With the holiday season and festivities upon us, the last thing on everyone’s minds are natural disasters and supply chain preparedness. But as the biggest shopping days of the year swirl around us, it is important to consider the supply chains that we as consumers rely on and what inclement weather can do to disrupt them.
The impact a natural disaster or inclement weather can have on a supply chain can happen instantly and last for an extended period of time. Even the most robust supply chains are only as strong as their weakest link. If one single link in the chain is broken, it could mean catastrophe for the supply chain as a whole.
Earthquakes, hurricanes, tornados, volcanic eruptions, flooding, winter storms, tsunamis and forest fires can all impair supply chains by destroying warehouses, or at the very least knocking out power. While many warehouses are somewhat fortified against natural disasters, what happens if all the preventative measures aren’t enough? What happens to your supply chain when it is without power, or worse, strewn across miles of land? What if your raw materials are damaged or ruined beyond repair? Many businesses are forced to shut down due to natural disasters and some supply chain based businesses never recover.
Even if your warehouse is nowhere near the eye of the storm, your supply chain can still be broken. In a 2016 article, Keetering University noted the 2011 Tohoku earthquake and tsunami “shook supply chains all over the world.” Companies that were dependent on Japan’s auto and electronic manufacturing facilities found their supply chains put on hold as Japan tried to rebuild.
Not only can a natural disaster disrupt the flow of parts and raw materials through your supply chain, but it can drive up prices for the movement of materials through your supply chain. A state of emergency can raise gas prices, which can force you to drive up your product prices or take a cut on your ROI. Natural disasters are notorious for closing down airports and sea ports, which can completely halt your material movement. In 2016, EPS News published an article stating that one in every three organizations report losses of more than $1 million due to supply chain disruptions. A financial hit that many businesses cannot afford to take.
So, what can you do to help protect your supply chain from natural disasters? The most important part of supply chain protection is supply chain visibility. You can’t completely predict how a natural disaster will impact your supply chain and ultimately your business, but being able to see into all aspects of your supply chain will help you prepare for whatever comes.
Knowing where your raw materials or parts come from can help you organize around local weather and mitigate the risks surrounding your supply chain. You can also plan for an influx or decrease in demand due to extreme weather. If you are a necessity supplier, such as water bottles, you may have a higher product demand during a natural disaster, whereas if you are a supplier of non-necessity items you may experience a serious demand decrease. Both cases can be crippling to your business if you are not prepared.
Creating a backup plan in case of a supply chain break is key to being prepared in the event of a natural disaster. If you are a potato chip company and your main potato supplier’s crop is ruined by a flood, having a secondary supplier can be an essential part of keeping your supply chain up and running. CRI CPAs and Advisors stated that backup suppliers are the link to a strong supply chain. Even without a natural disaster threat, it is important to have a backup supplier should your supply chain ever be threatened.
In the case of a total supply chain break, Inbound Logistics suggests looking to your partners. Not only is it vital to alert your partners of a potential supply chain break, but your business partners can provide assistance in a time of need.
While it is easy to only consider risk management during the face of a disaster, it is something your business should be planning for long before the first weather alert goes out. In some cases, you have time to prepare for a natural disaster before it actually impacts you, but in many cases, you do not. Secure your supply chain now, not later.