Ventiv Technology

801 2 ≥ aon 360º expert view: logistics e rapid pace of change in the logistics industry has major implications for logistics providers as well as the growing number of businesses worldwide who outsource their logistics services. Deregulation in the transportation sector, together with Internet, e-commerce and other electronic capabilities, have spurred new categories of logistics providers; both logistics providers and the organizations that utilize them need to have a firm grasp on the risk and contractual exposures they may face. e classic second-party (2PL) logistics provider is typically an asset-based carrier that own its own means of transportation. Businesses today are moving their logistics activities to third-party logistics (3PL) providers and even fourth-party logistics (4PL) providers. Most 3PL providers are asset lean and use 2PL firms, warehouse operators and other service providers, which gives 3PL providers flexibility in meeting their clients complex range of logistics needs. ose needs include administrative services such as export/import clearance, stock taking, tendering and carrier contracting, inventory management and track and trace services. 3PL providers even design and implement physical services such as storage, cross docking, consolidation of shipments, pick and pack, multi-modal transportation of goods, assembly of components and even recycling, waste handling and reconditioning. 4PL providers, meanwhile, are independent, singularly accountable non- asset based integrators who design, build and run comprehensive supply chains for their clients. For businesses outsourcing their logistics functions to 3PL or 4PL providers, it is important to be satisfied that the risks associated with transferring these functions are within the organization's risk appetite and risk capacity. Both the outsourcing organization and the 3PL or 4PL provider need to have a clear understanding of the implications of the following factors: » Level of risk associated with the contracted services » Duration and scope of the contract » Level of skill required in the delivery of the contracted services » Critical nature of the goods or services that are being covered by the contract » Actual risk exposures associated with complex supply chain arrangements, such as risk of disruption by natural disasters, pandemics and terrorism It should be noted that 2PL providers can limit their liability more effectively than 3PL and 4PL providers. 2PL providers can typically assess and limit their liability according to international conventions, law and contractual agreements. For 3PL and 4PL providers, however, activities outside of pure transportation are subject to law ; case-by-case and contract-by-contract arrangements; or otherwise leave the 3PL or 4PL provider with unlimited liability. 3PL and 4PL providers can be subject to a vast range of exposures by contract and law. ese exposures include liabilities arising their activities as Internet service providers (e.g., track- and-trace); logistics management (e.g., inventory management); transportation management (e.g., labelling and packaging); product liability (e.g., quality control, pick and pack); and administrative services (e.g., customs declarations and clearance). 3PL and 4PL providers may transfer some of these risks, but most will have to be retained. It is therefore of fundamental importance for these providers to manage their : » Contractual obligations and exposures » Leased or owned assets » Subcontractors and service providers » Incidents and claims A RMIS can help 3PL and 4PL providers keep track of risks retained and risks transferred. A RMIS will also help providers manage incidents and claims, track contractual and other exposures as well as assets, sub-contractors and agents. Such control is vital in enabling providers to proactively manage their risk exposures and to drive loss prevention and loss control activities. 3PL 4PL providers providers of Exposures by 3PL and 4PL Providers managing the wide range Ilka McHugh on +44 (0)20 7086 7275 or email ilka.mchugh@aon.co.uk for more information

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