With an increase in extreme global weather events that climatologists have largely attributed to man-made greenhouse emissions, leaders in the supply chain industry are paying attention and taking steps to use data collection tools to better reduce the threat of natural disaster-related concerns.
According to a survey of 2,415 supplier organizations in a report by the Carbon Disclosure Project (CDP), a 52 member organization of supply chain companies, 70 percent of respondents identified climate change as a risk with the potential to significantly affect business or revenue. Similarly, of the supply chain risks identified by respondents, more than half cited drought and precipitation extremes as already affecting operations or are expected to have an effect within the next five years.
"This research illuminates fragility in the global supply chain model." said Paul Simpson, CDP's chief executive officer.
Other findings show that a performance gap continues to exist between CDP supply chain members and their suppliers. Of the 29 percent of suppliers that have improved their operations, an estimated $13.7 billion was saved as a result. If the remaining proportion of suppliers in the survey were to achieve operational efficiencies at that same rate, the potential amount of savings could reach over $41 billion - a threefold increase.
Comprehensive Cooperation, Solutions Needed
Many of the leading industry suppliers have already begun implementing ways to streamline supply chain logistics and shipment tracking. The CDP stated that in order to achieve the goal of a better global supply chain, a collective effort is necessary on the part of all industry partners. The CDP is also careful to point out that a company seeking to transition toward a risk reduction strategy requires taking a number of steps, including making investments in supply chain software. Companies should have strong capabilities in data, process and governance and be able to improve upon its ability to manage data and measure progress. In addition, businesses should embed increased efficiency in day-to-day processes and manage multiple parts of the organization more effectively.
"[The companies taking the lead] are more likely to enjoy monetary savings as a result of their responses to climate change risks," said Gary Hanifan of Accenture, "but the return on investment by the most proactive companies will not reach its full potential unless those companies can encourage their suppliers to follow their lead."
The future threat of supply chain disruptions may become more frequent, but by improving data collection tools and methods, the supply chain industry can better mitigate its risk.