Wed Oct 28 2020

The team at AM&T (Allianz Marine & Transit) has recently partnered with the Institute of Transport & Logistics at the University of Sydney (ITLS) to undertake an investigation into the risks associated with Cold Chain Logistics.

The study was conducted with the purpose of better understanding the current risks inherent in the storage and transportation of refrigerated goods and to identify opportunities to mitigate these.

As a part of this study, ITLS talked to multiple logistics providers and industry bodies about how risks and mitigation measures are perceived by them and the key issues relating to risk management.  

What is Cold Chain Logistics?

The cold chain consists of a series of businesses engaged in manufacturing, transporting, storing, retailing and serving fresh, chilled and frozen foods. Over the last two decades as technology has advanced, the logistics of transferring food from paddock to plate have become more complex. The average food is moved in and out of refrigeration control 14 times before consumption. The effectiveness of the Cold Chain in maintaining the safety, shelf life and quality of foods rely on controlling product temperature through each and every step.

Cold Chain Logistics is the transport of perishable goods: goods that can spoil, like fresh meat, seafood and fruits, vegetables and even pharmaceuticals. These goods need to be transported and stored in temperature-controlled environments whilst at the farm awaiting shipment, in transit, in warehouses and while waiting to be loaded onto transport.

Cold Chain Logistics and Insurance claims

As a part of understanding the business landscape in the logistics and transportation industry, the study correlated industry information with 4 years of anonymised AM&T policy and claims data in order to:

  • better understand the risks associated with the storage and transportation of refrigerated food; and
  • identify risk mitigation measures to inform and support insurance brokers, who can in turn share this information with their clients, to assist in reducing the number and severity of claims.

The review looked at claims under both cargo and carriers policies and identified the following

  • 91% of claims fell under carriers’ policies; and

  • Only 9% of claims were from cargo policies.

AMT_Cold_Chain_Logistics_Claims_Analysis.png

The following findings were highlighted:

  • The most frequent causes of loss were refrigeration malfunction, collisions/rollovers and fires. Accidental damage also formed an important subset of cold chain claims.

  • The highest individual monetary loss per incident was as a result of a vehicle fire affecting chilled foodstuff.

The following conclusions were drawn from the review and findings:

Cold Chain Logistics can be challenging, but the following findings in relation to risk mitigation emerged from discussion of the  report with industry practitioners and representative bodies:

  • risk can occur at origin (i.e. the farm/factory) with growers or producers sometimes not having the right equipment to achieve the appropriate temperature in store ahead of the commencement of transit;
  • truck refrigeration is designed to keep stock at a set temperature; therefore, it is often the loaded temperature of the goods that counts;
  • the temperature may vary significantly between cold store and loading;
  • accurate recording of load temperature can help avoid losses and/or provide avenues for recovery;
  • differences in processes and procedures between various parties create weakness in the chain, goods can go through up to 17 different handlers in the cold chain between producer and supermarket so agreement on practices can help avert losses;
  • risk can be mitigated through behaviour change throughout the chain. Such as:
    • improving record-keeping and monitoring processes;
    • improving training for drivers;
    • improving packing and storing practices (i.e. stacking, max capacities, airflow) in conjunction with suppliers;
    • improving procedures for mixed loads with different temperatures for each of the items; and
  • Back up processes for power failures etc. and improved contingency planning.

Conclusion:

Mitigating risk does not necessarily always involve new capital investment. Much of the risk can be mitigated by behaviour change at each stage of the supply chain.  There are new and improved technologies that have been introduced including smart containers, cold chain mapping and monitoring solutions, and omnichannel management systems.

If you would like to find out more about this report or talk to one of our experts in carriers and cargo cover, please contact us to register for our virtual training seminar to gain a more detailed overview of the study.

 

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Disclaimer
This article has been prepared by AM&T (Allianz Marine & Transport)  ABN 98 155 554 279 AR No. 423910) agent for the insurer Allianz Australia Limited ABN 15 000 122 850 AFSL 234708 (Allianz). It is based on information obtained from a joint research project between AM&T and the University of Sydney. Information contained in this article is accurate as at 22/10/2020 and may be subject to change. In some cases, information has been provided to us by third parties and while that information is believed to be accurate and reliable, its accuracy is not guaranteed in any way. Any opinions expressed constitute our views at the time of issue and are subject to change. Neither Allianz, nor its employees or directors give any warranty of accuracy or accept responsibility for any loss or liability incurred by you in respect of any error, omission or misrepresentation in this article.