Understanding The Impact of Climate Disruptions on Supply Chains and What You Can Do About It
Climate change, with its effects on rising sea levels and extreme weather events, is set to disrupt shipping and port operations. Ultimately, this can impact your supply chain. To effectively navigate climate disruptions, follow these three strategies.
Right now, most discussions concerning the supply chain are centered around managing the pandemic’s continued fallout and getting everything “back to normal” — or at least close to it. While these are important discussions, worry over the pandemic’s impact has overshadowed a much bigger, more volatile, and longer-lasting threat to supply chains: climate disruptions.
Many people seem to think that climate disruption is a problem for the future, which it is. But climate disruption is also a problem for today.
Although rising sea levels threaten coastal communities and, by extension, shipping and trade, extreme weather is the most pressing concern for the supply chain. Flooding, wildfires, tornados, and hurricanes have become more common over the past few years, devastating communities and, in many cases, wreaking havoc on the supply infrastructure.
Take the Texas freeze that happened in February 2021 as an example. As a result of the blackout, three semiconductor plants were forced to shut down, exacerbating an already critical shortage. The freeze also led to the closure of railroad lines, the main modes of cargo transport between Texas and the Pacific Northwest.
In Europe, the Rhine River, an essential waterway for cargo transport, saw dangerously low water levels in 2023. The water level fell to 1.6 meters, which is far below the typical “low-water” mark of 2.1 meters. As a result, shipping was adversely impacted.
These events are only going to become more common as climate disruptions worsen. If you have not yet begun taking steps to mitigate the impact of climate disruptions on your supply chain, now is the time.
Why Supply Chain Executives Need to Spearhead Climate Disruption Preparations Now
The effects of climate disruptions — including the present-day damage from extreme weather events and the long-term effects of rising sea levels — can cause severe damage to your business operations. Supply chain leaders need to determine how exposed their global network is and which sites along the chain have the highest levels of risk. Determining risk involves the assessment of several factors, including geography, potential lost revenue, the repercussions for original equipment manufacturers, and how quickly a site can recover from a disruption.
Depending on the size of your business, determining risk has the potential to be a massive endeavor — but it is also unquestionably worth the work. By reducing your company’s risk now, you protect it from lost revenue and inventory due to natural disasters and extreme weather. This allows you to maintain healthy relationships with the OEMs that rely on your supply chain to build their products.
3 Steps to Help You Protect Against Climate Disruption
In the current landscape, leaders in the supply chain industry should focus not on whether to prepare for more volatile climate disruptions but on determining the most effective ways to do so.
- Expand your understanding of the threat.
Climate disruptions threaten your operations and infrastructural assets, such as ports, roads, transportation, and electrical grids. In anticipation of potential danger, it’s crucial to broaden your comprehension of risk, accounting for factors such as the threat’s location, nature, and timing. A comprehensive understanding of how these elements intersect with the supply chain and how they can be disrupted by severe weather conditions will enable you to respond more swiftly. - Rely on artificial intelligence.
Artificial intelligence can warn you of severe weather events heading your way, maximizing your ability to mitigate damage and decrease responsiveness time. With the help of AI, you can figure out how a natural disaster will impact your routes and put into motion the most effective backup plans for dealing with interruptions and closures. AI can also examine data patterns to guide you toward more sustainable operating procedures and help you determine which suppliers are least likely to be adversely impacted by climate events. - Develop contingency plans.
It’s important to remember that there’s no way to predict with 100% certainty what will happen. Certain impacts are inevitable regardless of how much work you do to protect your existing infrastructure. However, you will experience less impact if you plan ahead. Invest in risk and decision intelligence solutions that can help you craft contingency plans in case of disruptions and delays. That way, you can still deliver on time even if a site is down.
Facing the impacts of climate disruptions on your supply chain is not a question of “if” but “when.” As the CEO of a supply chain organization, you can no longer afford to put this off as a future problem. By taking the time to fully understand the risk, investing in the right technology to help mitigate that risk, and coming up with contingency plans, you can deliver on time and bypass costly delays.
Written by Ali Hasan Raza.
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