Extreme weather has taken a toll on the supply chain recently. The cost of sugar has surged by more than 40% globally since last year, largely due to dry conditions across India, China and Thailand.
An unusually cold and wet spring in Europe is expected to increase the prices of soda, candy and baked goods, among others. The same dramatic dry/wet weather patterns have also increased prices for coffee, nuts, and select produce.
The Impacts of Climate Change
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. 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% so they could traverse the shallow waters. This strained the supply of many materials including coal, chemicals, iron ore and other metals. This summer those water levels were down once again, an ominous reminder of how frequent abnormal weather conditions have become.
Navigating Climate Change Impacts
Weather-related disruptions are especially difficult for businesses to navigate because they’re so unpredictable. A survey from the University of Maryland’s Supply Chain Management Center, 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. Utilizing a multi-enterprise platform can help create visibility into an organization’s supplier base. This will allow supply chain managers to minimize the impact of disruptions and quickly find alternative suppliers to deliver products on time.
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.
Multi-enterprise platforms 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 the 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.
Tim Chiu is the Senior Vice President of TradeBeyond. He has more than 25 years of experience in supporting global sourcing automation and information technology that enables collaboration between global commerce communities.