Business managers or team managers know that there is always the risk that things won’t work as we expect, including when it comes to eCommerce shipping. With 2020’s events still fresh in our minds, it clearly exemplifies Mike Tyson’s quote:
“Everyone has a plan until they get punched in the face”
McKinsey splits risk into ‘known risks’ and ‘unknown risks’ and these risks exist in every facet of business, including eCommerce deliveries.
In 2020, iPrice and Parcel Perform noted that average transit times for eCommerce deliveries increased in the earlier months of the pandemic, especially with social distancing measures making it harder for land transport to make deliveries in roadblocked areas. Malaysia’s transit times increased to 4.6 days from 2.1 while in Indonesia it grew to 3 days from 2.3 days.1
“Unknown risks are those that are impossible or very difficult to foresee” McKinsey states. The impact of lockdowns on last mile delivery, as iPrice and Parcel Perform took note of, is an example of an unknown risk as few could foresee how widespread lockdowns became during the early months of COVID-19’s spread.
“Known risks can be identified and are possible and to measure and manage over time” McKinsey mentions. 11.11 delays and stockouts can be monitored and anticipated.
In 2021, Cainiao made adjustments to how they prepared for 11.11 that year to tackle the risk of stockouts and delivery delays during 11.11 and other Q4 peak seasons.2 Channel News Asia reported: “Cainiao has pre-stocked more than 300 million items from 87 countries and regions in its warehouses across China to help merchants avoid shipping delays. It has also secured additional cargo space in more than 1,350 flights, 1,170 containers on 210 sea freight trips and 150 trucks for deliveries to North and Southeast Asia, including Singapore.”
Learning to mitigate and manage risks is key to learning how to roll with the punches of the coming years. In this case, we’ll be adapting McKinsey’s processes for managing risk to eCommerce deliveries. You can find the link to McKinsey’s article in the references list below.
Managing Known eCommerce Shipping Risks
To manage known risks, McKinsey lays out 4 steps:3
- Step 1: Identify and document risks
- Step 2: Build a supply-chain risk-management framework
- Step 3: Monitor risk
- Step 4: Institute governance and regular review
Step 1: Identify and document risks4
When applied across the whole business, McKinsey starts by advising us to map out and evaluate the value chains of our major products. These risks will be entered on a risk register and consistently tracked and monitored.
When narrowing this step to eCommerce supply chains, this will be focused on the suppliers of your products (e.g. wholesalers or manufacturers) as well as our delivery providers.
When it comes to assessing suppliers, research agency Achilles5 recommends looking at our suppliers’ production and service locations. They also recommend gaining transparency and assurance from your suppliers in terms of their critical supporting suppliers.
The same can be applied to shipping partners or in-house delivery teams. Some of the factors that should be taken into account include your shipping partners’ fleet and warehouse capabilities, coverage, line haul capacity, how above board they are (e.g. smuggling, corruption), and financial position just to name a few.
Step 2: Build a supply-chain risk-management framework6
McKinsey’s next step advises us to build an integrated risk-management framework based on scoring risks based on three dimensions:
- Impact on the organisation if the risk materialises
- The likelihood of the risk materialising
- Your organisation’s preparedness to deal with that risk
When scoring the risks, it is advised to use a consistent methodology to assess them. This lets you prioritise and group threats to identify the highest-risk products or lanes with the greatest failure potential.
Step 3: Monitor risk7
Now that your risk-management framework is in place, you’ll need to consistently monitor the risks you’ve identified.
In the case of eCommerce supply chains, having a control tower that actively monitors stock levels and real-time delivery statuses across all transportation modes, partners and lanes is critical to pre-empting and rapidly solving any supply chain issues that arise. Some shipping partners also can equip you with early warning systems to manage and mitigate issues that crop up in your deliveries.
Step 4: Institute governance and regular review8
The last step to improving the resilience and agility of the supply chain is what McKinsey calls setting up a robust governance mechanism which regularly reviews supply chain risks and defines mitigating actions.
