Digitalization Can Help Mitigate Climate-Related Supply Chain Disruptions
For sugar importers, this past summer was anything but sweet. The cost of sugar has surged by more than 40 percent globally since last year due largely to poor harvest conditions caused by dry conditions across India, China, and Thailand, as well as an unusually cold and wet spring in Europe, which are expected to increase the prices of soda, candy and baked goods, among other products. It’s just the latest example of how extreme weather has taken a toll on the supply chain recently. The same dramatic dry/wet weather patterns have also increased prices for coffee, nuts and select produce.
Sourcing operations have always been subject to the whims of the weather, especially food and beverage manufacturers that depend on vulnerable harvests. From typhoons and flooding to earthquakes and wildfires, extreme weather has long caused supply chain bottlenecks across the globe. However, experts have warned that these kinds of climate-related disruptions will only become more common in the years to come as coastal sea levels continue to rise and the effects of climate change grow more pronounced.
Last year, stifling temperatures and draught shrank water levels along Europe’s Rhine River, a waterway relied on by much of the continent. Some ships had to reduce their loads by as much as 75 percent so they could traverse the shallow waters, which strained the supply of many materials including coal, chemicals, iron ore, and other metals. Those water levels were down once again this summer, an ominous reminder of how frequent abnormal weather conditions have become.
Weather-related disruptions are especially difficult for businesses to navigate because they're so unpredictable. They hit the supply chain without warning, and businesses are alarmingly vulnerable to them. A survey from the University of Maryland’s Supply Chain Management Center of the supply chains of 100 manufacturers, which include more than 12,000 production facilities, found that half of those sites were at high risk of being hit by floods, storms, droughts, heatwaves and fires. Yet most of those sites had no business continuity plans and no alternative sites lined up that could be quickly put into operation in the event of a disruption.
In order to get ahead of likely disruptions, supply chain leaders need strategy and process re-engineering to comprehensively describe their supply base risk exposure and identify actions necessary to manage rapidly evolving circumstances and unanticipated shocks. Ensuring a 360-degree view of the actors and entities that make up the supply chain network forms the foundation of those strategies.
Leveraging a Multi-Enterprise Platform
Brands and retailers that outsource most of their manufacturing need technology in place to facilitate better planning far earlier in the process. Having built a high level of agility in your supply chain platform allows you to adjust rapidly to these unforeseen circumstances and limit the impact on the business.
While companies cannot directly mitigate the higher trending trajectory for severe weather and its ensuing supply chain disruptions, they can take steps to better mitigate risk. A multi-enterprise platform, also known by Gartner as a multi-enterprise collaboration network, creates visibility into an organization’s supplier base so that supply chain managers can minimize the impact of disruptions and quickly find alternate suppliers while delivering products on time, at acceptable prices, and to their standards of quality and sustainability. Having end-to-end transparency and the real-time data and alerts that a multi-enterprise platform introduces is integral to achieving improved key performance indicators in the areas of staff productivity, customer service, and financial cost management.
There’s a popular concept in logistics known as the control tower — a connected dashboard for tracking orders from seven days before shipping until they arrive. A comprehensive supply chain management platform can do so much more than that, however. The right multi-enterprise platform connects not only logistics, but all critical steps in product development, from design to sourcing, costing and quality management.
It can also help businesses identify new material providers and efficiently onboard new suppliers, while ensuring that those vendors adhere to your environmental, social and governance (ESG) standards and your products are sourced responsibly. By taking a unified view of their supply chain planning and ensuring that every department has access to the same accurate, real-time information, businesses can better prepare for and predict disruptions and minimize their impact.
Weather-related disruptions are only going to increase, and companies will no longer be able to manage them without agile supply chain solutions in place. The right platform can limit the impact on their business, ensuring they’re sourcing smarter, planning further in advance, and staying prepared for whatever storms lie ahead for the supply chain.
Tim Chiu is the senior vice president of TradeBeyond, a company that connects retail supply chain operations from product development to delivery.