How do you deal with uncertainty and risk in freight and logistics planning and forecasting?

1 Understand the sources of uncertainty and risk

Identifying and analyzing sources of uncertainty and risk is the first step to managing freight and logistics planning and forecasting. Common sources include demand uncertainty, which can be affected by seasonality, trends, preferences, income, and competition; supply uncertainty, which can be affected by weather, geopolitics, trade, and technology; cost uncertainty, which can be affected by inflation, exchange rates, market forces, and policies; regulation uncertainty, which can be affected by legislation, enforcement, and compliance; and disruption uncertainty, which can be caused by accidents, strikes, protests, natural disasters, pandemics, and cyberattacks. Factors such as probability, severity, and contingency also play a role in disruption uncertainty.

2 Use scenario planning and sensitivity analysis

The second step to deal with uncertainty and risk is to use scenario planning and sensitivity analysis to evaluate the possible outcomes and impacts of different situations and factors on your freight and logistics planning and forecasting. Scenario planning is a method of envisioning alternative futures based on varying assumptions and drivers, while sensitivity analysis measures the effects of changing one or more variables on a given outcome or objective. Utilizing these techniques can help you identify and prioritize key uncertainties and risks, explore the robustness of plans and forecasts under different conditions, as well as develop contingency plans and mitigation strategies to cope with unexpected or adverse situations.

3 Use data and models to support your decisions

The third step to deal with uncertainty and risk is to use data and models to support your freight and logistics planning and forecasting decisions. Data and models are incredibly useful tools that can help you collect, analyze, visualize, interpret, simulate, predict, and optimize the behavior of your freight and logistics operations and environment. This includes sources such as sensors, surveys, reports, databases, platforms, statistics, graphs, dashboards, indicators, demand models, supply models, cost models, regulation models, and disruption models.

4 Monitor and update your plans and forecasts

The fourth step to deal with uncertainty and risk is to monitor and update your freight and logistics plans and forecasts regularly. This process helps you track, evaluate, and adjust your plans and forecasts based on actual or expected changes in your operations and environment. Monitoring and updating can measure and improve the accuracy of your plans and forecasts over time, detect discrepancies between them and reality or expectations, as well as learn from experiences and feedbacks for future planning and forecasting.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?