In eCommerce delivery terms, what this means is setting up a risk management team that includes representatives and managers from every node in your supply chain like suppliers and shipping partners. This team will meet regularly to review the supply chain’s top risks, list out mitigation actions, and be responsible for executing these steps. If you are working with many eCommerce delivery providers, the team will grow proportionately.
Janio manages multiple carriers on your behalf, giving you the risk management benefit of multiple carriers while needing only one touch-point. Talk to us via the banner below to learn more:
Managing Unknown eCommerce Shipping Risks
McKinsey recommends building strong defences together with building a risk-aware culture to handle unknown risks.
Building strong defences
Here, we’ve chosen the layers of defence that could help organisations manage unknown risks when it comes to eCommerce deliveries from McKinsey’s original list:
Building a Risk Aware Culture
These are the factors that McKinsey suggests to build a risk aware culture, which can strengthen your business’s defence against unknown risks:
- Acknowledgement – This means that everyone at all layers is able to pass on bad news and learn from mistakes instead of keeping them hidden. Less finger pointing and more openness means more time and resources to solve issues.
- Transparency – A transparent culture needs to allow for risk warning signs to be openly shared. Leadership also needs to align on which risks need to be mitigated and which risks can be taken on by the organisation.
- Responsiveness – Employees need to be given the authority to evaluate and react quickly to changes. Having an environment where employees have ownership of their work and decisions can foster this.
- Respect – Ideally, the risks that employees take should not benefit themselves at the expense of the company.
The Importance of Having Multiple Carriers
While it’s humanly impossible to prepare for every possible scenario, the above framework at least gives us a way to mitigate and control the risks we’re aware of while building in the trust, flexibility and speed needed to respond to unforeseen events.
For eCommerce shipping, spreading your eCommerce volumes among multiple different partners for each destination country can help keep your shipments moving in case one of them runs into trouble.
However, onboarding and managing these partners could get complex and costly for your company depending on how you want to approach spreading your delivery risk across multiple shipping partners.
It can take on average 5 to 7.5 months to onboard and integrate with a new shipping partner, with larger shipping partners taking longer times. Request for Quotation (RFQ) periods could take between 1 to 2.5 months while the tech integration could take anywhere between 4 to 5 months to fully onboard a partner. When considering the time-value of money, all these steps require man-hour commitments from your company if you are doing this in-house.
Depending on the volumes for each lane (e.g. Malaysia to the United States or Singapore to Australia) that you commit to, you may not be able to get the best rates your partners have to offer as the volumes you provide may not get you the cheapest tier that shipping partners can offer.
With the need to ensure that you always have multiple reliable shipping partners to work with to manage risk, it could make sense to work with a logistics vendor management partner who can help you manage and onboard all these shipping partners for you.
Janio has years of experience managing multiple logistics partners across the whole eCommerce delivery chain. We have a wide variety of shipping partners we work and manage on your behalf. This experience has also allowed us to refine our process of selecting, vetting and onboarding new shipping partners onto our network.
You’ll just need to onboard and integrate with a partner like Janio to gain access to our wide network of partners and our robust partner onboarding processes. As Janio directly manages these partners for you, we underwrite the risk when it comes to managing these partners’ volume.
Our selection process takes into account your supply chain needs at the time to ensure a good match. Our vetting process includes ensuring our partners have the proper registrations and licences. We also run background checks and anti bribery and corruption screening to ensure that your partners are legitimate and above-board.
Cost-wise, Janio’s high volumes give us economies of scale. Our volume consolidation gives us access to better rates that we pass on to our customers. Finally, your shipments with us will have risk coverage in case anything goes wrong, with the choice to upgrade the amount covered with our Parcel Shield service.
As our partners’ performance reflects on us, we also actively monitor and work with our partners to keep known risks to a minimum and have quick escalations to our partners to manage any unknown risks that may arise. Janio can be your one-stop shop for your shipping needs and our wide array of partners can help you manage and mitigate your supply chain risks.
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