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Planning a Warehouse in the City? Here are 5 Ways Your Risks Will Change.

The demand for fast delivery is driving the growth of city warehouses, but these urban facilities present unique property and safety challenges for wholesale distributors.
By: | July 30, 2018 • 6 min read

How quickly do you want that package you ordered today? Would you rather have it tomorrow, or a week from now?

According to the National Retail Federation, nearly 40 percent of online shoppers expect free two-day delivery, which is no surprise considering the appeal of online shopping lies in its convenience and speed.

But these expectations increase the pressure on wholesale distributors to shorten last-mile delivery timelines. Where warehousing was once a mechanism to store inventory at low cost, it’s now becoming a way to keep products closer to consumers to cut down on delivery lead times and costs.

“This is where urban warehouses come into play,” said Mark Morneau, Senior Vice President and General Manager, National Insurance, East Division, Liberty Mutual Insurance. “By moving into cities and getting products closer to where consumers live, they eliminate some delivery lead time and expense.”

Warehouses in densely-populated areas, however, come with unique risks that suburban or rural warehouses don’t typically need to manage. As wholesale distributors increasingly turn to urban warehousing to meet the demands of e-commerce, risk managers should be aware of these key risks and challenges:

1. Older Properties in Densely-Packed Neighborhoods

Warehousing in an urban setting typically means moving into an older and smaller building than what would be available further outside city limits, which presents many challenges.

“Oftentimes the buildings used are old manufacturing facilities that aren’t designed for extensive storage. So, they need to be brought up to standards suitable for housing products for wholesale distribution,” Morneau said.

That means retrofitting them with standard and code-compliant sprinkler, ventilation, electrical, and alarm systems and reconfiguring the space to properly store and move inventory, which could include raising ceilings, adding racks, and widening loading docks.

“Being much closer to your neighbors also presents risks,” Morneau said. “In densely populated areas, a fire that starts three buildings down can still take out your facility. Older water systems may not supply sufficient water pressure for fire sprinkler systems, so fire pumps may also need to be installed.”

While infrequent, fires can result in total loss without the proper safeguards. Clear emergency response and recovery plans can help mitigate the damage.

2. Premises Security

Fully-stocked warehouses make an attractive target for thieves.

“Urban environments mean more people, which means more potential for crime,” Morneau said. “The logistical realities of urban warehousing also make it more difficult to keep crime out.”

Concentrated areas mean less space for fences and other barriers that limit access. Narrow roadways necessitate smaller delivery trucks which will have to enter and exit the facility more frequently, increasing the opportunities for vandals or thieves to gain entry.

“Your inventory is a critical asset and must be well-secured,” Morneau said.

Around-the-clock security guards and security equipment that includes video surveillance can help to deter thieves, while protocols dictating who can enter the facility and when can help to limit opportunities for criminals.

3. Workforce Safety in Confined Spaces

The tighter floorplans of urban facilities also present safety risks to employees.

“Older facilities with less space won’t have as much automation, which means workers are doing more material handling. That alone increases injury risk,” Morneau said. “Employees are also likely to interface more with forklifts and other machinery, which are also operating in more confined spaces. Whenever people work near this type of machinery, the risk of bodily injury goes up.”

Investing in equipment like conveyer belts and elevators to streamline workflows can help mitigate that risk. Whatever changes are made, thorough safety training for employees is paramount.

4. City Fleet Operations

Cities’ crowded streets and tight corners aren’t built for hulking delivery trucks.

“A benefit of being in an urban warehouse is access to highways and roads, but larger vehicles can’t navigate as easily in a city environment. With more people, vehicles, and distractions on the part of both pedestrians and drivers today, accidents become much more likely,” Morneau said.

The pressure to meet quick delivery timelines could also lead to overscheduling drivers. Not only could this run afoul of regulations, but it can also lead to driver fatigue and a greater likelihood of accidents.

“Warehouse managers need to determine if they can operate effectively with their current fleet and should also consider city ordinances that may limit hours of business operation or affect parking,” Morneau said.

Distributors may also choose to outsource delivery rather than manage their own fleets. In cities, new sharing economy platforms are taking up this task along with traditional players. But farming out delivery to the sharing economy comes with its own liability challenges.

5. Relying on the Sharing Economy for Delivery

The sharing economy is introducing opportunities for businesses of all types to offer better, faster, and more cost-effective service, and the wholesale sector is no exception.

Wholesalers are finding available vehicles and drivers to deliver inventory to client locations via online transportation marketplaces. In the future, gig workers using their own cars and bikes as delivery vehicles could even help wholesalers get packages directly to consumers’ doorsteps. While these services can help expand distribution operations, they can also introduce general liability risks.

“Risk managers may be exposing their companies to a host of emerging liability issues by using sharing economy platforms because the drivers and fleets are relatively unknown,” Morneau said. “A third party is responsible for verifying drivers and their credentials, backgrounds, and vehicles, but you are trusting them to make deliveries. It’s a much harder situation to control.”

These relationships can offer the benefits of speed, efficiency, and capacity, but contracts with third-party platforms should outline service expectations and clearly delineate which party assumes liability.

Access Risk Management Resources and Comprehensive Coverage

Wholesale distributors are already making use of multistory urban warehouses in Europe and Asia, with a few cropping up in U.S. hubs like San Francisco and New York. The trend is likely to continue as e-commerce keeps growing and consumers keep expecting speedy delivery.

