The UK was recently subjected to an extreme cold spell that saw widespread disruption across the UK. Dozens of rail services and flights were delayed or cancelled, thousands of schools were closed, a raft of homes were left without power in certain parts of the country and many people struggled to get to work in the snowy and icy conditions.
This short spell of disruption would have come at a cost to the UK economy, but in reality we should be thankful we’re not subjected to the extremes of weather that can impact other parts of the world. Anyone remember the scenes we saw on our TVs in the wake of Hurricane Irma in the Caribbean and Florida? In addition to the devastation caused to thousands of families’ homes, businesses were left in turmoil too. Florida, for example saw the price of its diesel soar and shipping and trucking capacity was severely limited in the region. It is estimated that the economic cost of the storm which has caused significant damage to homes, businesses and crops could be as much as £227bn.
The knock on effect of the storm’s impact is still being felt, especially for any businesses with suppliers based in the storm-damaged regions. This event highlights the increasing risks businesses face when they have a supply base in a region that could be affected by adverse weather or other environmental factors such as earthquakes, or volcanic eruptions.
No matter where in the world your critical supply base is located it is essential that businesses ask their suppliers the right questions from the start of their relationship. Even with non-business critical purchasing activity, adopting a proactive approach to on-boarding/supplier evaluation and supplier contracting means that you can assess your suppliers and ask questions about disaster recovery, insurances, and best practice around handling large scale environmental events from the outset. Sounds obvious, but it’s very easy to overlook this line of questioning, especially if purchasing is being done on a decentralised basis.
Key to this is making sure both you and your suppliers can demonstrate what happens in the ‘what if’ scenario. Businesses need to consider the safety factor, especially those who don’t hold large amounts of stock or raw materials because they don’t have the storage capability or their cash flow model doesn’t allow for it. It’s essential that businesses have redundancy plans built in to their supply chain.
A good example of this, was the Japanese automotive industry’s response to the earthquake-tsunami that hit the region in 2011. Some businesses got back up and running considerably quicker than others, but harsh lessons were learnt all round and the catastrophe saw manufacturers and suppliers in the region re-evaluate how they do things including stockpiling more parts, relocating facilities away from flood plains and reinforcing their factories.
Adverse weather and natural disasters are clearly unpredictable events but understanding how to take on these conditions before they happen is a huge advantage. Understanding the potential impact on all parts of the supply chain and having a plan in place to minimise the impact of disruption is the key to surviving the worst that mother-nature can throw at us, no matter where your suppliers are located.