Can Coffee Shippers Hit the ‘Reset’ Button for Supply Chain Risks?

Sponsored content provided by Rekerdres & Sons Insurance Agency, Inc. 

By Adam C. Rekerdres

Reksons is a family-owned insurer specializing in origin-forward insurance of coffee traders since 1953. We have found that there are three classes of coffee shippers:

  1. Shippers who finance their supply chain risk
  2. Shippers who took their exposure to supply chain risks for granted and changed their outlook after a large loss
  3. Shippers who failed to survive their supply chain disruption

What part of human nature is at work here?

To begin with, coffee traders are real-life entrepreneurs who proudly source great beans from locales around the world, and often with stories straight from the pages of “Indiana Jones.” But entrepreneurs also run the risk of going ‘native’. Meaning that it is only human to become inured to the unusual. From time to time, a “reset “can be helpful.

Reality Reset

The 2016 global supply chain survey by the Business Continuity Institute found that some 70% of respondents experienced at least one supply chain disruption over the past 12 months. But most disturbingly, the same study found that of the disruptions – over 43% were not insured!

Disruptions in coffee supply chain can arise from many scenarios: Political, Physical, Contractual, and Force Majeure…sometimes referred to as an ‘Act of God’.

Yes, the consequences of unfinanced (meaning uninsured) disruptions are damaging – and hopefully survivable. However, it is even harder to predict the fate of your reputation. No wonder the weathered entrepreneur coffee shipper winds up with the ‘1000-yard stare’!

But there is an over-looked ‘reset’ resource available to the coffee shipper—your insurer!

Insurers as Risk Partners

For example, Rekerdres & Sons thinks of insurers like ‘wingmen’ to the coffee shipper. After countless ‘sorties’ we can guide you out of the dark clouds of uncertainty. Here are 4 areas where marine insurers – as partners – should be providing a needed review of your supply chain and opportunities to ‘reset’:

(1) Lessons from losses – Experienced insurers with long-term skin in the game can explain and apply lessons learned from real life losses – helping shippers focus supply chain loss prevention. Just ask.

(2) Trade is constantly evolving – What worked years ago might not work today or tomorrow. For example, shipping containers are older…and much nastier. Do you have a formal container rejection policy?

(3)  Court decisions as a ‘reset’ – A recent high-court decision re-affirmed Ocean Carrier cargo liability exemptions, specifically noting that “… the ocean carrier bill of lading is not a cargo insurance policy.”

Thus, in certain coffee trade routes, the shipper’s use of desiccants may be a condition precedent to cargo worthiness!

(4) Practical Risk Pricing – Shippers need an objective view and price of the varied ‘country risk’ factors. We use the RIPR (Rekerdres Index of Practical Risk Factors).

For many years, we have based our annual studies on 140+ countries, resulting in an index which weighs the Rule of Law—Government Regulations / Efficiency, and Openness of Markets. Included are outlooks on civil unrest and infrastructure. The result is an authentic risk/rate connection to the political and social trends at both origin and destination countries. For example, a typical supply chain disruption for coffee exporters is the overland theft of coffee trucks and/or containers.

So carefully engage your partners in supply chain risk, and see if they can cure the ‘1000 yard stare.’

Adam Rekerdres, MBA, CIC, ACI, is Vice President at Rekerdres & Sons, a global commodity insurer based in Dallas, Texas.