Digitalization Can Help Mitigate Climate-Related Supply Chain Disruptions

For sugar importers, the summer of 2023 was anything but sweet.

The cost of sugar has surged by more than 40 percent globally over 2022 due largely to poor harvest conditions caused by (1) dry conditions across India, China and Thailand and (2) an unusually cold and wet spring in Europe. The prices of soda, candy and baked goods, among other products, are expected to increase.

This is just the latest example of how extreme weather has taken a toll on the supply chain. 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. This is especially true for 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. But experts have warned that these kinds of climate-related disruptions will become more common in the years to come, as coastal sea levels continue to rise and the effects of climate change grow more pronounced.

Navigating Weather Disruption

In 2022, 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 such materials as coal, chemicals, iron ore and other metals. Last summer, those water levels went down, 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 University of Maryland Supply Chain Management Center survey of the supply chains of 100 manufacturers, which included more than 12,000 production facilities, found that half of those sites were at high risk of being hit by floods, storms, droughts, heat waves or 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.

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

The right technology can help brands and retailers that outsource most of their manufacturing facilitate better planning far earlier in the process. Building a high level of agility into their supply chain platforms allows organizations to adjust rapidly to unforeseen circumstances and limit their impacts.

While it’s impossible to directly mitigate the trend toward increasing severe weather and its ensuing supply chain disruptions, organizations can take steps to better mitigate risk. One way: Implementing a multi-enterprise platform. Such a platform creates visibility into an organization’s supplier base, so 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.

The platforms’ end-to-end transparency and real-time data and alerts are integral to achieving improved KPIs in the areas of staff productivity, customer service and financial cost management.

A comprehensive supply chain management platform can do so much more than the control tower concept — a connected dashboard for tracking orders from seven days before shipping until they arrive. The right multi-enterprise platform connects not only logistics, but all critical steps in product development. It can also help businesses identify new material providers and efficiently onboard new suppliers, while ensuring (1) those vendors adhere to the organizations’ environmental, social, and governance (ESG) standards and (2) 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, organizations can better predict and prepare for disruptions, minimizing 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. The right platform can limit the impact on businesses, ensuring they’re sourcing smarter, planning further in advance, and staying prepared for whatever storms lie ahead.

(Photo credit: Getty Images/Santosha)