Rising cost of fuel top risk facing supply chains

Pricing risks, particularly the rising cost of energy, is currently the most pressing supply chain risk, a Marsh survey of 110 risk managers has found.
With oil topping US$139 a barrel in mid-June, energy prices are creating significant margin pressures on all companies that make, move or sell physical goods, Marsh says in its report, ‘Inflationary Prices Putting Supply Chains at Risk.’
As a result of the surge in fuel costs, factories face increased per-unit costs, fuel surcharges for shippers are increasing exponentially, transport truck drivers (particularly in Europe) have organized mass strikes and less financially viable transportation companies and owner/operator truck drivers are being forced out of business, the report found.
Risk managers can help their companies with both the insurable and uninsurable risks posed by pricing pressures, Marsh says.
Important areas for risk managers to consider include:
Hedging: is the company locking in energy and commodity prices? Could something make the hedged commodity less vital, such as new product introductions, replacement ingredients or materials or other innovations?
Scenario and simulation building: For every 10 cents that fuel rises, does the company know the impact on its net income or cost structure? Have sensitivity analyses been run so that the price inflection points are known at which the company will activate contingency plans?
Insurance protection: is the company aware of emerging supply chain insurance products that cover product flow delays across the supply chain and how they might protect the company’s most valuable or vulnerable product lines?