Hurricane season is fast approaching. Are your shipping operations prepared to weather the storm?
Experts predict that this year will bring 23 named storms, including 11 hurricanes, a sharp increase from the 1991-2020 average of just 7.2 hurricanes per year. The current forecast is especially bad news for the shipping industry because extreme weather events wreak havoc on shippers’ operations, resulting in road and port closures, delayed shipments, and spikes in both linehaul rates and fuel prices.
So, to maintain operational continuity and profitability amid weather-related disruptions this hurricane season, shippers must tap into market expertise and maintain strong relationships with their carrier partners.
How Extreme Weather Events Impact Shipping Operations
Both shippers and carriers cited extreme weather events as their top transportation challenge this year. With hurricanes forecasted to batter coastlines and tornadoes already sweeping across the central U.S., these disruptions do more than obstruct the flow of goods — they also expose vulnerabilities in the transportation sector.
Extreme weather events like severe flooding or droughts can disrupt routes and delay deliveries, triggering a cascade of logistical challenges. Moreover, these disruptions often lead to increased fuel prices and higher linehaul rates, causing shippers’ operational costs to swell. Weather-related challenges can also expose vulnerabilities and strengths in shipper-carrier relationships, necessitating frequent communication and flexibility to navigate service disruption.
Considering the impact these events can have on your bottom line, there’s a clear need for robust preparedness and response strategies to effectively navigate inclement weather.
Key Initiatives to Weatherproof Your Shipping Operations
As hurricane season approaches, a proactive and comprehensive strategy to fortify your shipping operations is your first line of defense. This requires both preparing for the known impacts of severe weather and building agility into your transportation network to manage unforeseen challenges.
- Test Your Operational Readiness
Extreme weather events are unpredictable by nature, which means your teams must be prepared by nature. Through scenario planning and targeted trial runs, you can bolster your team’s ability to respond appropriately in high-pressure situations.
If you aren’t sure where to begin, start by identifying the parts of your network that are most at risk, like coastal distribution centers located in hurricane-prone areas that are susceptible to disruption.
By engaging in trial runs that simulate realistic and specific scenarios, you can identify gaps in your response strategies. These exercises provide an opportunity to revisit and refine your operational and communication plans with both internal and external stakeholders, ensuring continuity during extreme weather events.
- Equip Your Team with Data-Driven Insights
Awareness of changing market dynamics plays a crucial role in understanding the impact of weather-related disruptions on your operations. Access to granular, real-time data can help you gain this awareness.
Consider partnering with a trusted advisor who closely monitors the fuel and freight impact of extreme weather disruptions. These insights empower you to speak to changes in market conditions and make proactive adjustments to your transportation strategy.
For example, a trusted advisor can help you understand the broader implications of severe weather events on your operations so you can communicate effectively with upper management. This robust analysis supports informed decision-making, enabling leadership to allocate resources, adjust strategies, and implement contingency plans with greater precision.
- Reconsider Your Fuel Reimbursement Method
Extreme weather events have a significant impact on fuel prices. The mere threat of tropical storms can force the temporary shutdown of oil rigs and platforms, leading to diminished supply and skyrocketing fuel costs. And without a fair and accurate fuel reimbursement strategy, inflated costs can quickly undermine your profitability.
Instead of relying on the Department of Energy’s (DOE) weekly national average fuel price, consider adopting a market-based fuel reimbursement program. This type of program aligns with the actual daily price of fuel at the lane level, enhancing transparency between the shipper and the carrier.
Consider this example: If a hurricane threat leads to the shutdown of refineries in the Gulf Coast, a market-based program can immediately reflect the spike in fuel costs for the fueling stations impacted. As a result, you can be confident that you’re paying a fair price on days where fuel prices surge, rather than paying a higher average price for all loads throughout the week.
- Prioritize Your Carrier Relationships
While transportation professionals prioritized strengthening mutually beneficial partnerships in 2023, the focus has shifted slightly this year. More than half (51%) of shippers and carriers say their primary focus in 2024 is to establish new relationships that help them increase efficiency.
So, while it's critical to prioritize existing relationships by maintaining transparency and open lines of communication, it may also be worth it to explore alternative carrier partnerships.
For example, if your contracted carriers fail to meet their commitments, you’ll need to search for an alternative carrier in the spot market. By maintaining a list of asset-based carriers with expertise on the lane, you can avoid steep brokerage fees and ensure your freight reaches its destination. This type of strategic adjustment helps maintain service levels while optimizing cost management at the lane level.
Don’t Wait to Future-Proof Your Operations
The forecast for extreme weather events in 2024 highlights the need for robust preparedness. As hurricane season approaches, it’s critical to have the right tools and strategies to prepare your operations for weather-related disruptions. By leveraging data-driven insights and unbiased market expertise, you can maintain operational continuity, even in the face of severe weather.
Don’t wait for the next big storm to hit — proactively optimizing your operations ensures smoother sailing in the future.
