Transportation risk management: Defining and analyzing risk
According to the U.S. Department of Transportation Federal Highway Administration, transportation risks can be internal or external and both can impact performance and assets. Thoroughly evaluating risk to the supply chain is critical. As the agency says, “Risk management is the process of analytical and management activities that focus on identifying and responding to the inherent uncertainties.” External risks are often some of the most uncertain but can lead to the greatest interruptions in service.
The weather is a perfect example. Even with sophisticated meteorological data, we can only predict the weather to a certain degree of accuracy. This poses a particular problem for transportation companies who ship goods across the country. Temperatures and weather conditions may vary within a state and even more so across state lines. In order to truly analyze transportation risk, companies must have visibility into precise temperature and weather conditions along the entire route at the exact time the shipment will be in that particular area.
Weather isn’t the only external risk factor. Transport infrastructure must be analyzed along routes because any disruption to roads, railways, ports, and airports can directly impact the ability of a company to ship products on time and in good condition. Unfortunately, the nation’s infrastructure is in dire straits. The Association of Equipment Manufacturers “Mobility 2050” report found that “the condition of the U.S. transportation infrastructure, manifested by insufficient capacity, load restrictions, slow zones, rough pavements, and, in the worst cases, by physical failures, presents travel and logistics challenges across almost all modes.”
There isn’t an easy or quick solution to the infrastructure problems, either. The American Society of Civil Engineers (ASCE) gives the current U.S. infrastructure a grade of a D+ and estimates it will cost approximately $4.5 trillion to fix our roads, bridges, dams and other infrastructure.
Weather and infrastructure issues are among those that make it challenging for shippers and carriers to meet the increasing customer demands for faster deliveries. Manufacturers have to produce more products faster to meet their own customer demands and shippers and carriers are caught in the middle. With nearly 100 percent of U.S. consumers wanting fast delivery from their online purchases and consumer spending at all-time highs, it’s no wonder the American Trucking Association U.S. Freight Forecast predicts that freight volumes will continue to grow by more than 23.5 percent by 2025.
The risk variability and pressure to meet demand while reducing costs are forcing companies to get serious about their transportation risk analysis. There is simply too much data to manually gather and analyze and that data is constantly changing, prompting companies to take their analysis capabilities to the next level with the use of modern technology.
Frequent transportation risk analysis is the only way transportation companies can accurately identify current and potential risks, then strategically plan on how best to mitigate those risks. A transportation risk analysis solution must be able to look backward and forward, considering all external risks that pose a threat to each and every shipment days and even weeks out. But that shouldn’t be the full extent of the solution’s contribution to risk management. The software must be able to provide recommendations for risk mitigation.
6 Key Features to Look for in a Transportation Risk Management Solution
In the past, transportation companies relied on manual data gathering and incomplete, outdated spreadsheets to assess risks. More mature companies may have used software, but it was limited in what it could do, particularly given the dynamic nature and breadth of the data.
Today, there are better, more reliable and efficient solutions on the market, yet not all are created equally. The key is to find a comprehensive solution that is able to go beyond basic risk detection to offer actionable, predictive intelligence that informs decisions and sets a mitigation strategy in motion. When considering a modern transportation risk analysis solution, make sure it offers the following features:
1. Comprehensive Risk Assessment
The greatest benefit you’ll get from your investment into a modern transportation risk management solution is that it will offer complete visibility into all of your risks. One of the biggest issues with previous analysis methods is too many risks are missed, creating blind spots that leave organizations vulnerable. It is imperative to be able to look back at historical data to learn from the past, view present data to see in real-time what is happening, and have insight into forward-looking data that forecasts potential risks. This 360-degree view is the only way your company can see the full picture to make more informed decisions faster.
2. Instant and Actionable Reporting
Unfortunately, many software solutions fail to present the data in a way that instantly makes sense and is actionable. Stakeholders waste too much time breaking down the data to determine what really matters. Look for a transportation risk analysis solution that paints the picture for you so all your team needs to do is strategize and execute. This means the data should be visual, identifying risks but also giving those risks probability and severity scores, for instance. In cases where the solution deems a risk as being high, make sure the system will send instant alerts to stakeholders for rapid mitigation. Look for software with root-cause analysis to reveal where the issues originate to foster continual improvement and more proactive future mitigation.
3. Easy and Continual Customization
One size rarely fits all, including in a transportation risk analysis solution. An off-the-shelf solution without customization features will end up frustrating more than helping, likely providing features you don’t need and lacking ones you do. Find a solution that considers your organization’s unique requirements, demands, vulnerabilities, and value streams. It should be able to analyze and present the data you and other stakeholders most want and need to see, how you each want to see it. In this way, each person is able to glean the information they need to make their own decisions, while also providing a standardized, trusted data set to drive conversations that impact the business as a whole.
Because data comes from so many sources, it is important that a transportation risk analysis solution easily integrates with other business systems. When data is siloed and disconnected, it is basically useless to the organization. It also consumes massive amounts of time when resources are having to manually locate and input data, delaying mitigation efforts and increasing the risk for errors. By the time data is collected, much of it is outdated and unreliable. On the other hand, when systems are sharing data automatically, there is less risk for error and the data is reliable and current. Stakeholders trust the data and can confidently base their decisions on the data. Everyone is seeing the complete picture and it’s consistent across the business.
5. Objective Mitigation Recommendations
Identifying transportation risks is important, but it’s how those risks are managed that counts. It’s not always easy to know what the best mitigation strategy is for every scenario, making it advantageous to have an analysis solution that also crunches the data to determine the best potential alternative actions would be. Having these recommendations saves precious time, enabling transportation companies to make faster, more proactive decisions earlier in the timeline to minimize disruptions to deliveries and the supply chain. The software will provide insight into “what if” scenarios, showing decision-makers how a change in a lane, a mode of transportation, the shipping date, and the type of vehicle used, for example, would impact the ability to meet on-time delivery commitments and the bottom line.
6. Scalable to Evolving Business Needs
A transportation risk analysis solution should be able to not only meet the current needs of your business, but it should also be able to grow as your company evolves to meet whatever demand is placed on it and whatever risks threaten the supply chain. It should also scale to meet the individual business needs of each stakeholder, consuming and analyzing the specific data each stakeholder requires and then presenting the information in the “language” that speaks to each stakeholder. For instance, executives will require different data, higher-level data than a business unit leader who is more concerned with micro-level details that affect workflows. The solution needs to be able to handle both requirements, delivering the “just right” level of data.
Your Transportation Risk Management Solution Needs a 360-Degree View
Transportation companies are in a position to take advantage of the many benefits of technology to empower them to meet change and customer demands head-on. Risk mitigation leads to lower costs, less supply chain disruption, and a greater ability to deliver value. As PwC says, “Logistics companies will need to focus on ‘digital fitness’, cost efficiency, asset productivity and innovation if they want to meet shopper expectations.”
This type of digital fitness requires historical, real-time, and predictive data. Transportation risk analysis is only effective when all data points are integrated. Executives and business leaders need more than data; they need insights that reveal patterns and identify opportunities to mitigate risks with recommendations on the best ways to do so. Data may be power but only when it’s operationalized and presented in a way that makes sense to each stakeholder. The sooner leaders have this information, the faster they can respond.
Investment in a transportation risk analysis solution is an investment into the profitability and success of your company.
The Everstream Solution
To speak with an expert about what actionable, predictive intelligence can do for you and your supply chain when integrating a transportation risk analysis solution, contact us now.