How to create and run a resilient logistics risk management plan

by Heather Kosztowny

Logistics is a volatile and dynamic operation which can present as many difficulties as it does opportunities. The trick is knowing how to spot both from a distance, allowing your business to pivot quickly and potentially capitalize on changing situations. A comprehensive and pragmatic logistics plan will help you efficiently manage the logistical complexities that come your way.  

Generating your company’s logistics risk management plan will take some research, preparation, and may even necessitate some changes. However, implementing a new logistics risk management plan will ensure that key decision-makers get the relevant information needed to make the important changes to save your business from costly and damaging delays.  

Step 1: Document current logistics operations 

Preparing a plan begins with documenting your existing supply chain logistics operation and policies. This can be helpful as an exercise in and of itself, and should be done regularly to evaluate and optimize your regular, non-emergency logistics operations.  

Discussion questions for the team include: 

  • What are the current lead times for products or key materials? How long do customers expect to wait for their end product?  
  • Where are key materials sourced? Are there any outstanding concerns around the materials or their location? What are the alternatives? 
  • What is the current routing plan? Does this make sense in terms of time, cost, and reliability? What are the next best routing options? 
  • How much safety stock do you generally hold and where is it located?  

Once you’ve evaluated and optimized your current logistics routine, you can move onto creating your secondary and tertiary plans, based on known risks and desired outcomes. 

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, which 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.  infographic chart of what elements go into making a logistics risk management plan 
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 notification of potential risk is directly connected to the ability to sidestep disruption. For example, simultaneous slowdowns in the Suez and Panama Canals this winter 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 

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.  

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 Director 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. 


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