The development of international logistics networks that can efficiently deliver raw materials and finished products to many parts of the world has increased the reach of U.S. manufacturers and international competitors. Factories are frequently located in countries for tax, labor cost or political reasons, rather than proximity to raw materials or markets, as was once the case. Procter & Gamble, for example, operates about 130 manufacturing sites in nearly 40 countries.
In an increasingly global manufacturing environment, there is a need for a carrier to have the reach, expertise, capabilities and resources to provide worldwide coverage tailored to specific geographic locations.
Manufacturing companies must make large investments in production equipment and computer systems to improve efficiency, and in R&D to develop new products. R&D expenses for U.S. manufacturing companies are typically about 4 to 5% of revenue, but can be as high as 10 to 15%.
Proprietary information developed through extensive research and development can be prime targets for hackers and cyber criminals. Provisions and coverage for loss of data and business interruption in the event of disruption to your network are just as (if not more) important than traditional property and casualty insurance. The accelerating reliance on technology brings with it emerging exposures that could result in lost revenue, business down time and a host of unforeseen costs.
Scarcity of resources and long supply routes contribute to frequent changes in prices for energy and for many raw materials used by manufacturers. Steel prices, for example, can change by more than 30% from year to year. Crude oil and natural gas prices can also move more than 30% annually.
Carriers with deep industry knowledge can ensure that coverage is comprehensive and flexible enough to address pricing fluctuations that are inherent to specific business classes.
Failure of manufacturers to keep pace with (or exceed) the performance of competitors during a given product cycle can result in lost business, erosion of customer confidence and a deterioration in public perception. While attempting to retain competitive advantages through new product developments, companies must also maintain coverage adequate to match emerging product liability risks.
Carriers must have the specialized expertise to develop product liability solutions along parallel tracks with product development to ensure that customers maintain appropriate levels of coverage.
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