The Impact of Port Congestion on Cargo Risks: What Can You Do?
Port-related risks inevitably affect cargo shippers. The situation in the Red Sea for instance has prompted cargo shippers to choose longer but safer routes away from the Suez Canal leading to delays and bottlenecks at ports.
When ports are congested, this increases the costs of fuel consumption as cargos spend more time at the anchorage. With a longer turnaround time, this can lead to higher labour costs, cargo delays, and damages to cargo and equipment.
Fuel consumption increases, vessel downtime and demurrage fees affect not only shippers but also cause losses to ports and terminals.
The need for effective risk management has never been greater as port owners and cargo shippers continue to experience evolving disruptions from escalating extreme climate events and geopolitical tensions leading to port congestion.
Click here to jump to port risk solutions if you are a port and terminal owner
How can cargo shippers mitigate risks due to port congestion?
1. Multi-Port Strategy
Use multiple ports to redirect cargo from congested ports, considering accessibility, pricing, and facility reputation.
2. Flexible Routing
Implement routing adjustments based on real-time congestion data, using technology to monitor port conditions.
3. Inventory Management
Maintain higher inventory levels at distribution centres to buffer against delays and shortages.
4. Diversified Supplier Base
Source from multiple suppliers in various regions to reduce reliance on a single source.
5. Contractual Flexibility
Negotiate carrier contracts with flexible shipping schedules and routes to quickly adapt to changing conditions.
6. Review Bills of Lading Terms
Ensure bill of lading information is accurate and consider the impact of port changes on operations and logistics.
Port congestion also leads to the disruption of the entire cargo logistics chain. It is therefore necessary for cargo shippers to mitigate supply chain risks. One efficient method is to utilise advanced technology to identify risks.
Sentrisk: Navigating port and cargo risks with technology
By leveraging advanced technologies such as supply chain mapping AI and geospatial satellite imaging, Sentrisk, a joint development effort between Marsh and Oliver Wyman, enables port owners and cargo shippers to identify and map supply chain risks such as critical upstream suppliers and potential vulnerabilities to develop robust contingency plans:
1. Risk Assessment & Mitigation
- Assess risks against ports and terminals.
2. Supplier Mapping and Validation
- Identify and map upstream suppliers.
- Validate supplier details and assess location risks.
3. Supplier Risk Assessment
- Evaluate risks associated with suppliers (natural hazards, geopolitics, etc.).
- Assess transport route risks and bottlenecks.
4. Real-time Alerts and Monitoring
- Ongoing alerts for potential disruptions (weather, supplier impacts etc.).
- Monitoring and contingency planning based on real-time information.
5. Prioritising Critical Supplier Networks
- Mapping transportation routes through the supply chain, including ports and terminals.
- Identifying key exposures and analysing risks for disruption.
With the ability to analyse deeply into the supply chain map, Sentrisk overlays proprietary analytics to pinpoint low, medium, and high-risk vulnerabilities down to a site, supplier, or component-specific level.
Sentrisk also addresses the increasing strain on global supply chains caused by transportation delays, geopolitical conflicts, trade wars, and climate change. These factors can lead to congestion at ports and critical passageways, resulting in shipping delays and financial losses.
Importantly, Sentrisk helps companies gain visibility into their upstream supply chains, identifying suppliers and assessing risks such as natural hazards and geopolitical events. This enables businesses to evaluate transport routes and infrastructure vulnerabilities, allowing them to diversify suppliers, reroute components, or utilise insurance products to mitigate potential losses.
In addition, Sentrisk’s capabilities extend to evaluating a variety of risks that may impact businesses including regulatory challenges, labour issues, equipment failures, cybersecurity risks, and more.
Drive positive risk outcomes with Marsh’s innovative solutions
Innovative risk transfer solutions are crucial for addressing contemporary challenges that can severely disrupt port and cargo operations and impact profitability. Consider integrating our proprietary AI technology, Sentrisk, into your supply chain risk mitigation strategies alongside Marsh’s Trade Disruption and Port Blockage insurance solutions to enhance your business resilience.
Marsh’s extensive global expertise in the marine and cargo industry, combined with our strong relationships with insurers, enables us to advocate for tailored insurance limits and policies that meet the unique needs of our clients worldwide.
Unlock effective risk solutions for your cargo and port risks today
Speak with our specialists for a non-obligatory consultation.
Case study: Assisting a commodity player through Sentrisk
By analysing a commodity player’s upstream supply chain, Marsh Asia was able to help the client identify key transport routes together with critical terminals and ports along the way, and evaluated the exposure of these transport infrastructure to both climate risks and geopolitical events.
Besides cargo shippers, port and terminal owners need to consider current port risk solutions and assess if there are protection gaps in an uncertain world.
Specialised port risk coverage for challenging times
The Francis Scott Key Bridge collapse significantly impacted the Port of Baltimore, an important economic asset for the state of Maryland and the United States. In response, Marsh launched the first Port Blockage Insurance to cover revenue losses from third-party incidents, such as vessel sinkings, impacts causing waterway closures, and natural disasters.
Additionally, Marsh partnered with Tokio Marine Kiln to offer the first of its kind in the port insurance market – Trade Disruption Insurance (TDI). TDI is an exclusive risk transfer solution for ports and terminals to cover business interruption losses due to trade disruption caused by geopolitical events and extreme weather incidents.
The infographic below show the differences in coverage between Port Blockage and Trade Disruption Insurance: