In our current survey, those risks are also seen as #1 of the current risks - and this is a change to previous years. The HR related risks have two basic causes: On the one hand, the current and future lack of truck drivers is obvious. On the other side, logistics processes and process chains are becoming increasingly complex, for example due to ongoing globalization and still increasing tendencies of outsourcing logistical business processes (contract logistics). To cope with those new challenges, more well-educated staff is required.

Although energy prices have decreased for some time, companies see fluctuations in energy prices as the #2 future risk. This is understandable, since energy cost are a major driver of total cost, especially for those companies with a focus on trucking.

It is interesting, that the top 5 risks differ from the top risks in the Allianz Risk Barometer (take a look at our blog entry from March 'Our number one is... Supply Chain Risks! (But beware of Cyber Crime!)': There, the top risks are business interruption and supply chain, natural catrastrophes, and fire and explosions. Cyber crime - a risk that is becoming more and more important - is not within the top 5 risks; however, 39 % of the LSP's see cyber risks as important risks.

Figure 2: Application of risk management in the logistics industry

Figure 2: Application of risk management in the logistics industry

Even if competition is becoming stronger, logistics process chains show an increased complexity, and German law requires risk management, the application of risk management in the logistics industry is on a relatively low level. As figure 2 displays, only a little bit more than half of the LSP's have a risk management in place. Looking at the development from 2008 until now, the use of risk management has not changed much over time. Instead, the percentage values are more or less constant over time. We still see a group of some 25-30 % of the companies that do not have risk management in place, and also do not plan to implement risk management soon. Thus, the need for risk management is not seen by many logistic service providers.

Figure 3: Methods used in risk management in the logistics industry

Figure 3: Methods used in risk management in the logistics industry

Those LSP's who have a running risk management in place, show - in average - only a medium level of maturity. Take, for example, the methods used for risk identification and assessment. As figure 3 shows, the methods most commonly used are expert and employee consultations, checklists and brainstorming. More sophisticated methods, such as FMEA, fault tree analysis, or simulation are only used by less the 3 out of 10 LSP's. Even risk maps, as an easy tool for communicating risks, are only used by 30 % of the companies. It is somehow irritating, that a risk inventory is not used by any of the companies - or that the term 'risk inventory' is maybe just unknown.

To sum it up: Comparing the results of our surveys over time, we do not see significant changes in both the application of and the maturity of risk management in the logistics industry. Both offer room for improvement. We forecast, however, an increasing pressure by customers, banks, and insurance companies on LSP's to implement a risk management system.

The full report Huth, M./Lohre, D.: Risikomanagement in der Speditions- und Logistikbranche: Bestandsaufnahme zu Verbreitung und Reifegrad, Discussion Papers in Business and Economics (17), Fulda 2015 (unfortunately only in Germna) can be downloaded here: fuldok.hs-fulda.de/opus4/frontdoor/index/index/docId/349

Author:

Prof. Dr. Michael Huth. After graduating from school and spending two years at the German Army, Michael Huth studied business administration at Goethe University in Frankfurt/Germany and at Southampton University/GB. Following this period, he worked as a post-graduate academic at Goethe University. In parallel, Michael Huth did research for his PhD thesis focusing on logistics risk management. Since 2006 he is teaching and conducting research at Fulda University of Applied Sciences, Faculty of Business, specialized in logistics and supply chain management. His research primarily focuses on supply chain risk management.

Prof. Dr. Michael Huth. After graduating from school and spending two years at the German Army, Michael Huth studied business administration at Goethe University in Frankfurt/Germany and at Southampton University/GB. Following this period, he worked as a post-graduate academic at Goethe University. In parallel, Michael Huth did research for his PhD thesis focusing on logistics risk management. Since 2006 he is teaching and conducting research at Fulda University of Applied Sciences, Faculty of Business, specialized in logistics and supply chain management. His research primarily focuses on supply chain risk management.

[ Bildquelle: (top): © kalafoto - Fotolia.com; picture Huth (bottom): Stefan Heigl / RiskNET GmbH ]


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