Risk affects every business. There is no way to avoid it entirely. So, for companies with shipping needs, the best question to ask is how do you calculate your shipping risk and manage that risk in today’s world of small package shipping?

Today's consumer expectations are high. Customers want excellent products with a single mouse click and seamless parcel shipping to their front door. E-Commerce retailers must deliver, and costs can be high. Managing shipping risks is one way e-commerce businesses can keep their profits on small parcel shipping in line.

The key to success for shipping companies is to practice good risk management.

Universal Shipping Risk

Whether you use truckload LTL or small parcel carriers, freight shipping includes some universal risks. These risks affect all types of shipping and have to do with not having an adequate supply of a needed product or not having the ability to meet a consumer’s time frame.

These may be the cardinal sins of the shipping industry.

This challenge of availability and delivery is paramount. Some e-commerce businesses mitigate the risk by charging more for the product or the shipping. Other ways to protect against this top risk is by in-depth knowledge of your supply chain, your shipping risk, and proper insurance.

Risks that Chip at Profit

While there are shipping risks that are easily identifiable (bad weather on a sea route, terrorism, or supplier delays), it can be the less apparent small parcel shipping risks that over time can cause problems with profits and business.

The difficulty with these ongoing risks is they are more challenging to diagnose and deal with. They can act like a small stream of disruption, continually eating away at your profit margin.

Some companies manage their freight shipping risks well, but then get stuck in habits that aren’t cost-effective. They may continue to use a shipping system based on past results instead of the best available options. They may stick with a supplier because they haven't had a supply problem in the past, even though their costs are higher.

In today’s globally competitive world, companies must innovate to survive, and that includes monitoring their shipping costs and risks for better business practices.

The good news for today’s e-commerce businesses is that shipping risks are highly calculable with modern software. Further, shipping insurance is available to help mitigate against whatever risk remains after superior shipping and receiving management is in place.

Domestic Shipping Risks

Shipping insurance works to diminish shipping risks that extend beyond good analytics and shipping and receiving management. Some of the most troublesome shipping risks are domestic.

Unreliable shipping carriers

Your business is only as good as your carriers. If your carriers are not reliable, your e-commerce business can’t succeed. Avoid doing business with carriers who don't accept responsibility for damaged shipments in their contract. Also, carriers that subcontract your shipments without your approval should be avoided.

Cargo theft

Small parcel theft is a big problem. Make sure you have insurance that protects against this risk. Commonly stolen parcels include medications and electronics. But any product with monetary value is at risk for theft.

Poor warehouse handling

If you use a warehouse in your shipping operations, be selective. If your warehouse has poor handling techniques or doesn’t understand your product, your products could be damaged.

Packaging 

Product packaging is an often-overlooked component that impacts your shipping risks. If your packaging and parcel design isn’t appropriate for your product and shipping method, you can end up with damaged goods.

Parcel handling

Parcel handling is a shipping risk that can be mitigated with good insurance. Still, accidents happen, and parcels get damaged in the handling process. Machinery such as forklifts and cranes can sometimes damage packages.

International Shipping Risks

If your business requires international shipping, you assume additional risk. Global shipping risks can be less predictable and more difficult to mitigate.

Geopolitical problems

International shipping requires a global perspective. Global unrest, such as terrorism and political dissidence can have direct effects on your shipping risks.

Import Regulations

For effective international shipping, you must be aware of import regulations. Tariffs, taxes and possible restrictions on product and merchandise must be on your radar.

Carrier Inconsistencies

Just because a package leaves the country with your carrier doesn't mean that carrier is the one ultimately delivering the package at the destination. Government-run USPS transfers the package to that country's government-run postal service equivalent to finish the job. That means tracking can be inaccurate, quality of service is not guaranteed, and higher disappearance rates for packages.

Private companies like FedEx will contract with third parties located where you are shipping, which also means inaccurate tracking and unknown service quality. When shipping internationally, consider DHL. As a global company, they do not contract with third parties and instead have branches within the network. 

Benefits of Third Party Shipping Insurance

Shipping insurance is one of the most effective ways e-commerce industries can protect themselves from domestic and international shipping risks.

Third-party insurers have a lot to offer a company’s shipping system since their insurance will apply to nearly any carrier you decide to use.

Here are some other benefits of third party shipping insurance:

• Shipping risk software that works with the large parcel carriers including UPS, USPS, and FedEx.
• As risk management professionals, third-party carriers offer much faster response time to claims with minimal paperwork.
• Third party shipping insurers offer higher coverage limits for valuable shipments with high dimensional weight.
• Policies provide coverage for a variety of shipping risks and methods including LTL shipments.
• Third party shipping insurance like Cabrella provides coverage in almost every country. Cabrella also insures USPS international shipments at a fraction of the price due to being able to avoid government fees. 

Know Your Shipping Risks and Insure Against Them

With autonomous shipping appearing on the horizon, the need for good shipping risk management deepens. Assigning liability when things go wrong on an autonomous shipping load may be difficult, and good shipping insurance will become increasingly important.

Calculating your shipping risks and insuring against them are steps that can make a difference to your bottom line. Whether you ship domestic or overseas, knowing your shipping and supply risks, and purchasing good third-party shipping insurance can protect your e-commerce business when trouble strikes.

With Cabrella's easy-to-use software, all the information you need about your shipments are available on your mobile device or desktop.

Have one of our shipping insurance experts show you how this revolutionary software can help your e-commerce business thrive by applying for insurance today.

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