Risk managers can best plan and prepare for the unique exposures associated with urban warehouses by working with well-resourced insurers. Liberty Mutual’s risk control consultants can assess property, safety, and fleet risks and recommend strategies to mitigate them, such as developing a fleet safety program, evaluating a new or existing fire protection system, or reviewing an emergency response plan.

“Our risk control team helps risk managers identify the exposures they’ve overlooked so they can bring down their residual risk and focus on operating their businesses profitably,” Morneau said.

Along with core primary property and casualty products, Liberty Mutual also offers specialty coverages like environmental, cyber, and professional policies through Ironshore, a Liberty Mutual company.

“We have the full suite of products to address urban warehousing exposures and help distributors take advantage of these opportunities,” Morneau said.

To learn more, visit https://business.libertymutualgroup.com/business-insurance/industries/wholesale-business-insurance-coverage.

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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty Mutual Insurance. The editorial staff of Risk & Insurance had no role in its preparation.




Liberty Mutual Insurance offers a wide range of insurance products and services, including general liability, property, commercial automobile, excess casualty and workers compensation.

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In the Fast-Paced World of Retail, This Risk Manager Strives to Mitigate Risks Proactively and Keep Senior Leaders Informed

Janine Kral works to identify and mitigate risks, building strong partnerships with leaders and ensuring they see her as support rather than a blocker. 
By: | October 29, 2018 • 4 min read

R&I: What was your first job?

My very first paid job was working on my uncle’s ranch in British Columbia in the summers. He had cattle, horses and grapes — an unusual combo. But my first real job out of college was as a multi-line claims adjuster at Liberty Mutual.

R&I: How did you come to work in risk management?

Right out of college I applied for a job that turned out to be a claims adjuster at Liberty Mutual. I accepted because they were offering six weeks of training in Southern California, and at the time that sounded really fun. I spent about three years at Liberty Mutual and then I spent a short period of time at a smaller regional insurance company that hired me to start a workers’ compensation claims administration program.

I was hired at Nordstrom as the Washington Region Risk Manager, which was my first job in risk management. When I started at Nordstrom, the risk management department had about five people, and over the years it has grown to about 75. I’ve been vice president for 11 years.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

I would say that technology has probably been the biggest change. When I started many years ago, it was all paper and no RMIS.

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R&I: What risks does the retail industry face that are unique?

We deal with a lot of people — employees and customers. With physical brick and mortar settings, there are the unique exposures with people moving in and out in a public environment. And of course, with ecommerce, we have a lot of customer and employee data, which creates cyber risk — which is not necessarily a unique risk in today’s environment.

R&I: Can you describe your approach to working with senior leaders and front-line staff alike to further risk management initiatives?

It starts with keeping the pulse of what’s happening with the business. Retail moves really fast. In order to identify and mitigate risks proactively, we identify top risk areas and topics, and then we ensure that we have strong partnerships with the leaders responsible for those areas. Trust is critical, ensuring that leaders see us as a support rather than a blocker.

R&I: What role does technology play in your company’s approach to risk management?

Janine Kral, claims adjuster, Nordstrom

We have an internal risk management information system that all of our locations report events into — every type of incident is reported, whether insured or uninsured. Most of these events are managed internally by risk management, and our guidelines require that prevention be analyzed on each one. Having all event data in one system allows us to use the data for trending and also helps us better predict what may happen in the future, and who we need to work with to mitigate risks.

R&I: What advice might you give to students or other aspiring risk managers?

My son is a sophomore in college, and I tell him and his friends all the time not to rule out insurance as a career opportunity. My advice is to cast a wide net and do your homework. Research all the different types of opportunities. Read a lot — articles, industry magazines, LinkedIn. Be proactive and reach out to people you find interesting and ask them about their careers. Don’t be shy and wait for people and opportunities to come to you. Ask questions. Build networks. Be curious and keep an open mind.

R&I: What are your goals for the next five to 10 years of your career?

I have always been passionate about continuous improvement. I want to continue to find ways to add value to my company and to this industry.

R&I: What is your favorite book or movie?

My favorite book is Shantaram by Gregory David Roberts. It’s a true story about a man who was in prison in Australia after being convicted of armed robbery, and he escaped to India. While in India, he passed himself off as a doctor in a slum. It’s a really interesting story, because this is a convicted criminal who ends up helping others. I am not always successful in getting others to read the book because it’s 1,000 pages and definitely a commitment.

R&I: What’s the best restaurant you’ve ever eaten at?

Fiorella’s in Newton, Massachusetts. Great Italian food and a great overall experience.

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R&I: What is your favorite drink?

“Sister Carol.” I have no idea what is in it, and I can only get it at a local bar in Seattle. It’s green but it’s delicious.

R&I: What is the riskiest activity you ever engaged in?

Skydiving. Not tandem and without any sort of communication from the ground. Scary standing on a wing of a plane, but very peaceful once the chute opened, slowly floating down by myself.

R&I: If the world has a modern hero, who is it and why?

I can’t think of one individual person. For me, the real heroes are people who have a positive attitude in the face of adversity. People who are resilient no matter what life brings them.

R&I: What about this work do you find the most fulfilling or rewarding?

It’s rewarding to help solve problems and help people. I am proud of the support that my team provides others. &




Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at kdwyer@lrp.com.