Enhancing Cost Structure with Supply Chain Insurance Procurement Intelligence

The supply chain insurance category is anticipated to grow at a CAGR of 4.5% from 2023 to 2030. There are several possible risks and interruptions for supply chain enterprises. Due to the intricate web of interactions between vendors, suppliers, and customers, a break in one link in the supply chain can result in bigger losses in several other links. For companies whose activities are directly dependent on a major supplier's manufacturing capacity, supply chain insurance coverage is crucial.

In 2021, according to Morningstar, the COVID-19 pandemic exposed the limitations of business interruption insurance. As a result of this, there has been an increased demand for supply chain insurance significantly. Insurance companies have expanded their offerings and coverage beyond their regular Business Interruption (BI) and Contingent Business Interruption (CBI) policies. As corporations seek more extensive coverages and risk transfer instruments, the pandemic's challenges to the global supply chain have presented new economic possibilities for many insurance and reinsurance companies. For instance, even though BI insurance is meant to cover losses due to physical damage, the pandemic caused a significant number of BI claims in many nations, which increased insurance company litigation and presented many difficulties for the sector. This is because the product was not priced to cover pandemic losses. In addition, in 2021, a few instances of unfavorable occurrences were the severe winter storm, URI, in Texas, the closure of the Suez Canal, and the cyberattack on the Colonial Pipeline Company. This, in turn, compounded the problems that the supply chain is facing. All such factors have contributed to the increasing requirement for supply chain insurance worldwide.

The supply chain insurance category is fragmented. Companies (or, category buyers), following the pandemic and several prolonged supply chain disruptions, have started collaborating and working with risk management professionals, trusted brokers and coverage counsel to better assess and evaluate the impacted business' insurance program. Category suppliers have broadened their coverage to include aspects such as Non-Damage Business Interruption (NDBI) Insurance, Product Recall Insurance, Stock Throughput (STP) Insurance, Trade Disruption Insurance (TDI), Terrorism Insurance, Political Risk Insurance, and Cyber Insurance. This has increased the competitive rivalry among providers and reduced the bargaining power to moderate.

Order your copy of the Supply Chain Insurance Procurement Intelligence Report, 2023 - 2030, published by Grand View Research, to get more details regarding day one, quick wins, portfolio analysis, key negotiation strategies of key suppliers, and low-cost/best-cost sourcing analysis

There has also been an emergence of parametric insurance solution providers for particularly nuanced or self-contained risks. Latest technology such as blockchain, enhanced automation, and real-time IoT data processing are facilitating the rise of parametric-enabled digital insurance products. By using real-time analytics to monitor the indemnified risk, these solutions compensate the risk of occurrence of a pre-defined event. In the event that the risk under observation violates a pre-established condition, the violation will result in the payment of a pre-arranged claim. Insurance providers have also been found to establish “strategic partnership” teams that are mainly responsible for top-tier companies.

Some of the key cost components include the salaries of insurance consultants/professionals, technology and software, claim expenses, tax, legal and underwriting, marketing, facilities/rent and others. The “claims function” is an important and strategic asset for modern insurance companies. However, the level of insight and influence the function can have on an organization is widely underutilized. KPMG reported that the costs of the claims supply chain may account for up to 80% of the overall indemnity expenditure and are a crucial part of the entire claims process. Similarly, salaries form an important component as the personnel are responsible for developing different policies. Insurance managers’ salaries in the U.S. can range from USD 86,000 - 90,000 annually. Salaries can increase based on expertise, years of experience, and other factors.

Technology is another important cost component. The lack of accurate, timely, and credible visibility into the claims lifecycle and supplier actions for insurance providers can result in increased costs, delays, and dissatisfaction between supplier-client relationships. Hence, insurance companies are increasingly implementing advanced digital technologies to provide higher cost savings and claim updates to companies, improve workflow, and track claims using analytics.

In 2022, in the U.K., as per Gallagher reports, motor insurance claims were impacted by delays in automotive parts and increased costs. Commercial vehicles and car parts were impacted significantly due to supply chain issues (further escalated by the Russian-Ukraine War) and problems with semiconductor chips globally. Compared to 2021, labor costs had increased by 6.5 - 7%, and repairs and parts costs had increased by 6 - 9.1% in 2022, which in turn negatively impacted vehicle manufacturers as per Allianz data. Settlement times had increased from seven weeks to a year in 2022. This posed a serious problem for drivers who could not operate without transportation. It was also found that, as a knock-on effect, many used commercial vehicles were being sold at a higher price than fresh new cars in 2022. For commercial properties, insurance claims in 2022 increased by 6 - 10% as a result of material delays and high costs of construction materials.

