Slide 1

Logistics Industry Risk Management Transport and Logistics companies around the world face a host of dynamic risk issues. Aon's risk management experts understand the complex legal and cultural issues that shape transportation firms strategies and approach to risk. Our experts focus on a wide range of issues to provide clients with creative insurance solutions backed by the leading risk advisory firm in the logistics and freight management industry.

Overview of Logistics Industry Logistics, as a business concept, evolved only in the 1950s. This was mainly due to the increasing complexity of supplying one's business with materials, and shipping out products in an increasingly globalized supply chain, calling for experts in the field who are called Supply Chain Logisticians. This can be defined as having the right item in the right quantity at the right time at the right place for the right price and to the right target customers (consumer); and it is the science of process having its presence in all sectors of the industry. With the changing economic scenario, factors such as globalization of markets, international economic integration, removal of barriers to business and trade and increased competition have enhanced the need of transportation.Objectives In todays business big or small, domestic or global, the value of time is clearly immense. Businesses today are focusing on how they can deliver goods and services to the global markets in a timely and reliable manner. Besides efficiency in pick up, timely delivery, timely information and availability of other infrastructure facilities for efficient handling of cargo transportation have become the need of the day.

Some definite objectives to be achieved through a proper logistics system. These can be described as follows: 1. Improving customer service. 2. Rapid response. 3. Reduce total distribution cost. 4. Generating additional sales. 5. Price stablization. 6. Creating time and place utility. 7. Quality Improvement. 8. Movement consolidation. Funding Sources Equipment Lender Equipment lenders often serve as an excellent source of financing for asset-intensive transportation companies. Equipment lenders that focus on the transportation industry understand industry dynamics, characteristics and risks. Banks often consider transportation assets too risky to use as collateral and lend against because the assets are "rollingSTOCK," which company personnel can readily drive offsite. This makes the equipment difficult to repossess. However, the equipment lenders industry knowledge allows them to mitigate their risks. Equipment lenders typically offer both lease and purchase options.

Funding Sources Accounts Receivable Financing Transportation companies that generate invoices from quality customers can obtain lines of credit from accounts receivable financing, or A/R financing, firms. Transportation-focused A/R financing firms assign more weight to the credit quality of a small company's customers and adherence to payment terms than to the small company's credit history. For example, a small local transport company that makes deliveries for large retailers such as,, Target or Lowe's would typically qualify for accounts receivable financing. This is important because many transportation industry customers pay in 30 to 45 days, which may have caused cash shortages for firms and impacted their credit history.Funding Sources Fuel Cards Transportation companies' largest variable expense is fuel, whether gasoline, diesel or natural gas. Fuel card providers generally offer up to 30-day payment terms for most small companies. This allows firms to better align their cash outflows for fuel with the cash inflows from customers paying invoices. Companies could use CREDIT CARDS, but most fleet fuel cards offer tracking services that standard credit cards do not. Therefore, fuel cards have an additional benefit of helping businesses better manage their fuel, supplies and cleaning costs. Both fuel providers and third parties offer fuel cards.

Funding Sources Partnership or Joint Venture One often overlooked source of financingfor transportation companies is a strategic partner or joint venture. Many large corporations and government agencies have small business purchasing programs. Some of these organizations encourage their large suppliers to partner with smaller companies to help mentor and develop the smaller entities, while adding flexibility and responsiveness to the larger company. In addition, a small company may have the opportunity to win a larger contract, but require a partnership with a larger company to access additional capacity. In exchange for the additional business, the larger company may extend a line of credit or guarantee a bank loan on behalf of the smaller company.Risks Involved Supplier failiure(28%)Strategic risk(17%)Natural risk(15%)Geo-Political events(11%)Regulatory risk(11%)Logistics failiure(10%) Insurance Involvement The Logistics industry is all about deadlines and with it comes specific insurance challenges particularly in the areas of equipment replacement, environmental regulations and the safety of both people and product. This sector is made up of distribution companies and their intermediaries.Property insurance Covers items for accidental loss or damage generally anywhere in INDIA.Business interruption insurance (also known as business income insurance) Cover for loss of profit/revenue/income/rent following an insured loss. Can include additional increased cost of working and claims preparation costs/professional fees Insurance InvolvementVehicle insurance (also known as, GAP insurance, car insurance, or motor insurance) Cover for all registered vehicles for which you are responsible, whether owned, leased, employees or hired.Public Liability Covers you against the legal liability to third parties for personal injury or property damage resulting from an occurrence in connection with the insureds business.Insurance InvolvementCarriers Liability Cover against shipment loss, damage, and delay or goods transported.Professional Indemnity Cover for legal liability to compensate third parties for loss sustained by or arising out of the negligent acts, errors or omissions on the part of the insured in the conduct of their business.Management Liability This includesDirectors and officers (D&O) liability insurance,Employment practices liability (EPL) insurance,Fiduciary liability insurance, and Special crime" insurance (covering kidnap, ransom, and extortion exposures).