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In early January 2014, a blast of subzero arctic air blew across different parts of the United States. This polar vortex wreaked havoc in the Northeast, Midwest and even some parts of the south. Not only did these severe winter conditions close schools and businesses, but it also increased transportation difficulties that has affected the bottom line of carriers throughout the country. Even carriers not based in areas hit with ice and snowstorms will feel the economic effects of a winter that is not over yet.

Bad weather comes as no surprise to industry veterans who are used to what can happen on the asphalt that links the nation together. However, what may concern some is how even mild weather conditions can impact performance for a wide range of industries. Unseasonal or unexpected weather can also negatively impact operations and cash flow for trucking companies.

Financial Impact of Weather Conditions in the U.S. and Globally

For many trucking companies, incremental changes in temperatures, rainfall, snowfall or even wind levels can mean significant changes in revenues. However, bad weather is not considered a good excuse for fluctuating revenues and higher operational costs. While no one expects trucking companies to control weather patterns, they are expected to have better control over the financial impact from disappointing earnings.

A report by Allianz Global Corporate & Specialty, a global insurance company, found that the overall U.S. economy is impacted by routine weather variations to the tune of up to $534 billion each year. Delays in the trucking industry costs $3.5 billion of that total. In addition, an estimated 30 percent of GDP in the U.S., which is close to $5.7 trillion, is either directly or indirectly affected by weather events.

In more of the report, 93 percent of the 905 weather-related disasters in 2012 cost $170 billion. Furthermore, the direct cost of weather volatility on a global scale significantly increases how much insurers pay out to businesses seeking to recover from setbacks. Globally, extreme weather have led to $70 billion for the past three years. This is a considerable increase compared to the 1980s when weather-related catastrophes cost the industry $15 billion.

Despite the financial losses and inevitable increase in insurance premiums, most U.S. businesses fail to make the connection between their revenue streams and climatic conditions. This is an interesting fact considering the link between transportation services and road conditions.

Many transporat companies turn to Transportation Factroing Companies to abosrt the cash flow slump, it is solely based on the accounts receivable value of the company. The funding can occur in a minimum of 5 days which would be much faster than a bank.

Improvements to Weather Risk Management Capabilities

With that being said, the growing accessibility of weather data has increased over the past decade. This should help to strengthen weather risk management capabilities among insurers and trucking companies. The hope is that as more information and tools become available, insurers can offer protection for remote locations around the world. For trucking companies, these tools can help with implementing strategic plans to endure weather’s impact.

Specifically, these risk management tools can highlight how extreme weather patterns might affect delivery times. In addition, there could also be an opportunity to factor into operational costs how weather impacts the life cycle of equipment. This is of greatest concern when engines are forced to operate for extended periods to provide heat for truck drivers who are stuck at a truck stop.

Preparing for the Unexpected

Industry analysts, rating agencies, lenders and shareholders have all increased their awareness of the need to have weather protection as part of a trucking company’s risk management plan. While there are no unreasonable expectations for trucking companies to control the weather, they are not excused from understanding the economic impact. Rain or shine, trucking companies should be prepared to make educated decisions on the best ways to insulate their operations from unexpected and unwanted weather risks. Doing this gives them greater control over the financial impact.

There are fewer incidences like a blizzard, for example, to highlight the unique role that transportation software can have in mitigating damages. Similarly, global events such as the price of fuel can also affect the cost of transporting goods. Notwithstanding daily external factors such as traffic conditions that can influence operations, making customer deliveries remain a high importance. When a significant portion of a scheduled route is hindered, business operations within a trucking company should be prepared.

Climate change advocates believe that severe weather will have an increasing role in fleet management operations. The biggest problem, they propose, is that climate change will increase extreme weather patterns each year and interrupt the transportation industry. A report due out in March 2014 from the Intergovernmental Panel on Climate Change emphasizes the negative impact of severe weather on agriculture and infrastructure as well.

Ways to Overcome Severe Weather Setbacks

Changes in weather conditions pose significant challenges to the trucking industry, which leads to dramatic increases in fuel and labor costs. Lost revenues from delays or cancellations only exacerbates the problem for fleet services that depend on serving customers with on-time deliveries. Despite severe weather and climate change predictions, there are ways that trucking companies can overcome the economic setbacks. Investments in advanced logistics software applications will not change the past but can safeguard against future weather-related problems.

Use Technology to Reroute Deliveries

An obvious impact to the trucking industry from severe weather events is when previously planned routes for deliveries become inoperable. Fleet managers should invest in technology that reroutes deliveries to keep them as close to schedule as possible.

Where there is excessive snowfall, there is most likely dangerous road conditions. As a result, trucking companies should use routing software that can identify faster, alternative routes. There are significant risks to dispatching trucks in the middle of a severe snow storm.

Not only are drivers put in danger, but stranded trucks can also increase the financial costs of attempting to make a delivery. Instead, trucking companies can keep track of weather patterns and plan routes according to anticipated changes.

Rearrange Dispatch Plans

An obvious impact to the trucking industry from severe weather events is when previously planned routes for deliveries become inoperable. Fleet managers should invest in technology that reroutes deliveries to keep them as close to schedule as possible.

Where there is excessive snowfall, there is most likely dangerous road conditions. As a result, trucking companies should use routing software that can identify faster, alternative routes. There are significant risks to dispatching trucks in the middle of a severe snow storm.

Not only are drivers put in danger, but stranded trucks can also increase the financial costs of attempting to make a delivery. Instead, trucking companies can keep track of weather patterns and plan routes according to anticipated changes.

Protect the Merchandise

It also helps to have a plan for safety and security measures to protect sensitive or hazardous goods while traveling. The quality of some merchandise can be affected by cold weather while heading towards its destination. Interruptions due to weather conditions are handled more effectively with improvements to forecasting the needs of certain merchandise. End-to-end processes for handling deliveries leads to better temperature control in trailers based on outside weather conditions.

Conclusion

Simply waiting for the storm to pass may not be a viable option for all trucking companies. Sometimes, weathering the storm is overcoming visibility impairments, extreme temperatures, pavement friction or any other condition that will affect driver capabilities. In other times, bad weather leaves trucks completely immobile. While this creates challenges to the bottom line, weather interruptions can be handled more effectively when through forecasting and rerouting schedules that leave trucking companies on the positive side of profits.