Every logistics operation has its weaknesses. These weak points create risks that threaten your supply chain’s workflow and efficacy – so mitigating these risk factors is paramount.
Although it’s not viable to completely eliminate all risk from your logistics operation, effective risk management makes a huge difference. In this guide, we explore what logistics risk management is, discuss what’s involved, and share some strategies to help you mitigate logistics risk.
What is logistics risk management?
Logistics risk management is the process of identifying and mitigating possible issues that could disrupt the flow of goods in your supply chain.
Logistics risk management is a branch of supply chain risk management, but it focuses exclusively on logistics-related risks. This includes risks related to:
- Logistics and fulfilment strategy
- Warehousing
- Inventory
- Transportation
- Carrier performance
- Compliance issues.
What are the objectives of logistics risk management?
Minimising delays
Disruptions in your ecommerce logistics workflow could create delays that impact and throw off the timing of everything else in your supply chain. Identifying these potential disruptions and bottlenecks ahead of time will help you mitigate them and prevent delays, allowing for more seamless, timely, and efficient logistics operations downstream.
Maintaining supply chain stability
Logistics issues are a major cause of interruptions and instability within the supply chain. When you minimise the risks that threaten your logistics’ integrity, you ensure a seamless flow of operations that improve your supply chain performance stability.
Improving customer satisfaction
Timely and accurate deliveries are the cornerstone of customer satisfaction. When you mitigate logistics risk, you prevent delays, disruptions, and mistakes that could affect the fulfilment experience – and ultimately protect and improve your customers’ satisfaction.

Types of logistics risk management
Strategic risk management
Strategic risk management focuses on eliminating long-term risks that could impact your overall logistics and fulfilment strategy. For example, strategic risks include:
- Relying too heavily on a single warehouse
- A lack of or inaccurate demand forecasting
- Poor supplier and manufacturer fit
It’s important to anticipate your business’s logistics needs as you grow, and proactively mitigate potential risks. For instance, to manage the strategic risks above, you may choose to store your inventory in more than one fulfilment centre to help avoid disruption in case something affects your first warehouse. Additionally, you may invest in real-time inventory tracking software that helps you anticipate your inventory needs and forecast demand more accurately.

Warehousing and inventory risk management
Warehousing and inventory risk management focuses on mitigating risks related to storage, stock levels, and fulfilment accuracy. Inventory risks include issues like overstocking, which can lead to warehouse congestion, and understocking, which can lead to stockouts.
Warehousing risks, on the other hand, have to do with operational inefficiency in your warehouse or fulfilment centre (such as mis-picks that create delays that affect the rest of your logistics operations).
Businesses may leverage risk management strategies like smart inventory allocation to effectively distribute stock based on demand.
WMS automation is also an effective solution, as it helps you keep track of inventory levels in real time and automatically notifies you when it’s time to reorder.
Similarly, a WMS lets you run multiple checks and balances throughout various warehousing processes, which reduces the risk of mis-picks.

Transportation and carrier risk management
One of the biggest components of risk management relates to transportation and carrier risk. This focuses on managing risks associated with shipping, carrier performance, and delivery reliability.
This is one of the most risk-prone areas of your logistics, with common liabilities including:
- Weather-related delays and disruptions
- Carrier strikes
- Shipping cost volatility (which can result in high logistics expenses)
- Shipping damages
However, many of these risks are preventable. Having a multi-carrier strategy is an effective way to minimise some of these risks, as well as using AI-driven route optimisation to improve last-mile delivery. This will allow businesses to find the most efficient delivery routes to save on shipping costs while ensuring faster deliveries.
Real-time tracking is also essential to maintain transparency and identify potential delays so you can mitigate them on time.

Compliance and regulatory risk management
Compliance and regulatory risk management focuses on avoiding legal, regulatory, and international shipping risks. It’s particularly important for businesses serving an international audience base, as cross-border shipments come with a series of compliance requirements.
Not only do you have to deal with customs delays, but you could also experience several import/export restrictions that could complicate the process. High import duties, tariffs, and compliance penalties further add to the risk.
This makes it crucial to find a 3PL partner with global fulfilment expertise, so you can leave all the complexities of managing compliance and regulatory requirements to the experts.
Offering DDP shipping is another solution to streamline the customs clearance and compliance process. Additionally, you’ll want to invest in supply chain tools that offer compliance monitoring so you can ensure that your shipments are shipped with all the essential documents and regulatory requirements.

