Logistics chains are complex and interconnected processes that ultimately have the role of turning goods or services into actual sales. Since this is the primary goal of any organization, logistics chains are critical from an economic standpoint. However, such complex networks are prone to having high risks because of the activities that are involved within the process. There are several risks associated with logistics chains. However, certain strategies can be used to mitigate any possible issue.
One of the risks that affect the domain of transportation is the exchange rate risk. According to researchers, this is one of the main problems that affects global sourcing and leads to unfavorable economic outcomes (Schutte et al., 2019). Another risk that affects transportation is the long distances that negatively impact inventory levels. Moreover, an issue that correlates with logistics is the regulatory and political differences that can become issues for global logistics chains.
All of the possible problems highlighted above can lead to an increase in landed costs. In case of a drastic exchange rate, the planned outcomes do not align with the spending that went into product development. Long distances negatively impact lead time, which then leads to more expenses since the need for larger inventory levels increases (Schutte et al., 2019). Another risk, which is linked to political and regulatory differences, may create delays or even returns, generating unfavorable outcomes for the company.
As mentioned before, there are effective methods that can be used to mitigate such risks and remove lead time. In case of high exchange rates, it is essential to minimize extended payments rates. This would create a beneficial economic environment and decrease the land time by receiving payments in time. Long distances and significant inventory levels can be solved by having effective management that is proficient in planning inventory and routes for transportations.
This would reduce the rate of unsold goods and have positive effects on the overall delivery deadline. It is also important to take into consideration specific regulations and policies within different regions and countries beforehand to make sure the products will arrive on time, and no refunds or delivery issues occur.
Reference
Schutte, F., Niemann, W., & Kotzé, T. (2019). Post-shipment financial flows in supply chains: A study of small- to medium-sized enterprise importers. Journal of Transport and Supply Chain Management, 13. Web.