Weatherproofing Supply Chains: 5 Strategies to Mitigate Extreme Weather Risks
With historic drought plaguing the Panama Canal, a tropical storm slamming the California coast, and wildfires ravaging Canada, we have entered an era marked by increasingly frequent and severe weather events. As a result of these events, the resilience of global supply chains is facing a significant challenge. Data shows a 36 percent increase in extreme weather events in 2022 compared to the previous year; and that number is expected to climb further in 2023. These disruptions not only halt transportation and operations but also pose substantial risks to supply chain continuity. To navigate this increasingly volatile landscape, businesses need to adopt proactive strategies to minimize potential losses and mitigate disruptions.
In this article, we’ll take a look at five strategies businesses can implement to weatherproof supply chains against the impact of extreme weather.
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Multi-Tier Mapping
A critical starting point in weatherproofing supply chains is gaining a comprehensive understanding of an organization’s multi-tier supply network, ideally down to the part-site level. By mapping the supply chain’s intricate layers, businesses can gain visibility into the complete picture of their supply chain, including the origins of components and raw materials. Mapping also enables companies to pre-emptively relocate high-risk products (ahead of a storm), identify alternative production sites, and swiftly redirect operations in response to an extreme weather event.
Event Monitoring
With the supply chain mapped, another key to minimizing risk lies in monitoring for potential disruptions that could affect a company’s supplier network. There are technology-based supply chain risk monitoring services that leverage AI to scan millions of news sources for risk events – including hurricanes, floods, droughts, and fires. Investing in this type of 24/7 monitoring is critical to stepping up mitigation efforts and responding to weather-related threats in real-time.
Supplier Risk Assessments
Consistently evaluating how equipped suppliers are to handle extreme weather events is crucial to business continuity. This might include ongoing risk assessments that survey and score suppliers on their hurricane preparedness or site BCP risk. By conducting these assessments, organizations can identify suppliers with robust preparedness strategies as well as those requiring improvements. The former can serve as a benchmark, while the latter should be looked at as an opportunity to collaborate with the supplier(s) to fix issues.
Consider this: a recent Resilinc business continuity assessment found that 73 percent of suppliers surveyed didn’t have satellite phones on site, while 37 percent of sites lacked backup power. Having transparency allows businesses the opportunity to work with at-risk suppliers to develop joint plans to close gaps and limit exposure to any trouble. And if the risk is too great, businesses should make an informed decision to terminate the relationship and find a new supplier.
Leverage Historical Data
By studying past disruptions, companies can identify vulnerable points within their supply chain. This analysis is especially valuable in learning which locations are more susceptible to weather-related disturbances. According to a study Resilinc conducted with the University of Maryland’s Supply Chain Management Center and Earth Systems Science Interdisciplinary Center, only 11 percent of supply chain sites are fully prepared for disruptive weather events due to climate change. The study, which included supply chains of 100 original equipment manufacturers (OEMs) in the high tech, auto, and consumer goods industries, spanning first- and second-tier suppliers across 12,000 U.S., Chinese, and Taiwanese production sites also revealed:
Half of the sites are at high risk of being hit by storms, flooding, heatwaves, droughts, and fires.
80 percent of all sites in the U.S. and 48 percent of all sites in China and Taiwan have either no business continuity plans or alternative manufacturing sites lined up.
Of these, 72 percent of U.S. sites and 38 percent of sites in China and Taiwan are critical 1st and 2nd-tier sites whose disruption would gravely impact OEM revenue (they are high-revenue-at-risk sites).
Develop Comprehensive Backup Plans
No weatherproof strategy is complete without a robust contingency plan. In the face of severe weather, employees need clear directives. A comprehensive playbook should outline protocols to be followed when an organization’s supply chain is hit by an extreme weather event. Storing additional inventory in diverse locations, establishing alternative distribution methods, and minimizing dependence on single sites for high-risk components are all best practices to ensure business continuity while minimizing disruption impacts.
Navigating the unpredictable terrain of extreme weather disruptions demands a multifaceted approach. By enhancing supply chain visibility, fostering strong supplier relationships, and leveraging advanced monitoring and planning techniques, businesses can swiftly mitigate the impacts of extreme weather events. With climate risk-related events on the rise, technology-driven risk management tools and data are becoming indispensable. By adopting these strategies, companies can stay one step ahead of unforeseen circumstances and ensure resilience in the face of storms.
Since founding Resilinc in 2010, CEO Bindiya Vakil has helped transform the way that global organizations approach supply chain visibility and risk; driving them to shift from reactively addressing catastrophic supply chain events to putting preventative solutions in place through monitoring, mapping, and planning. She is a founding member of the Global Supply Chain Resiliency Council and a member of the Advisory Board of MIT Center for Transportation and Logistics.
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