Risks are an important consideration in warehousing and logistics. Identifying and categorizing risks in rented warehouse is significant when managing the flow of goods. According to Falkner and Hiebl (2015), companies that manage warehouse face market, technology, and finance oriented risks. Identifying risk and how they occur is important for decision-making. Such decisions advice on mitigation models through strategic planning. Ho et al. (2015) demonstrate that risks occur in micro or macro levels of business. Micro risks can be categorized further into infrastructure, manufacturing, demand, and supply risks. Players in the logistics sector should analyze the susceptibility to such risks to develop mitigation measures. Macro level risk occur in the natural environment that are controlled by human activities. Identifying such risks help a business to plan ahead before they occur by strategizing and setting milestones.
Every business sector faces various categories of risks. The logistics sector attracts several risks unique to the specific sector and across the global continuum. Ho, Zheng, Yildiz, and Talluri (2015) illustrate that players in the supply chain sector are affected by macro and micro economic risks. For instance, macro risks, such as unfavorable weather conditions, earthquakes, and other disasters are important consideration for strategy development. Other categories of macro risks are orchestrated by human being, such as war, political instability, and terrorism (Ho et al., 2015). It is imperative that a business such as Outdoor Fun anticipates such macro risks and manage them through strategy. Locations with recurrent political turmoil and dictatorial government are more susceptible to political risks and likelihood of terror activities. The risks in such setups occur when citizens are disenfranchised and when democratic space is limited. Therefore, business should carry situational analysis to ascertain vulnerability in such locations before critical decisions are made.
Micro risks originate from business activities within the supply chain. Manufacturing challenges such as the inability to produce quality product affect enterprises and reduce customer satisfaction. Furthermore, supply and demand risks are occasioned by up and down stream partnerships, which affect the supply chain by creating shortages in product delivery systems. Other micro risk in logistics is technological turbulence due to the nature of the digital platform (Ho et al., 2015). Such activities affect the logistics sector significant and often lead to substantial losses.
Risk Mitigation Strategy
Risk mitigation is an important factor when managing business challenges. Adopting mitigation approaches can support businesses to manage operational turbulence to achieve stability. According to Abbasi, Wang, and Abbasi (2017), risk mitigation can be achieved through networking.. Risks such as technological turbulence, operational threats, and financial limitations are manageable through collaboration with various stakeholders. Accordingly, Abbasi et al. (2017) confirm that asset securitization is an approach in risk management that allows a business to transfer liquidity, credit, and interest rates risks to other players in the market. Stergiopoulos, Kotzanikolaou, Theocharidou, and Gritzalis (2015) confirm that interdependent infrastructures create failures in business. For instance, delivery logistics within cities experience congestions and incur costs of rents, which may affect delivery services. Mitigating such risks enhances business operations and leads to growth.
Renting a warehouse comes with various risks for a business. Businesses tenancy agreements are defined within specified timeline before renewals. Such conditions may not favor a business, especially during off peak business seasons or during turbulent economic times. Given that warehousing support product flows into the market, competition is influenced by efficiency and reliability. Controlling risks related to efficacy and dependability can be managed through technology, such as automation in warehousing (Davarzani and Norrman 2015). According to Davarzani and Norrman (2015), implementing models, such as warehouse management systems (WMS), voice sorting or picking, and radio frequency identification devices can create efficiency in warehouse logistics. The authors maintain that warehouses links other departments such as production and deliveries. Thus, businesses should develop controls, such as storage and shipment policies, which wouldprovide a framework to manage long-term operational approaches and limit the susceptibility to risk for implementing organizations. Bychkov et al. (2017) posit that digital approaches, such as automation and simulation, enable create value, enhance time management, and improve efficiency in operations. Therefore, risk controls in warehouse can be achieved through digitizing operations.
Warehouses play an important role in delivery logistics. Operating rented warehouses near customers have various threats, including market, technology, and financial risks. However, managing such risks promotes business growth. It is imperative for businesses to analyze risks exposure and develop mitigation approaches to accept , defer, or cover risks. Additionally, analyzing business risks within an entity s prepares a firm for timely processing. Although macro-economic risks, such as natural disaster, are difficult to project, areas with such susceptibility are easy to identify and develop mitigation strategies.
As an enterprise that seeks to operate on the virtual platform, Outdoor Fun should develop strategies to mitigate risks by employing digital approaches such as warehouse automation within its operations. Investing in voice sorting, picking, and radio frequency identification devices will improve efficiency in the warehouse and enhance deliveries to customers. Furthermore, to manage challenges in rented warehouse, the company should adopt long-term contracting and initiate negotiations of payment based on he strength of abusiness.
Abbasi, W. A., Wang, Z., & Abbasi, D. A. (2017). Supply chain finance: Generation and growth of new financing approach. Journal of Finance, 5(2), 50-57.
Bychkov, I., Oparin, G., Tchernykh, A., Feoktistov, A., Bogdanova, V., Dyadkin, Y., … Basharina, O. (2017). Simulation modeling in heterogeneous distributed computing environments to support decisions making in warehouse logistics. Procedia Engineering, 201, 524-533. doi:10.1016/j.proeng.2017.09.647
Davarzani, H., & Norrman, A. (2015). Toward a relevant agenda for warehousing research: literature review and practitioners’ input. Logistics Research, 8(1), 1-18. doi:10.1007/s12159-014-0120-1
Falkner, E. M., & Hiebl, M. R. (2015). Risk management in SMEs: a systematic review of available evidence. The Journal of Risk Finance, 16(2), 122-144.
Ho, W., Zheng, T., Yildiz, H., & Talluri, S. (2015). Supply chain risk management: A literature review. International Journal of Production Research, 53(16), 5031-5069.
Stergiopoulos, G., Kotzanikolaou, P., Theocharidou, M., & Gritzalis, D. (2015). Risk mitigation strategies for critical infrastructures based on graph centrality analysis. International Journal of Critical Infrastructure Protection, 10, 34-44. doi:10.1016/j.ijcip.2015.05.003