The last two decades have brought about increasingly destructive natural disasters. From Hurricanes Katrina and Sandy to the eruption of Eyjafjallajokull volcano in Iceland to the earthquake and tsunami in Japan. Along with widespread devastation to their physical surroundings, each of these natural disasters impacted business operations in many cases on a global scale. Over the years, climate changes are happening at a faster pace than originally anticipated. This has resulted in rising sea levels, which coincides with more severe storms, temperature swings, and volatile precipitation. Because of this, we have seen and will likely continue to see more intense weather
that will have greater destructive potential, according to the National Oceanic and Atmospheric Administration (NOAA). In this blog, we’ll go over the economic and supply chain impacts that result from these events and how you can best prepare your supply chain.
Impacts on the economy and supply chains
Severe weather has exponential impacts on our global economy. According to Aon Benfield’s 2016 Global Climate Catastrophe Report, the world saw $210 billion (USD) in economic losses because of 315 separate natural disasters. That’s 21 percent above the 16-year average of $174 billion (USD). When these natural events happen, numerous businesses find their supply chains shook.
Natural disasters cause severe disruption to global technology supply chains. For example, after the 2011 Thai floods, there was a global shortage of computer hard drives that sent consumer prices skyrocketing until factories were able to get back up and running. When the 2011 tsunami struck, several major car manufacturers were forced to shut down production at factories throughout Europe and the U.S. due to a lack of available parts from factories in Japan, setting off a supply chain reaction that impacted multiple suppliers of parts throughout the wider global economy. Snowstorms are also a culprit of transportation delays and supply chain worries. If weather conditions drop below a certain temperature truck engines will not start, quickly accumulating snow may mean railroads might not be able to clear the tracks fast enough and snow and ice can make it impossible for planes to travel safely. All causing disrupted supply chains across the country.
Preparing your supply chain
With the increase of natural disasters, ensuring that your business is prepared for the potential disruption is very important. Disaster planning needs to consider not just the direct impact to your infrastructure, but how the after-effects of events far away from your base of operations could affect your supply chain and markets.
Create a disaster preparedness plan
Have a plan ready that outlines what to do in case of emergencies and natural disasters. This plan should take into consideration all types of weather and natural disaster your area is most susceptible to, and perhaps some that would particularly be considered unlikely. Also, be sure to ask companies you partner with for their disaster plans to ensure alignment with risk management.
Monitor for threat
Supply chain risk management works best when companies have the earliest possible notice of potential disruptive impacts. Keeping up with potential weather, running a data analysis, and running simulations across your supply chain to identify pressure points where natural disasters would most likely impact your operations are all ways to keep up with your disaster preparedness plan.
Be transparent and flexible
Many natural disasters may be impossible to predict (earthquakes, wild fires, etc.) so disruption may be inevitable. Be open with members of your team and companies you partner with about how weather or natural disaster may affect capacity and your company’s supply chain. Additionally, think about substitute work spaces and methods of transport for your goods. It’s never too early to revisit your risk management and disaster preparedness plans. At Trinity, we work with a network of over 70,000+ carriers and we’re always looking at the state of the industry and communicating with our customers. If you’re looking to partner with a 3PL to help manage your supply chain or have any questions about how Trinity can help your business, fill out our quick form here