Dealing with extremes - Does your supply chain management strategy cater for climate change?

Posted by Barloworld Logisitics on 28 Jun 2018 10:00:00 AM

Supply chain

With the increasing frequency and severity of global weather events and the resulting negative impact on infrastructure, agriculture and the overall wellbeing of humanity, climate volatility effects the entire world, directly and indirectly. Businesses and industries are reliant on logistics networks to maintain market share, but thanks to extreme weather events these networks are at a considerably increased risk. Scientists are progressively cautioning businesses to keep climate change in mind when developing supply chain management strategies.

The effects of climate change have a negative impact on the economy, with South African being no exception. Extreme weather events like severe storms and droughts may affect the accessibility of raw materials such as water, food, cotton, rubber or paper and may result in damage to key infrastructure such as roads, ports, rail, pipelines, communication networks, and electricity supply inevitably impacting the supply of key resources, manufacturing processes or transporting products to customers, export and more importantly the health and safety of employees and communities. In order to survive, businesses are required to take reasonable measures to ensure that the effects of extreme weather events have a minimal impact on their operations and that should such events occur, the aftermath results in low level environmental impact. For example, manufacturers using hazardous goods within their processes need to consider if these materials are stored in such a way that the water supply would not be contaminated should their facility flood, or, organisations reliant on the road networks need to plan an uninterrupted supply should the network be compromised.

Companies would be prudent in keeping abreast of climate trends to avoid finding themselves unprepared at the strike of natural disasters.

For instance, if a particularly heavy rainstorm occurs, a warehouse situated in a low-lying area could see floods, possibly damaging products and leading to great financial losses. Concurrently, a truck driver making deliveries across the country could run into a sinkhole, causing delays in the delivery of goods. Supply chain sits at the centre of a smooth running economy and a disrupted supply chain could ultimately, for example, mean a dying patient not receiving urgently needed medication on time. As any supply chain manager is aware, one misstep in the process can lead to ramifications throughout the supply chain.

Remaining abreast of likely weather risks enables supply chain managers to plan accordingly and mitigate scheduling and budget issues.

The World Economic Forum’s 2016 Global Risk Report classifies water scarcity along with the failure to adapt to climate change as the two highest risks to the global economy. The delay or failure in supplying a resource due to infrastructure damage may have a knock-on effect for numerous businesses. Companies would do well to map such impacts and begin to implement adaptation measures with the aim of not only minimising these risks but ultimately remaining competitive.

Read our logistics of life infographic: Every Drop Matters 

This highlights the importance of selecting effective partners. Companies need to scrutinise their supply chain vendor relationships, and ask critical questions such as whether their partners have the suitable strategies in place to avoid climate change challenges. How prepared are their risk managers? Supply chain partners need to be able to respond to changes speedily, if a natural disaster strikes. They need to be agile and well equipped with the tools and knowledge to adjust immediately to prevent delays in the supply chain process.

In addition to being prepared, supply chain management professionals can play their part in averting severe climate change through sustainability efforts. Indeed going green is becoming a business imperative, with many customers generally being willing to accept longer lead times or higher prices in favour of environmentally friendly practices. Simple changes can considerably reduce a company's carbon footprint. One such example is to do away with paper-based processes in favour of digital data collection solutions. This reduces waste and can also improve efficiency.

Supply chain managers ultimately drive all raw material extraction, all mechanical and chemical conversion in manufacturing, as well as all packaging and delivery from source to end consumer. This applies to medicine, food, clothing, and machinery as well as all infrastructure in cities and towns. Changing the way supply chains are run today will impact the availability of resources tomorrow.

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Topics: Business, Trends