The Impact of Climate Change on the Supply Chain

Dustin Caudell
Mon, Sep 12, 2016
Climate change is affecting how the success of the supply chain, and companies must have certain strategies in place to weather this storm.
Climate change is affecting how the success of the supply chain, and companies must have certain strategies in place to weather this storm.

Scientists are now warning businesses to keep climate change in mind when developing supply chain management strategies. In fact, FM Global recently released a white paper that addressed this issue, forecasting the future of climate change and highlighting how companies can adjust their practices to safeguard their business.

The Current Picture of Climate Change
The document, titled "Coping with Extremes: The Impact of Climate Change on Extreme Precipitation and Flooding in the United States and How Businesses Can Prepare Now," is the result of collaboration between atmospheric experts and FM Global researchers. Their findings give readers a highly researched and in-depth view of how increased rainfall will affect businesses. It stressed that understanding this concept is the first step to protecting the supply chain.

According to the white paper, the Northeast, Midwest, Great Plains and Southeast areas of the country are particularly susceptible to increased rainfall. Meanwhile, the Southwest region may be prone to droughts.

Companies must keep these trends in mind to ensure they don't lose money to natural disasters like floods and fires. For example, if an especially heavy rainstorm occurs in the Midwest, a warehouse situated in the area could see floods, potentially damaging products and leading to major financial losses. Meanwhile, a truck driver taking deliveries across the country could run into a snowstorm, causing delays in the logistics end of the supply chain. As any supply chain manager knows, one misstep in the process can cause ramifications down the line. That is, an issue in the U.S. could impact the global supply chain. Remaining aware of these risks allows supply chain managers to plan accordingly and avoid scheduling and budget issues.

Despite these warnings and research, the white paper noted that many business people do not take climate change into account when making business plans. In one survey, 96 percent of executives said their facilities were located in locales susceptible to natural disasters like earthquakes and floods. However, less than 20 percent of those respondents considered these disasters impacting the business as a major concern.

These statistics demonstrate a gap that must be addressed to ensure effective supply chain management and business success.

Relocating Warehouses
The white paper advised businesses to situate their facilities in at least 500-year flood zones. That is, the locale should have only a 1 in 500 chance of experiencing a flood. Truly, locating to an even less risky area is better, but the number of safe zones becomes more limited as climate change progresses.

For many companies, this may mean relocating warehouses, which will cause challenges along the supply chain. These moves call for extra scrutiny in keeping track of products and adhering to schedules.

In fact, the move presents an opportunity to apply new strategies to increase efficiency and productivity. The RFgen white paper, "Tomorrow's Warehouse Today: Three Technologies for Exceptional Operational Efficiency' highlighted how innovative data collection solutions can help supply chain managers do just that.

For one, warehouse managers should digitize workflows and get rid of paper-based processes. Installing solutions like mobile data collection devices and wireless barcode scanning devices increases efficiency. This adjustment can also improve accuracy and allow for easier traceability of products - an important component during relocation.

Additionally, companies may benefit from instituting voice-enabled picking. This technology allows for faster training, which is vital when onboarding new employees at a relocated warehouse.

Picking Effective Partners
The FM Global white paper also stressed that companies must look at their supply chain vendor relationships. Do their partners have the appropriate strategies in place to prevent climate change challenges? How equipped are their risk managers?

DSC Logistics and Supply Chain Management offered some criteria when selecting supply chain partners to ensure a successful relationship. For example, how well does the partner share and collaborate among team members? Consider what tools they have in place for this process. A digital and mobile data collection solution will allow for communication better than a paper-based process. Additionally, the partner must be able to respond to changes quickly. If a natural disaster strikes, they must be equipped with the tools and knowledge to adjust on the spot to prevent delays in the supply chain process.

Be Proactive with Sustainability
Beyond being prepared, those in supply chain management can do their part in preventing severe climate change with sustainability efforts. In fact, considering going-green is such a popular trend, customers may accept longer delivery times or higher prices in favor of environmentally friendly practices.

Even simple changes can significantly reduce a company's carbon footprint. For one, supply chain managers can do away with paper-based processes in favor of digital data collection solutions. This reduces waste and can actually improve efficiency, too.

Supply & Demand Chain Executive also advised business invest in renewable energy resources. For example, warehouses managers can install solar panels to provide energy to run the facility. However, efforts need not be that substantial. Companies can make a big impact with simple light-source changes. According to the U.S. Department of Energy, swapping out incandescent lights for LED bulbs can drop energy use by 75 percent. Meanwhile, LED bulbs last 25 times longer, saving companies money on overhead expenses.

Additionally, companies should consider more than just the flood risk when relocating warehouses. They might also select locations that put the facility near transportation hubs. A shorter distance between logistics bases and warehouses will reduce miles traveled, saving on gas and reducing carbon output.

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