Transportation Risk Management: A Guide

Weather events are happening more frequently, and becoming more severe. This is a huge problem for the transportation industry.

Industry analysts anticipate that natural disasters will not only occur more often, but that they will cost more in damages. There is no question that many businesses have felt the impact from these significant events. Insured losses from natural catastrophes topped $330 billion in 2017.

Weather was once considered an uncontrollable force in supply chains. Now, it is quickly becoming the top risk management priority for transportation companies. Unusual climate patterns are emerging worldwide. As a result, supply chains must become proactive in addressing weather-related threats. Manufacturers and 3PL’s both see this as an opportunity to help their shipper customers.

Discovering emerging threats is one of the most underrated parts of any risk management plan.

How Enterprises Managed Transportation Risks in the Past

In the past, enterprises haven’t done much to deal with threats.

For example, a national retail chain with more than 4,000 locations printed a map and drew dots to represent stores and facilities. They then overlaid a transparency of the forecasted hurricane track. This is how a billion-dollar-a-year business tried to understand the potential impact of a threat. And this had to happen before they could implement a single part of their plan!

The same type of “old” workflow happens across many industries. From digital maps with contextual balloons to emergency email distribution lists–the plans generally aren’t cohesive.

Meanwhile, transportation professionals look at radar on weather websites. They then attempt to mentally match it to their own shipment plans. This is often how they set their weekly strategy.

While pencils and overhead transparencies are an extreme case, a lack of preparedness is not uncommon. The accuracy level of many of these fragmented approaches is painfully low.

In order to understand how threats relate to their business, team members are forced to compile information from different sources. Automated tools that identify weather and crime threats are often an afterthought.

And, as losses mount, ensuring your business is prepared for threats before they happen becomes paramount.

Risk Management — Past to Future

How Your Enterprise Can Better Manage Transportation Risks Today

Today, there are tools that can help enterprises manage and react to uncontrollable events in real-time. These tools can be integrated with many popular ERP and transportation management systems (TMS.) They provide a quantifiable, visual way to understand both weather and crime-related threats.

Through supply chain situation rooms and control towers, shippers can see a visual representation of the threat. You can also see your plants, vendors, and customer locations. Sort by event type, lane, or even SKU!

These tools are starting to be offered by 3PL’s and visibility platforms as a value-added service for their customers. 3PL’s and brokers are looking at more customer-centric approaches to transportation management. They want integrate technology to help shippers take the right action at the right time. This reduces freight spend and wasted driver hours, while increasing engagement and customer loyalty.

Metrics to Measure Transportation Risk Management Success

A functional transportation risk management system:

• Provides a consistent, real-time measurement of risk
• Incorporates hazards including:
  • Weather
  • Civil unrest
  • Acts of terrorism
  • Bridge collapses
• Matches the risk based on your organization’s specific criteria
• Enables you to quickly determine the lowest-risk alternative to your current plan

Riskpulse does this through the advent of a customized “risk score.” A risk score can be used as a normative benchmark, with different levels of risk fueling different strategies.

For example, an environmental risk plan might dictate the following, with the highest possible risk score being 25:

• Management is informed when a certain facility’s risk score is 10;
• An official warning is issued to employees at 15;
• Facilities are closed at 20.

By applying gradations to risk, the score provides a higher resolution view of risk. This granular view does much more than simply showing which locations are in or out of an impact zone.

Risk scores eliminate the guesswork on when to take action. They help managers prioritize the locations or assets experiencing the greatest risk.

A risk index can also be analyzed over time to understand and evaluate risk on a seasonal or historical basis.

If you’d like to know more about how risk scores work at Riskpulse, contact us!