Managing the Uncontrollable Variables in your Supply Chain could Save your Company

A few weeks ago, I gave a presentation to a group of transportation professionals at a Best Practices in Cross-Border Freight Transportation conference in Buffalo, NY, sponsored by SMC3. I made the point that changes in just one variable, Currency Exchange, could make or break a company. As I look back over my lifetime (I am an old guy), Canada – U.S. exchange rates have varied from a Canadian dollar being worth $0.61 US to $1.10 US. As evidenced by the past few days, these currency fluctuations can occur quickly and without warning.

Furthermore, these types of variances can have huge impacts on shippers and carriers. If you look at some of Canada’s core industries (e.g. newsprint, minerals), the effects can be devastating in terms of market competitiveness, north-south freight flows, freight rates, empty miles, - - - even business survival.  Currency exchange fluctuations are just one of a number of variables that can change quickly and without much warning. There are a host of others.

Think about the winter we came through in the first quarter of this year. Is this the result of climate change? Will this be, as some suspect, the new normal? Have you made plans in the event that the next winter is as bad as the last one? We are still dealing with rail congestion as a result of the harsh winter and we are about to enter the fourth quarter. In addition to winter storms, we are seeing an upswing in other types of weather issues (e.g. tornados) in America and other countries.

Think about the Middle East that is a powder keg today. What if war breaks out in a variety of locales? What if ISIS tries to attack America? What if some sources of energy supplies are cut off and diesel fuel prices spike? What happens if the economy spikes? Think about the driver shortages today, the challenges in attracting drivers into the industry and the potential impacts on the supply of truck and rail equipment if the demand for transportation services is not met with an increase in supply. What would significant increases in freight rates do to your business?

Think about the possibility of an economic slowdown in Asia, Europe, Russia and/or South America, countries that are still dealing with the aftermath of the last recession. What would happen to our economy if some of these economies falter? We are living in a turbulent and fragile world.

Every company has options. It can bury its head in the sand and hope that none of these events happen or it can proactively create business and transportation strategy contingency scenarios and plans to manage the consequences. Business executives and transportation professionals have choices. When it comes to transportation services, many companies can take concrete steps. These include:

1. Explore modal options

2. Build a robust carrier routing guide

3. Diversify sources of supply and customers, both in terms of geography, size, transit times, vulnerability, stability and economic viability

4. Evaluate Outsourcing options (e.g. your private fleet, warehousing, logistics operations etc.)

5. Partner with core carriers to increase access to reliable capacity

6. Make your company easy to work with

7. Reassess your mix of transportation and warehousing options (e.g. locating warehouses closer to end consumers)

8. Bolster security of physical plant, personnel and IT infrastructure

9. Identify backup alternatives in the event of a catastrophic failure

10. Develop and revise, on a regular basis (e.g. semi-annually), written plans and procedures that are accessible to your employees if any of the above-mentioned or other force majeure events occur.

Planning for the worst may help your company become the best.