The Impact of Increasingly Severe Weather and Climate Disasters on Transportation Risk Management
Weather events and climate disasters have wreaked havoc on the United States and beyond since the beginning of time, but the increasing frequency and severity of these events are alarming. The significance of these events is far-reaching, affecting not only people in the obvious impact zones but virtually every consumer and business that feels the effects of supply chain disruption. Transportation risk management solutions are attempting to predict major and even minor events to prevent operations interruptions, but many are incomplete, offering only a sliver of what businesses need to mitigate the risks these weather and climate events present.
Looking at the data from NOAA, you can see why there is a valid reason for concern. Keep in mind that NOAA defines an “event” here as a drought, flood, freeze, severe storm, tropical cyclone, wildfire or winter storm that caused at least a billion dollars worth of damage.
The graphic above illustrates the monthly accumulation of billion-dollar disasters for each year. 2019 and 2018 tied for having the fourth-highest total number of events, following the years 2017, 2011, and 2016. Other years appear in gray. Screenshot from NOAA NCEI Billion-dollar Disasters webpage and https://www.climate.gov/sites/default/files/events_cumulative_by_month_1981-2019.png.
While the chart above highlights more recent years, we can go back a few decades prior to see the magnitude of the shift in events. During the ten years of the 1980s, there were 28 events (2.8 per year) at a cost of $127.7B ($12.8B per year) and 2,808 deaths (281 per year).
During the ten years of the 2000s, there were 59 events (5.9 per year) at a cost of $510B ($51B per year) and 3,051 deaths (305 per year.
During the nine years calculated in the 2010s (2000 – 2019), there were 119 events (11.9 per year) at a cost of $802B ($80.2 per year) and 5,217 deaths (522 per year).
Looking beyond the U.S., the record-breaking temperatures and drought in Australia have sparked brushfires that have decimated the continent, damaging or destroying at least 27 million acres so far. How are companies that are reliant on transportation positioning themselves to protect the supply chain with so much risk swirling around them? They invest in a modern transportation risk management solution capable of detecting, analyzing and predicting risk well-enough in advance that organizations have time to make smart risk mitigation decisions.
The Challenges with Common Transportation Risk Management Efforts
The rapid acceleration of these weather and climate events has left many organizations ill-prepared. It’s surprising how many have yet to prioritize risk assessment and mitigation. Even some of the largest enterprises are still relying on manual tactics to understand their risk, hand-drawing their stores, facilities, and lanes on a map and then overlaying a basic hurricane track to see if their assets and supply chain are at risk. This type of workflow is all too common across industries.
While organizations that depend on transportation or are in the transportation industry may go a step further to include software in their risk assessment, many of their systems are disconnected. From digital maps and automated alerts to regional weather radars and weather reports, these companies are still lacking a cohesive solution to pull all of the various data points together to paint a reliable, comprehensive, big picture that allows business leaders to make smart risk mitigation decisions early enough in the timeline to minimize or prevent disruption to the supply chain.
As weather and climate events escalate in both their number and severity, companies must do more to balance the inevitable threats with their capacity to mitigate those risks.
Modernizing Transportation Risk Management to Prepare for What’s Next
With shrinking margins, more pressure to reduce costs, and increasing demand to meet customer expectations, transportation companies must be able to adapt to the changing weather and climate trends. These events may be uncontrollable, but with the right technology, organizations can have the data they need to detect, analyze, predict, and act quickly to mitigate the risk these events pose.
The best solutions will offer integration with ERP and transportation management systems (TMS) to offer real-time insight into the entire supply chain and the risks that surround it. This may include not only the shipments, but also the distribution centers, facilities, plants, vendors, and customer locations.
Instead of manually collating data from multiple sources, the modern transportation risk management solution will pull data automatically from all relevant sources and present it in a visual way that makes it easy for leaders to see where their risks lie for every shipment and the best options on how to prevent or minimize the impact those risks will have on the shipment. It is important for the software to scale to meet the unique needs of each stakeholder. For instance, reports must offer various sorting and filtering capabilities to give users the view they need to see.
Other Considerations for a Modern Transportation Risk Management Solution
In order to mitigate risks, leaders need to know exactly what their risks are based on historical data, real-time data, and forecasted data, including:
- Weather and climate events
- Infrastructure outages
- Natural disasters
- Acts of terrorism
Each of these risks poses a real threat to transportation companies and those industries that depend on transportation. While weather and climate events are the most obvious external threats, bridge collapses, road closures, wildfires, and other situations out of their control can impact a carrier’s ability to deliver a shipment on time and in full. Unless the organization understands what risks are most likely for each shipment, with probability and severity scores associated with each risk to ensure those risks can be properly prioritized, risk mitigation is impossible. Be sure the solution you choose offers:
- Risk scoring, based on your organization’s specific criteria, that assesses the quality of each risk to bring attention to the right risks at the right time
- Customized, automated alerts to key people to prevent oversight and maximize response times to more immediate threats
- High-level and granular-level detail of each risk for “just right” reporting
- Risk reporting over time to offer trend analysis for continual improvement
- Objective recommendations and “what if” scenario planning to identify the best mitigation strategies
It’s easy to see how a modern transportation risk management solution is significantly more capable than the manual, disconnected tools of the past. If weather and climate trends continue in their current direction, transportation companies must have more reliable, real-time data at their fingertips. It’s not enough to just understand a portion of your risk. You must see all of the risks and recognize that all risks are not equal. A system that is able to provide micro- and macro-level detail on each risk per asset is critical in giving enterprises the opportunity to proactively respond to risk before it causes disruptions. Risks may not be controllable, but your reaction to them can be if you utilize modern technology built for today’s changing environment and customer demands.