How Well Is Your Operation Insured for Supply Chain Delays?

Manufacturers rely heavily on facilities around the country and world to supply products, with any disruption in supply or distribution chains potentially causing significant interruption and loss to a business operation. In addition, the use of just-in-time supply systems increases the potential loss caused by any interruption in a company’s logistics. Such systems benefit a manufacturer when operating at full capacity. Anything that falls short of full capacity operations may result in significant losses if you’re unable to acquire the needed materials to meet your production capacity. Moreover, a significant downturn in supply often results in increased costs to acquire the necessary materials to continue operating. It can also result in partial or complete shutdown of facilities lacking the resources to operate.

You can take measures to minimize the impact of supply chain disruption by using multiple suppliers when possible. Buying specialty insurance policies, including Contingent Business Interruption (CBI) insurance and Supply Chain insurance, can also limit your exposure to loss.

CBI reimburses your business for lost profits and related costs caused by disruptions in your supply chain even if your company has not suffered any damage. CBI can provide an important line of defense against losses caused by disruptions at the locations of your suppliers or downstream customers. It provides coverage if a business you rely on is disrupted by physical property damage—for example, if a supplier’s facility is damaged by fire and ceases operations. However, it does not protect a business when roads are closed and workers are unable get to work or when products cannot be distributed or other suppliers are affected. For this you will need Supply Chain insurance, which offers far broader coverage than CBI insurance for business interruption caused by disruptions to your supply chain.

In addition to covering disruptions caused by property damage to your suppliers’ or downstream customers’ businesses, Supply Chain insurance can cover losses caused by a wide range of events, including natural disasters; industrial accidents; production process problems; closure of roads or other transportation infrastructure; regulatory action; among other exposures.

You can also minimize your supply chain exposure by assessing your supply chain and identify risks and weaknesses; balancing supply chain logistics (e.g., just-in-time delivery) with risk management; identifying back-up suppliers and vendors; and establishing contingency plans and include supply chain disruption in your business continuity plan.

Precision Manufacturing Insurance Services (PMIS) has developed custom-tailored insurance products for manufacturers with our ManufacSurance® program. We put expertise and experience to work for you to assess your risks and provide you with the insurance products needed to address your exposures. This includes examining your property risks including business interruption exposures that can upend your operation. For more information about our ManufacSurance® program, just give us a call at 855.704.7306.