Step 2: Build Logistics Risk Management Plan Scenarios
With every day operations documented, it’s now time to explore the “what ifs.” There are two main scenarios that you will want to build logistics risk management plans for:
- Partial shutdowns are significant disruptions to logistics that may cause serious delays, but won’t fully stop shipping or production.
- Full shutdowns are more extreme events, and result in a full suspension of activities.
For both a partial and full shutdown, define the expected length of time your company can keep functioning in each scenario generally, as well as exactly what activities they may impact.
For example, if a specific portion of your logistics were to suffer a partial or full shutdown, how much more lead time would you need, and what adjustments must be made? Would your safety stocks be enough to get you through? What are your options once your safety stock runs short? You may need to shift to different routes or different carriers. This can only be done effectively if you understand and can visualize the full logistics landscape.
Finally, with all of these factors in mind, set a timeline including a decision day when the risk management plan will be implemented after a critical alert. Maybe your business has enough lead time and buffer stock to function normally for five days in the face of a partial shutdown, so day six would be the day that alternative plans need to be executed.
Having this structure planned before a disruptive event means that you can quickly implement Plan B, instead of debating how bad circumstances have to get before switching. 
Figure 1: A strong logistics risk management plan incorporates alternates for many potential disruptions.
Step 3: When Not to use Logistics Risk Management Plan
You’ve put your new logistics risk management plan in place and a week later you receive your first critical alert. What now?
Having an action plan in place doesn’t mean you should automatically take action at the first sign of trouble. Early alerts may never develop into critical alerts. Instead, keep an eye on these emerging situations and make sure you have the steps in place to tackle it if it grows to meet your criteria for criticality.
Also, not all risks have the same urgency, and each company will have a different interpretation of that risk. Risk scoring will allow your company to understand and track each risk’s status, giving you the information, you need to put Plan B, C, or D into place when it’s the right time. Some alerts will highlight a pending moderate risk, which you may want to track, waiting to trigger your management plan until the situation becomes higher risk. If it’s an ongoing or inherent risk, you probably already have an automatic plan to implement, adjusting where necessary.
With enough advance notice of an emerging situation, sometimes proactive problem-solving is sufficient to avoid disruption. For example, you may be able to simply reserve alternative cargo space before prices spike.
Early Notifications Help Avoid Disruption
Early notification of potential risk is directly connected to the ability to sidestep disruption. For example, simultaneous slowdowns in the Suez and Panama Canals this forced companies to rethink their standard shipping strategies. Businesses that were aware of early signs of trouble were able to switch to contingency plans as soon as the scale of disruption became clear, shifting to alternatives in air freight and ground shipping. These quick key decisions kept their logistics running with minimal delays.
Companies also could have switched material suppliers where possible to keep their operations running smoothly. Whatever the outcome may be, having early knowledge of potential risks gives companies longer runways to implement necessary changes.
Step 4: Logistics Risk Management Plan Execution
Communicate Early and Often
Deciding to put your logistics risk management plan into action should immediately trigger a wave of communication. Just as your company can’t function in isolation, these changes must be made in conjunction with key stakeholders and suppliers. Talk to suppliers and carriers to understand what decisions they are making in the face of the inciting incident or risk. Opening early channels of communication with them may also give you leverage to influence decisions that could give your business a competitive advantage.
Make sure that people executing this plan also have the relevant, up-to-date data in front of them so they can make the best and most effective decisions. This might also include people who don’t usually interact with your company’s risk management platform, such as employees in the field or on the ground. Everyone with responsibility within this plan should have an understanding of what exactly their role within this plan is before execution, so they can focus on implementing the best solution possible.
Track and Record Actions
As execution progresses, activities should be tracked and recorded to provide for future learnings. After completion, it’s worth going through and discussing what did and didn’t work.
Supply chain logistics are complex, inconstant, and laden with risks. Putting logistics risk management plans in place gives your business the ability to make effective, proactive changes in the face of these risks, heading off disruptions to the best of your ability. Ensuring that your company is plugging in relevant data that gives you as much lead time as possible will give your company the best chance of minimizing logistical risks within your supply chain.
Heather Kosztowny is the Vice President of Data Science for Everstream Analytics, leading development and implementation of transportation modeling and optimization insights. Her 15 years of experience in data analytics and modeling have focused on logistics issues and carbon emissions evaluations and insights.
