Plan B: 5 Ways to Weatherproof Your Supply Chain
From establishing secondary suppliers to setting up alternative routes, here's how Plan B strategies can keep you up and running, even during extreme weather events.
You don't have to be Al Roker to know that the world is experiencing more frequent and severe weather events that impact supply chains.
In fact, "extreme weather events" are ranked as the top risk for likelihood as well as third in terms of impact, according to the World Economic Forum's Global Risks Report 2019. Just six years ago, this phrase wasn't even in the top five for either category.
Between 2016 and 2018 in the United States, the number of weather-related billion-dollar disaster events was historic—more than double the long-term average, reports the National Oceanic and Atmospheric Administration.
"North America historically has been viewed as a safe zone, but if you look at recent weather events, the security that companies had by keeping their supply chain close by is going away," says Bill DeMartino, general manager, North America, for riskmethods, a global supply chain risk management company.
The impact of extreme weather events isn't always short term, either. "We see the impact more in the aftermath," says Robert Boyle, vice president, NA managed logistics services for Connecticut-based Odyssey Logistics & Technology Corporation. "A localized issue often becomes regional and then national when capacity is disrupted."
As a result, weatherproofing the supply chain is now essential for shippers. Here are five ways to do that.
1. Plan. Then plan some more.
The goal for shippers is to be both proactive and reactive. Make sure you have access to the data that can help you plan—but be certain to have a plan, too.
At a recent riskmethods summit, one customer detailed how it worked with the risk management company during Hurricane Florence in 2018. The riskmethods system first identified 171 of the customer's supply chain nodes—suppliers, ports, hubs—in the storm's path. As the forecast evolved in the following days, that number narrowed to 57.
The customer determined which suppliers in the storm's path were critical to its business. That knowledge, and a plan that specified responsibilities, tasks, and contingencies, minimized the storm's supply chain impact.
Even logistics service businesses need plans in place for their operations, as third-party logistics (3PL) provider Pilot Freight Services has seen more than once. For example, when Connecticut was hit by a freak but devastating snowstorm that wiped out power in nearly the entire state several years ago, the 3PL scrambled to find generators for its Hartford operation.
"Once we had generators, we could keep processes moving even though we didn't have heat or light for about five days," recalls Kim Gajewski, regional vice president. She adds that the facility now has a permanent—and powerful—generator.
2. Always have contingency plans.
Having back-up options is essential, especially among manufacturers using a lean approach. "They don't have 10 to 20 days of stock like they used to," says Dennis Drinan, vice president, lead logistics provider, for DHL Supply Chain, Americas.
Using ocean freight coming to the United States from overseas under threat of an East Coast hurricane as an example, he says, "We might look at ways we can get that material off the vessel sooner—maybe pull it off in Montreal rather than wait for the Port of Savannah to return to normal."
For some shippers, contingency planning involves back-up suppliers, redundant inventory elsewhere, or shipping larger amounts ahead of storm season to make sure customers have an emergency supply.
3. Be strategic about contingency product placement.
For some shippers, extreme weather contingency planning involves moving product and equipment away from the storm's path. For others, it's about bringing it closer.
Retailer Ace Hardware, for example, uses temporary warehouse space provided by FLEXE to move essential post-hurricane merchandise, such as generators, closer to regions typically in the path of devastating storms. It does the same with snow blowers in other parts of the country.
"There's enough predictability with this weather that Ace can temporarily move its goods where there will be the greatest demand," says Megan Evert, senior vice president, operations for FLEXE, a Seattle-based provider of on-demand warehouse space and services.
4. Look to the cloud.
In large part because it's located near hurricane-prone New Orleans, hearing products manufacturer General Hearing Instruments has moved its systems to the cloud. With customers that include Walmart, Sam's Club, and HSN, the company uses a cloud-based e-commerce platform provided by supply chain systems integrator DiCentral. It also has online proprietary enterprise resource planning software for everything from accounting to inventory management.
Cloud-based systems and processes mean that should manufacturing need to relocate, even temporarily, employees can log in to the system from anywhere.
"In this new era of climate change, we need to ensure that our location can also change," says Robert Artigues, vice president of operations, General Hearing Instruments. "Our systems must be available no matter where we are."
"It's also not just the day of the storm when you have trouble," adds Gajewski. "We need to be able to work remotely using the cloud because it can take three or four days before things are restored."
5. Have your tool chest stocked and ready.
A number of companies, including riskmethods, offer risk management and threat assessment tools that marry weather data with supply chain information.
One advantage of using these, says Drinan of DHL, which offers a cloud-based platform called Resilience360, is that they can provide essential information about weather that impacts the supply chain in other parts of the world.
"We all know when there's going to be a hurricane in the United States, but if significant weather elsewhere in the world isn't a catastrophic event, we don't hear about it," he says.
Ongoing access to that information, combined with supply chain data, allows companies to see quickly if or where they need to take action.
For many shippers, risk management for weather-related disruptions isn't optional. "When the disruptions are measured by the number of suppliers affected rather than the number of individual events, the four most significant triggers in 2017 were hurricanes, extreme weather, earthquakes, and floods," explains the Global Risks Report 2019.
Just ask Al Roker.