Under sourcing intelligence, organizations generally fully outsource their insurance requirements. Insurance can play a critical role in mitigating several supply chain risks. Therefore, when selecting an insurance provider, it is important to review and assess policies to address common gaps, discuss the unique risks of the specified business/industry with the advisor, and consider additional/ complementary insurance coverage (if necessary). During the process of purchasing supply chain insurance, a company (or, buyer) should consider discussing certain topics, such as exclusions in the policy, the scope of coverage, the waiting period, the duration of coverage, the financial and geographical limits of the policy, and proof of loss. Some of the other sourcing practices include identifying backup vendors and suppliers, revisiting procurement contracts with the legal team to reduce contractual liabilities and developing contingency plans. 

Browse through Grand View Research’s collection of procurement intelligence studies:

• Clinical Logistics Procurement Intelligence Report, 2023 - 2030 (Revenue Forecast, Supplier Ranking & Matrix, Emerging Technologies, Pricing Models, Cost Structure, Engagement & Operating Model, Competitive Landscape)

• Cold Chain Logistics Procurement Intelligence Report, 2023 - 2030 (Revenue Forecast, Supplier Ranking & Matrix, Emerging Technologies, Pricing Models, Cost Structure, Engagement & Operating Model, Competitive Landscape)

Supply Chain Insurance Procurement Intelligence Report Scope

• Supply Chain Insurance Category Growth Rate: CAGR of 4.5% from 2023 to 2030

• Pricing Growth Outlook: 10% - 20% (Annually)

• Pricing Models: Contract-based, dynamic pricing model

• Supplier Selection Scope: Cost and pricing, past engagements, productivity, geographical presence

• Supplier Selection Criteria: Products and services, commercial insurance policies (casualty, marine, engineering and property, professional indemnity, cyber, accident health), credit lines, tools used, operational and functional capabilities, technology used, and others

• Report Coverage: Revenue forecast, supplier ranking, supplier positioning matrix, emerging technology, pricing models, cost structure, competitive landscape, growth factors, trends, engagement, and operating model

Key Companies

• Zurich Insurance Group Ltd.

• American International Group Inc.

• Berkshire Hathaway Inc.

• Munich RE

• Allianz SE

• Marsh LLC

• If P&C Insurance Ltd

• Swiss Re

• Morris & Reynolds Insurance

• Kaercher Insurance

Brief about Pipeline by Grand View Research:

A smart and effective supply chain is essential for growth in any organization. Pipeline division at Grand View Research provides detailed insights on every aspect of supply chain, which helps in efficient procurement decisions.

Our services include (not limited to):

• Market Intelligence involving – market size and forecast, growth factors, and driving trends

• Price and Cost Intelligence – pricing models adopted for the category, total cost of ownerships

• Supplier Intelligence – rich insight on supplier landscape, and identifies suppliers who are dominating, emerging, lounging, and specializing

• Sourcing / Procurement Intelligence – best practices followed in the industry, identifying standard KPIs and SLAs, peer analysis, negotiation strategies to be utilized with the suppliers, and best suited countries for sourcing to minimize supply chain disruptions

Sustainable Solutions in Flexible Packaging Procurement Intelligence

The flexible packaging category is expected to grow at a CAGR of 4.7% from 2023 to 2030. The growing use of these products in the pharmaceutical and food and beverage industries is anticipated to drive the demand. In 2022, Asia Pacific accounted for the highest proportion of the category share, with more than 38%. Flexible packaging has the primary advantage of reducing the amount of packaging materials used. They boast a low packaging ratio (up to five times less than alternatives), are highly customizable, lightweight, use less energy and water during production, occupy less space in landfills, and are highly customizable. More food businesses are exploring flexible packaging for their products. Producers, consumers, and retailers all benefit from flexible packaging in terms of sustainability.

One of the major trends in this category is the increasing use of sustainable plant-based packaging solutions. According to studies, polyethylene resin and/or paper derived from plants can currently be used to create flexible packaging. TricorBraun Flex's introduction of a completely biodegradable, plant-based flexible packaging material, named Biotre 3.0, in 2021 is an example of the same. A survey conducted by the Paper and Packaging Board in 2022 found that 72% of respondents reported dissatisfaction with the packaging solution and design of the product, which influenced their purchase decisions. E-commerce stores have begun to pay attention to flexible packaging because of this.

Order your copy of the Flexible Packaging Procurement Intelligence Report, 2023 - 2030, published by Grand View Research, to get more details regarding day one, quick wins, portfolio analysis, key negotiation strategies of key suppliers, and low-cost/best-cost sourcing analysis

The overall packaging sector experienced a slowdown in M&A activity in Q2 2023, as both transaction volume and valuations declined modestly. In the coming years, the ongoing global plastics treaty negotiations (which started in March 2022) will likely have a significant impact on flexible packaging. A few examples are:

• In August 2023, Amcor plc announced the launch of its high-barrier packaging made of paper in the North American region. As part of its “Amfiber” portfolio, the new recyclable product is known as AmFiber Performance Paper. The product adheres to the Repulpability Standards–curbside recycling−thereby enabling firms to offer consumers more environmentally friendly packaging. The product was already launched in Europe in June 2023 to include heat seal sachets for dry applications in beverages such as drinks powder, instant coffee, seasonings, and spices.