Order fulfilment risk management
The order fulfilment process is also susceptible to several risks, mainly tied to the picking, packing, and shipping operations within the warehouse. Fulfilling orders manually often leaves your brand vulnerable to mis-picks and packing errors, which not only increase your fulfilment error rate but also slow down your processing times.
That said, there are ways to reduce your order fulfilment risk:
- Warehouse automation: Automation is a key step in managing your order fulfilment risks. By automating some of your warehouse workflows, you can streamline the fulfilment process to improve efficiency.
- Barcode scanning systems: These allow you to run multiple checks and balances throughout the fulfilment process, helping to reduce errors.

Reverse logistics risk management
Every ecommerce business has to deal with customer returns, and there’s a need to manage the risks associated with reverse logistics. This mainly focuses on managing returned inventory efficiently while minimising losses. Some of the biggest risks related to ecommerce returns include high return rates, restocking delays, and slow processing of returned goods.
Having a streamlined return processing system in place is crucial to minimise these risks. Many businesses set up automated returns systems to speed up the process and offer faster refund approvals. Additionally, it’s important to optimise the restocking process so you can quickly prepare inventory for resale.
The impact of poor logistics risk management
Taking risks in other aspects of life might be fine – but not in your logistics. If your brand neglects risk management in your logistics, here are just some of the issues and impacts you can expect to see in your operations, supply chain, and business.
Fulfilment and operational inefficiencies
When you fail to manage risk, you leave room for delays and disruptions. This creates inefficiencies in your fulfilment process and various aspects of your logistics operations. For instance, failure to address high rates of mis-picks would create a need for constant rework, which will slow down fulfilment.
Dissatisfied customers
Poor logistics risk management often results in mis-shipments and fulfilment delays. This leads to higher customer dissatisfaction as customers’ orders consistently arrive late (or not at all) or they’re forced to return incorrect items.
Lost revenue
Risks related to stockouts create backorders and lost sales. In some cases, delays may also lead to cancellations. Moreover, customers may avoid buying from you again due to a bad fulfilment experience. All of these issues eventually translate to lost revenue, which will affect your bottom line.
5 proactive strategies to mitigate logistics risk
Effective logistics risk management requires following a few essential steps to identify and manage weaknesses in various aspects of your operation. Let’s break down some of the strategies and best practices for mitigating logistics risk.
1. Leverage a distributed fulfilment network
Diversification is one of the most effective ways to mitigate logistics risk – especially when it comes to inventory storage and fulfilment.
Distributing your inventory across a wide fulfilment network helps you reduce single-point failures. This means that even if there’s a stockout or a disruption affecting one location, you can keep your fulfilment operations running from other warehouses.
Additionally, a distributed fulfilment network gives you the advantage of shipping orders from the closest fulfilment centre. This reduces travel time, which not only speeds up deliveries but also cuts down shipping costs. Plus, a shorter travel distance minimises the risk of delays and disruptions in transit.
“Expanding our warehouse network from 2 to 4 warehouses has translated into $1.5 million in freight cost savings for Our Place. It also cut our fulfilment and shipping times in half, from 5 or 6 days to just 2.5 days.”
Ali Shahid, COO of Our Place
2. Diversify carrier and shipping options
Transportation is another aspect of your logistics that can benefit from diversification. This involves considering multiple carrier and shipping options, and using different couriers for different orders.
When you have a strong partnership with multiple shipping couriers, you can minimise risks related to carrier-specific failures. You can choose the best carrier for each order based on factors like speed and cost instead of being restricted to one option.
Moreover, with multiple shipping options, you give your customers the option to choose a solution that fits their unique needs. Whether they need expedited shipping or they don’t mind the wait that comes with affordable shipping, you give them the flexibility to choose an option that suits them.
“What impressed me most was ShipBob’s robust software, which also has all of the carrier’s rates and carrier selection logic. For example, if we want to sell a certain bottle of wax, we can see which carrier can send it the cheapest: DHL, FedEx, USPS, and even others.”
John Lewis, President and COO of Vision Investments (parent company of AutoGeek)
3. Strengthen supply chain partnerships
Even as you diversify your supply chain partnerships, make sure to strengthen your relationships with these partners. A strong and diverse supplier relationship provides you with backup options in case of supply chain shortages and disruptions affecting one supplier.
Similarly, having a strong relationship with multiple couriers allows you to take advantage of bulk discounts and reduce shipping costs for your customers. In other words, stronger supply chain partnerships help you minimise weaknesses and strengthen your logistics operations.

