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How to Future Proof Against the Future Impacts on Supply Chains in a COVID-19 Environment

Can you safeguard your manufacturing business against the impacts of the COVID-19 Pandemic?

As COVID-19 restrictions lift across the globe, and manufacturing, logistics and supply chain businesses emerge from hibernation after a long hiatus or patchy couple of years, many businesses are eager to resume trading as quickly as possible, to build back up to their previous operations and make up for lost time and income.

But consumer fear, extended national and international border closures, and constant COVID cases and exposures are seeing some supermarket shelves near empty and import costs at an all time high. It seems that new risks have begun to present themselves within these unprecedented times. These supply issues require innovative solutions (and government support!) to protect businesses that may still be in a financially vulnerable position among ongoing supply chain disruption.

While we wait for macro solutions and advice, what can businesses do to manage supply chain risk?

Why is Risk Management Important for Businesses? 

Due to the vast impacts of COVID, Australia’s international supply chains are dealing with extended order backlogs, a lack of staff who may have retrained during periods of unemployment, and supply issues within their own countries due to lockdowns, quarantining or other economic shortfalls.

With insurers across the board adopting and imposing COVID-19/Biosecurity Act exclusions on their insurance policies, business owners need to ensure that they adapt and are as savvy as possible on risk management best practices  to continue to insulate themselves. This way, if issues do crop up, business owners have the facilities in place to increase cash flow, mitigate losses or future proof against business closure when facing operational challenges. .  

What does this look like in practice? Two key industries that are currently experiencing supply issues are the construction industry and information technology sectors.

How has COVID-10 Impacted the Construction Industry? 

The challenging environment in which we  find ourselves has heavily impacted the construction industry’s supply chain. The industry has been experiencing difficulties with sourcing many key materials, with a shortage of pine and other timber impacting in big ways.. The scarcity of lumbar, as well as other materials such as MDF sheets, hardware components and windows, just to name a few, has resulted in price increases and shipment delays. However, it’s expected that we’re only beginning to see the severity of this problem, with predictions suggesting that the supply problem will only worsen with time. 

These factors are already increasing production costs for builders, which in turn are passed onto the end consumer.

A practical example of some of the impacts of these delays includes issues with the completion schedule of new home builds. As material delays continue, building contract terms regarding the time of a build’s completion trickle down to project contractors and as income penalties begin to kick in, the flow-on effect is reduced income against their contract.

This, in turn, drives poor interactions between developers, builders and purchasers and subsequent interactions for future work engagements.

Additional issues include extended settlement delays on home loans for new builds, with some contracts being declared null and void due to blown-out timeframes and some businesses that have missed out on income having to enter administration as they’re unable to pay their contractors and staff.

How Has COVID-19 Impacted the Information Technology Sector?

For the IT sector, we’re beginning to see reduced silicon availability, which is affecting the ability for manufacturers to construct essential components such as motherboards and graphic cards for computers and personal devices. The reduced silicon availability is expected to drive electronic costs up into the next few years.

Protecting Your Shipments with Marine Cargo Insurance

While we can’t offer solutions on how to quickly and effectively address these worldwide issues, we can offer you the right advice on how to protect your assets and reduce poor outcomes for your business as much as possible.

With the supply of materials looking challenging into the foreseeable future, and increased order costs becoming a critical factor for many businesses, a simple and effective risk management technique is to take out a Marine Cargo insurance policy for your shipments while they’re in transit. This relatively cheap and effective insurance allows you to protect your goods whether they’re conveyed by air, road, rail, sea or freight.

What are the Benefits of Marine Cargo Insurance? 

If you’re waiting for an important shipment of materials or components only to receive them damaged or unusable, you can claim for the loss up to the replacement value of the goods so that you are returned to your initial financial position prior to the loss. Some policies are even able to offer no excess so the only outgoing is the cost of the initial policy.

While this policy can’t expedite the timeframe to re-order and replace the goods, it allows policyholders to protect their financial position and manage potentially damaging client interactions by offering an option to refund third parties for their damaged goods (should they require it). This option can be the difference between a negative interaction and having the capability to instead reframe it in a positive light by offering a refund to the client, so that they aren’t forced to wait for another extended order.

Most notably, Marine Cargo Insurance can potentially save you from reputational damage to your brand, which has intangible costs that can’t only be quantified in financial terms.

Covering the Replacement and Repair Costs of Your Machinery with Machinery Breakdown Insurance

For those within Australia that aren’t importing their own goods and are instead carrying out their own manufacturing, you are likely dealing with a high number of orders as some industries resume operations and offices return to work, or you’re dealing with your own backlogs.

Because of these factors, there’s never been a more critical time to consider Machinery Breakdown Insurance. This policy can cover the repair or replacement costs for your machinery, as well as address any associated business interruption/loss of income you’d generate if you’re only able to operate at a reduced capacity.

What are the Benefits of Machinery Breakdown Insurance?

Machinery Breakdown policies are highly versatile, so you can ensure every piece of machinery in the factory is covered or you can choose to only insure your mission-critical machinery. It is a truly bespoke cover and can be tailored down to your individual needs.

Some machinery breakdown policies can also allow for an increased cost of working as well. For instance, providing funds to hire a temporary machine while you wait for a replacement or service of your existing machine, or even allow for the costs of outsourcing that aspect of the production to a third party.

Safeguard Your Manufacturing Business During the COVID Pandemic with BlueRock General Insurance

While we can’t manage the unpredictable events of life (like COVID-19 unfortunately!), we can offer you critical risk management techniques and mitigation solutions to ensure that while you’re trading, you’re in the right hands and can rest easy knowing you’ve taken all the necessary steps to reduce the potential impacts to your business as much as possible. 

With a broker in your corner, we can offer outside-the-box insurance solutions for you and handle the claim process for you every step of the way. Get in touch with our Melbourne-based Business Insurance brokers today to get started.

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The origin of the BlueRock name is a mash-up of the founders two favourite things.
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