• In June 2023, Huhtamaki announced its decision to consolidate the production footprint of its Flexible Packaging business segment in Europe. It would close its manufacturing plant in Prague, Czech Republic, as part of this consolidation process. By March 31, 2024, all operations will be closed at the facility, including all production and support activities.

• In February 2023, Sealed Air Corporation (SEE) announced the acquisition of Liquibox for USD 1.15 billion in cash. The acquisition is expected to enhance the former’s fluids and liquids business segment, under its brand, CRYOVAC, which is Sealed Air’s fastest-growing segment.

• In February 2022, Sealed Air Corporation (SEE) acquired Ireland-based Foxpak Flexibles Limited. Foxpak would expand on SEE's digital/smart packaging solutions, where graphic design and digital printing are major value-creating areas. 

Flexible Packaging Sourcing Intelligence Highlights

• The global flexible packaging category features a fragmented landscape with the presence of several international and regional players. By providing a variety of unique shapes and general conveniences that are appropriate for a variety of purposes, pouch manufacturers are literally and figuratively going the extra mile to meet the needs of consumers.

• The major cost components associated with the production of flexible packaging are raw materials, energy, printing-converting-packaging processes, equipment, types of products chosen for production, and labor.

• More than 60% - 65% of pharmaceutical companies fully outsource their packaging requirements due to its complexity to a third-party contractor. Outsourcing enables a company to obtain a partner who can take care of a variety of regulatory and quick launch requirements, including international regulatory requirements for multi-market launches.

• The most preferred countries for sourcing this category’s materials and films are India, China, Vietnam, Turkey, and Germany. As of May 2023, India is the world's leading exporter of flexible packaging material, shipping the majority of its products to the UK, the U.S., and South Africa.

 

Browse through Grand View Research’s collection of procurement intelligence studies:

• Blister Packaging Procurement Intelligence Report, 2023 - 2030 (Revenue Forecast, Supplier Ranking & Matrix, Emerging Technologies, Pricing Models, Cost Structure, Engagement & Operating Model, Competitive Landscape)

• Blow Molding Plastic Packaging Procurement Intelligence Report, 2023 - 2030 (Revenue Forecast, Supplier Ranking & Matrix, Emerging Technologies, Pricing Models, Cost Structure, Engagement & Operating Model, Competitive Landscape)

List of Key Suppliers 

• Bemis Company, Inc.

• Amcor plc

• Mondi plc

• Huhtamaki Oyj

• SEE (Sealed Air Corporation)

• Constantia Flexibles International GmbH

• Sonoco Products Company

• Ukrplastic Corporation

• Ampac Holdings LLC

• Wipak Walothen Gmbh (Wipak Group)

• SIG Group

• Aluflexpack AG

Flexible Packaging Procurement Intelligence Report Scope 

• Flexible Packaging Category Growth Rate: CAGR of 4.7% from 2023 to 2030

• Pricing Growth Outlook: 15% - 25% (Annually)

• Pricing Models: Single, bundled, volume-based pricing model

• Supplier Selection Scope: Cost and pricing, past engagements, productivity, geographical presence

• Supplier Selection Criteria: By types of roll stock (barrier films, cold seal, resealable), pouch type (retort and hot fill pouch, stand up, closure option pouch), lidding types (retail package lid film, peel and reseal, non-food package lid films, food service lidding), operational capabilities, quality measures, technology, certifications, data privacy regulations, and others

• Report Coverage: Revenue forecast, supplier ranking, supplier positioning matrix, emerging technology, pricing models, cost structure, competitive landscape, growth factors, trends, engagement, and operating model

Brief about Pipeline by Grand View Research:

A smart and effective supply chain is essential for growth in any organization. Pipeline division at Grand View Research provides detailed insights on every aspect of supply chain, which helps in efficient procurement decisions.

Our services include (not limited to):

• Market Intelligence involving – market size and forecast, growth factors, and driving trends

• Price and Cost Intelligence – pricing models adopted for the category, total cost of ownerships

• Supplier Intelligence – rich insight on supplier landscape, and identifies suppliers who are dominating, emerging, lounging, and specializing

• Sourcing / Procurement Intelligence – best practices followed in the industry, identifying standard KPIs and SLAs, peer analysis, negotiation strategies to be utilized with the suppliers, and best suited countries for sourcing to minimize supply chain disruptions