4. Use data-driven inventory forecasting to plan ahead
Proactive inventory planning is the cornerstone of effective risk management. When you accurately anticipate your inventory needs, you can plan ahead to minimise risks related to stockouts and overstocking.
This makes it crucial to invest in demand forecasting tools that will help you prepare for supply chain uncertainties and seasonal demand fluctuations.
“We rely heavily on ShipBob for inventory tracking and forecasting and that’s been a key part of our partnership. Our area of expertise is not logistics or inventory management, so we lean on ShipBob a lot for that. We’ve learned so much about this industry since working with ShipBob, as they are true supply chain experts, which has been good for everyone on our team. When thinking about fulfilment, there’s such a focus on the packing and shipping aspect that the inventory management piece can often go unnoticed. But ShipBob’s ability to help us track and reconcile inventory is really great.”
Callie Tivnan, E-commerce Manager, and Christina Williams, Customer Success Manager at Barefaced
5. Invest in warehouse automation and a WMS
An optimised warehouse operation is the key to unlocking greater fulfilment accuracy and efficiency. Warehousing automation plays a vital role in achieving this, as it enables you to automate some of your warehouse workflows to maximise speed in the fulfilment process.
For instance, a system that automatically kickstarts the fulfilment process once an order is placed will help you get orders out the door faster. Similarly, the use of automation tools within your on-site warehouse operations will help you improve speed and accuracy while minimising safety risks.
The use of barcode scanners synced with a centralised warehouse management system also allows your team to verify items before retrieval. This reduces the risk of mis-picks and improves fulfilment accuracy – not to mention the added benefit that comes with automatically updating your system with the latest inventory data to reduce inventory discrepancy.
“For us, one of the greatest benefits in using ShipBob’s WMS has been reducing mispicks. Before ShipBob, when we were just relying on label generation software, we didn’t have a way to validate which products were going out to customers. The label would say ‘pick 3 of these specific sunglasses’ but really, you could have sent any type of sunglasses since there was no validation – and that happened frequently. One of the biggest reasons we went with ShipBob is the multiple checks from start to finish. The WMS makes it really hard to send out the wrong product. It still happens on rare occasions – but it happens a lot less than before. Before we implemented ShipBob’s WMS, our order accuracy rate was around 92%. Now we’re at 99.7% for order accuracy, which equates to 2,100 less mispicks a year on average.”
Jourdan Davis, Operations Manager at Pit Viper
How ShipBob helps ecommerce brands manage logistics risks
ShipBob’s powerful fulfilment solutions and proprietary technology empower brands to pinpoint and strengthen weaknesses within their ecommerce operations, enabling them to effectively manage logistics risks and operate a seamless and efficient supply chain.
Here are some of the ways that ShipBob helps brands mitigate logistics risks and optimise their supply chain operations.
Distributed fulfilment reduces supply chain vulnerabilities
With dozens of fulfilment centres across the US and the world, ShipBob’s fulfilment network enables businesses to strategically distribute their fulfilment efforts – and risk – across multiple locations.
By leveraging multiple of ShipBob’s fulfilment centres, your brand can:
- Store inventory closer to customers to reduce shipping times and costs (as well as shipping delays).
- Opt to send an order from a different fulfilment centre if the facility closest to the end customer is out of stock, ensuring timely delivery.
- Maintain contingencies in case of supply chain disruptions (e.g., weather disasters, social unrest, etc.).
Inventory placement and demand forecasting minimise stockouts and overstocking
ShipBob’s Inventory Placement Program enables an even more strategic inventory distribution strategy based on demand.
Our proprietary algorithm leverages your business’s real order data to calculate the most ideal distribution of inventory across our 60+ fulfilment centres, so you can store and fulfil closer to end customers, minimise shipping times and costs, and reduce the risk of stockouts in high-demand regions.

