Why You Should Manage Logistics Risk

For decades, the primary focus of logistics was creating lean, just-in-time systems. 

Leanness offered great gains in terms of cost control and efficiency. But there was a tradeoff – a lack of resilience in the face of disruptive events. 

The global events that impact logistics are unique in their ability to snarl up millions of supply chains. But logistics professionals face less newsworthy challenges every day – from storms closing transportation nodes, to backlogs at border crossings. 

These are recurring challenges that can bring production to a halt, negatively affecting profitability, customer satisfaction and brand reputation. 

Something will inevitably go wrong, at least some of the time. Unfortunately, some risks remain unpredictable, such as the 2025 Russian earthquake and the subsequent tsunami warning that threw logistics across the Pacific into chaos. 

Large-scale disruptions are beyond any single company’s control. However, the most resilient and successful organizations know logistics optimization is no longer just about efficiency. Instead, it is about building a robust and agile network capable of navigating around disruption. 

This requires a fundamental mind shift from reactive, crisis-management to a proactive, data-driven logistics risk management strategy.  

The key lies in focusing on the elements of risk that are, in fact, within your company’s control. 

Why You Need Logistics Risk Management: From External Shocks to Internal Strategy

It is easy to feel powerless when faced with a hurricane bearing down on a critical port or shifting trade policies. You can’t control the weather, or intergovernmental relations. So, focus on what you can control: 

• Your logistics network design 
• Shipment planning 

The core of this new approach is built on three controllable pillars: mapping the network, monitoring for threats, and making data-driven decisions. This allows you to optimize your logistics operations for risk to avoid predictable disruptions. 

Figure 1: Mapping and monitoring your logistics network allows you to see risks during the planning and tender process 

Mapping the Network: You Can’t Protect What You Can’t See

The first step to de-risking your logistics operations is mapping your logistic network. This includes: 

• Airports, ports, border crossings and rail terminals 
• Shipping lanes and transportation routes 
• Nodes 
• Carriers 
• Manufacturing plants, warehouses and other facilities 

By mapping these elements, you create a digital twin of your network. 

Armed with this information, you can get a clear picture of dwell times at ports and airports, port congestion, and other key performance indicators. This historical data will help you understand which parts of the network are more susceptible to disruption. 

Monitoring Upcoming Threats: Predictive Risk Assessment

More importantly, once the network is mapped, the next step is to monitor it for potential threats. It is important to remember that these disruptions can be compound one another. Natural disasters can cause infrastructure damage; geopolitical changes can impact carrier capacity and so forth.  

Figure 2: Logistics risks can be divided into categories, but these are often interconnected where one disruptive event can cause multiple knock-on effects 

Supply chain risks include: 

Natural disasters 

You can track hurricanes, earthquakes, floods, drought and wildfires in real-time to understand their potential impact on mapped network nodes. 

Infrastructure and labor 

Here you can monitor issues such as port congestion, road closures, cyber-attacks, strikes, and labor shortages that can delay shipments.  

Geopolitical and trade risks 

Keep abreast of new tariffs, trade embargoes, political instability, and acts of war that could affect shipping lanes or supplier locations. 

Carrier risks 

You can get early warnings about potential carrier insolvencies, and other issues that could have an impact on your shipments such as litigation, or mergers and acquisitions. 

This is not just about collecting data. Instead, it is about contextualizing that data against your specific logistic network to understand potential threats to your operations. 

For example, a national rail strike is a piece of news. But an alert that says, “A planned rail strike will impact three of your critical inbound lanes next week, potentially delaying shipments to your primary manufacturing plant,” is actionable intelligence. 

Data-Driven Decisions: Turn Intelligence into Action

Visibility and monitoring are only valuable if they lead to better decisions. An effective risk management plan is one that enables you to make informed decisions.  

With a clear understanding of where your risks were in the past, and where they continue to be, you could consider tweaks to your network design, such as onboarding new carriers to build resilience. 

However, the real value of risk intelligence and alerting is during the shipment planning process. 

Risk information is fed into your transportation management system, giving you early indications of potential disruption to your shipments. This applies to the full shipment planning process of freight rating, service options, tendering – if required – and subsequent updates such as rescheduling. 

This means that you can mitigate issues before they become problems. Early warnings mean you can consider your options and plan around a disruption. 

Rescheduling and rerouting 

With advance notice, you can reschedule pickup and delivery windows, change the transportation mode, such as from ocean to air for a critical shipment. You could also decide to reroute shipments around a congested port or a storm-affected area. 

Changing carriers or service levels 

If you have onboarded multiple carriers, you can switch between them to get the best rate, route or service level to avoid riskier shipments. 

Adjusting production planning 

If a hurricane is likely to shut down one of your manufacturing plants, you could work with your supply chain planners to adjust production plans. This could mean you need to re-route inventory to ensure your most profitable products remain unaffected.  

Setting customer expectations 

If you cannot work around a delay, you should inform your customer as soon as possible. Transparency and clear communication around what happened, why it happened, and the steps you are taking to address the issue is important for customer satisfaction. 

A real-world example

A global automotive Tier-1 supplier, faced with the Red Sea crisis, used early alerts to quickly form a task force. The company began by rerouting vessels around the Cape of Good Hope. This added weeks to transit times and threatened production at their European plants.  

Armed with predictive intelligence, the company made a decisive move: they shifted their shipments from ocean to a China-Russia-Poland rail route.  

This decision cut transit time by seven days, as well as avoided the high cost of air freight. The rerouting ultimately saved the company an estimated $10 million over 10 months. Proactive, data-driven decisions can turn a potential catastrophe into a manageable logistical challenge. 

Getting Ahead of Risk

Not all risks are created equal. Once you know the full spectrum of potential threats, you should prioritize them. Consider issues such as the likelihood of a particular event, and the potential impact on the business. 

For each high-priority risk, develop a clear action plan. These could include pre-defined playbooks that outline the actions to be taken.  

Who do you need to notify? What are the pre-approved alternative routes, carriers or other mitigation strategies? What is the communication plan for customers? Your logistics team needs to know when and how to act in response to a particular type of disruption. 

Do a post-event analysis for continuous improvement. What worked well? Should you have done some things differently? What would have been the financial loss had you not acted? You need to refine your action plans after testing them in the real world.  

Finally, you need to invest in the right technology. It is not possible to identify all potential risks manually. You need risk intelligence, along with predictive analytics, to stay ahead of disruptions. These platforms integrate with existing TMS and ERP systems, enriching them with the risk intelligence needed to make smarter decisions. 

The results of this proactive approach are compelling. Companies that have embraced a control tower strategy powered by risk analytics have seen significant improvements: 

• 10% increase in on-time performance 
• 5% reduction in unplanned expedited freight costs 
• 70% reduction in the time spent chasing shipments 

These are real savings in time, money, and resources, and a significant enhancement in customer satisfaction. 

While you cannot control the weather, the global economy, or geopolitical events, you can control how you prepare for disruptions and your responds to them.  

By shifting your perspective from managing crises to proactively managing risk, you can build a supply chain that is not only efficient but also resilient, agile, and competitive.  

The power to navigate the storm lies not in controlling the wind, but in mastering the setting of your sails. 

See Everstream in Action 

If you would like to see how logistic risk management could work for your organization, contact Everstream Analytics for your personalized demo.