Risky Driving

Risky Driving

When you’re driving for 40 miles during a blizzard in a small rental car on a major interstate, trying for most of the time to stay in the fast-disappearing tire tracks of a tractor-trailer chugging ahead in the packed snow ahead of you, your mind very naturally turns to risk management.

The snowstorms that walloped the mid-Atlantic states over the past two weeks, along with those that hit the Midwest and the heavy rains and mudslides that battered Southern California, were extraordinary yet natural events that any business will tell you are beyond the ability of any company to foresee.

But a long string of events over the last few years, most recently the earthquake in Haiti and the horrible hurdles to relief efforts there, also provide important lessons that events we think are extraordinary are distressingly common. In his close look at the logistics of the humanitarian aid efforts in Haiti in this week’s edition of The Journal of Commerce, R.G. Edmonson details the lessons logistics providers have learned from past natural disasters and the problems they now face.

The logistics of humanitarian aid is a specialized corner of the transportation and supply chain world, but with its mix of discipline and flexibility, it’s a corner that may provide some serious schooling for businesses in the 21st century.

That’s because it’s becoming more clear that the economy, and especially the shipping and supply chain economy, will put a premium on risk management at companies that have long focused on growth management.

Shippers certainly have been looking more closely at risk as an element of supply chain planning for several years. Logistics planners at Cisco Systems and other companies formed the Supply Chain Risk Leadership Council a couple of years ago to set common principles and trade knowledge on the issues surrounding mitigation of supply chain risk.

But the signals in the shipping economy in the period leading up to and since the deep recession suggest that management of economic risk will be at the forefront of business strategy for the foreseeable future.

Those signals come in the sharp swings the transportation world is seeing in just about every metric available, from the operating reports from carriers across the spectrum to the pricing and capacity measures that provide a snapshot of shipper-carrier relations.

And the signals run deeper, to the prices of the underlying commodities that provide the foundation for industrial production. As shown in our JOC By the Numbers section, the weekly Journal of Commerce-Economic Cycle Research Institute Industrial Price Index has been on a remarkable roller coaster over the past year, moving from a 60 percent year-over-year decline to a 76 percent increase. Even in recent weeks, the IPI has grown 14 percent in two months and then fallen back more than 2.6 percent in three weeks.

It’s the economic equivalent of a blizzard on a crowded highway, when moving forward quickly may be less important than keeping your hands on the wheel, watching the truck ahead of you and knowing where the exits are.

Paul Page is editorial director of The Journal of Commerce. He can be contacted at 202-355-1170, or at ppage@joc.com