“Through ShipBob’s Inventory Placement Program (IPP), we’ve been able to automate a lot of our inventory placement and regional distribution in the US. IPP uses real order data to calculate the ideal distribution and replenishment of inventory across ShipBob’s network to minimise shipping costs and times. My team uses that tool extensively. It helps them understand the potential gains of expanding to different warehouses, and how it could save time and money – it’s been really useful.”
Sergio Tache, Founder and CEO of Dossier
Multi-carrier shipping mitigates transportation and carrier risks
ShipBob has an established relationship with leading national and regional couriers, allowing customers to take advantage of bulk discounts to reduce shipping costs. You also have the ability to choose between multiple couriers for each shipment, giving you agency and helping reduce the risk of carrier delays, rate hikes, or capacity shortages (since you always have a backup).
Moreover, our multi-carrier shipping software can even automate the carrier selection process for you. This automatically selects the best carrier option based on shipping routes and cost, helping you optimise your delivery operations.
ShipBob’s WMS improves order accuracy and warehouse efficiency
ShipBob’s WMS is built to streamline warehouse operations and reduce risk across our fulfilment network – and in your warehouse. It features key capabilities like:
- Picking optimisation: ShipBob WMS optimises the picking process by automatically generating pick lists with optimised pick routes. This reduces travel time between pick locations and enables warehouse staff to efficiently complete their pick lists.
- Optimal packaging selection: Our WMS automates packing by recommending the optimal box size based on dimensions and weight. This helps minimise empty space during the packing process, and helps prevent excess fees for oversized boxes (as well as shipping damages).
- Barcode scanning technology: The WMS pairs with barcode scanning technology, allowing warehouse staff to run multiple checks and balances during the receiving and fulfilment processes. This enhances inventory and fulfilment accuracy, reducing the risk of errors that could create delays.
Simplified global fulfilment ensures compliance and cross-border success
For businesses running a global supply chain, ShipBob’s international fulfilment capabilities help you navigate the complexities that come with cross-border trade. You can take advantage of ShipBob’s global fulfilment network to store your inventory closer to your customers and speed up international deliveries.
ShipBob’s DDP shipping solution further streamlines international fulfilment by managing customs regulations, duties, and taxes. This helps you minimise compliance risks and shipping delays resulting from prolonged customs holds, thus enhancing the customer experience.
“You can always navigate cross-border complexities, but you can’t undo a customer’s stressful delivery experience. Leveraging ShipBob’s global network to fulfil and ship locally reassures our customers, so that when someone in a key market like Australia or Canada buys from us, they’re not worrying about their order getting stuck in customs or wondering if they’ll ever get their items. They also know it’s not going to take two weeks or more to be delivered, and they don’t have to pay exorbitant international shipping rates.”
Sergio Tache, Founder and CEO of Dossier
To learn more about how ShipBob can help your brand mitigate logistics risk, click the button below to get in touch.
Logistics risk management FAQs
Below are answers to the most commonly asked questions about logistics risk management.
How can you design a logistics contingency plan for unexpected disruptions?
Diversification – whether it’s with inventory storage, suppliers, or shipping couriers – is the key to maintaining an effective logistics contingency plan to protect you from unexpected disruptions. This provides you with a backup option in case of any disruption affecting your original warehouse, supplier, or carrier.
How can businesses manage risk during peak seasons?
Accurate inventory forecasting is essential to anticipate demand trends and stock up on sufficient inventory to meet demand during peak seasons.
How does ShipBob help with logistics risk management?
ShipBob provides a distributed fulfilment network to diversify your inventory storage and fulfilment strategy. Moreover, a powerful WMS helps you streamline your warehouse operations with real-time visibility and control to effectively manage disruptions.