Climate crusaders say, magnitude of climate change’s threats on supply chain, a long term dire, is not getting projected the way it ought to be, whereas impact of the Covid pandemic on it which is transitory gets widely discussed. Focus or otherwise, supply chain disruptions due to extreme weather conditions like hurricanes, floods, wildfires are jolting the global economy. Being weather-ready and get prepared for the weather impacts can minimize supply-chain disruptions, experts say. But many a time this is easier said than done.
Introduction
According to a report by UN, risks to global supply chains are on the rise due to the severe effects of climate change. It could put huge pressure on fuel stability and essential goods worldwide.Companies which manage supply chain need to understand the risks involved and to respond or adapt to the climate change.
Climate Change Disruptions
Climate change disasters include winter storm/cold waves, droughts/heat waves, wildfires, tornadoes and tropical cyclones. These may make the global delivery network fragile and disrupt the each and every link of supply chain threatening ports, roads, railways, bridges and factory closures.
Of all of climate change’s threats to supply chains, sea level rise seems to be a potentially the big threat. Around 90% of the world’s freight moves by ship. Inundations eventually will threaten most of the world’s 2,738 coastal ports, whose docks generally lie just above sea level to as high as 4.5 meters.
Supply chain disruptions caused by hurricanes, floods, wildfires, and other forms of increasingly extreme weather are jolting the global economy. The consequences of climate change disruptions could be price increases and shortages of all kinds of goods right from agricultural commodities to cutting-edge electronics.
One of the biggest challenges threatening the integrity of SCM is the cost of goods and the cost of shipping. In some instances, shipping costs have skyrocketed by as much as 600%, a non-sustainable amount. For instance, damage to food storage, caused by electricity failures, and to transport routes could significantly decrease availability and increase the cost of 22 highly perishable, nutritious foods such as fruits, vegetables, fish, meat, and dairy.
Ways to adapt to Climate Change
According to Mckinsey, the following ways might be significant requirements for supply chain companies to adapt to climate change:
Conducting risk diagnostics, protecting manufacturing assets, redesigning operations (for example, by increasing safety stock of key inputs), broadening supplier base, shoring up infrastructure, etc.
Gartner identified three enterprise adaptation actions:
- Focused Adaptation: Identifies climate threats and opportunities at a site-by-site level and helps to protect the assets.
- Informed Adaptation: Identifies climate risks and opportunities for product portfolio and footprint and helps for revenue protection
- Transformative Adaption: Identifies climate change risks and opportunities to inform and drive supply chain and enterprise strategy; and helps for revenue protection. It helps in competitive differentiation.
Conclusion
As Gartner emphasizes, supply chain officers must determine how to ensure that both short- and long-term supply chain and organizational strategies can be achieved. The companies need to integrate the climate change risks into their strategic decision making. They also need to collect and review the costs of historic disruptions. Based on this, companies should chart climate change response plan.
Learners’ Opportunity
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Discussion Question
Is buffering an easy way out for supply chain disruptions? Why?
Key Words
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Source Article
2. “How Supply Chains Are Responding to a Changing Climate”. (2022).
4. Jacques Leslie. (March 24, 2022). Climate Change Will Make Supply Chain Woes Worse,