Manufacturers are problem solvers at their core, but with each New Year face an increasingly complex business environment. In response, they innovate. Perhaps 2017 will be the year to streamline supply chains, repatriate certain production elements, or launch a new product line.
What's on your list this year? New goals often require complex adjustments to operations that can leave companies open to new risks. For example, adjustments in supply chains to include a new foreign supplier of a single component will undoubtedly affect product recall strategies. In addition, production line improvements will require a closer look at hiring, training, and safety protocols.
With operational changes comes risk. It's incumbent on your company to be proactive with your insurance broker to be sure those risks are managed adequately and that any potential new exposures are addressed at the policy level. As a company grows, adapts or pivots, it's management's responsibility to ensure insurance carriers are the right fit. Not doing so can leave a company vulnerable.
To help manufacturing business owners understand the current insurance climate, here are some of the top insurance considerations for 2017.
Product recall. In today's complex world of manufacturing, it is exceedingly rare to build a product with only one source component. In fact, most products contain a variety of components from different domestic and foreign suppliers. If 2017 is the year for your firm to launch a new product or improve a current product, you'll need to work on a product recall strategy. Is your company prepared to weather a product recall? Product recall insurance can be a great support in a time of need for a company, especially to help cover what can often be astronomical costs.
For example, Blue Bell lost $180 million in sales from their listeria product recall which might have ended the company were it not for an infusion of capital. While theirs was a unique situation, product recalls are increasingly common with the Food and Drug Administration reporting nearly 2,800 in drugs, medical devices, and some food and nutritional products in 2015.
Business interruption. The manufacturing industry is a highly collaborative ecosystem of suppliers, vendors, technologists, partners and more who rely on each other in everyday operations. With so many entities relying on each other, a significant loss in one facet of the industry, can drastically affect another. Should your supplier experience a devastating loss that requires them to shut down operations, even briefly, your business would experience the effects. How would your firm handle the loss of a key supplier or vendor? Insurance can help you handle situations like these that are far beyond your control.
Equipment breakdown. Manufacturing processes rely heavily on properly functioning equipment, so heartache from key technology not functioning is often acute. Almost all manufacturers will be investing in their equipment this year. Will you suddenly be out of business if a key piece of equipment goes offline? Require your carriers to help assist you with the financial ramifications of broken equipment to your operation.
Cyber issues. While technology investment continues to help the manufacturing segment to grow, it also is one of the biggest risks to consider when designing a protection plan for this year. The continued adoption of new technology raises a manufacturer's risk of cyber attacks. This is a new era in which cyber criminals use advanced techniques to gather sensitive data, payment processing, and the like. According to Linda Conrad, director of strategic business risk for Zurich, physical damage is not even in the top three causes of supply chain disruptions. In fact, cyber issues contributed to over 50 percent of 2013 supply disruptions. Are your network and employee practices up to the test against evolving cyber threats? Lean on both your insurance carrier as well as cyberattack specialists as part of your risk mitigation in this area.
Your insurance providers are paid to help you manage risk. Don't wait to discuss details of your 2017 business plans. Share your operational plans early. Your success may depend on it.