Disruptions are Difficult to Manage
Businesses are woefully unprepared for disasters and disruptions in their supply chain. In fact, two-thirds of employees say their businesses have not reassessed safety and crisis plans since the last time they faced a natural disaster.
In the first half of 2014, the U.S. lost $50 billion in productivity due to natural disasters. Much of the disruption is from delayed or stopped transportation, which is particularly susceptible to poor weather conditions and natural disasters.
Some companies are reactive and agile during a disruption or disaster – using a transportation management system (TMS) to reroute freight in transit and schedule alternative modes for inventory on hand. But, most companies aren’t able to be proactive when disruptions occur, and many find it difficult to be reactive in these situations.
It is likely your company will be hurt by the next potential disruption in your supply chain. Often times, natural disasters and disruptions are unavoidable, and all you can do is limit the damage done to your supply chain.
Climate change is the biggest looming disaster facing businesses today, and fortunately, you can prepare for it.
Climate Change is a Major Threat to Supply Chains
Climate change poses a major threat to all modes of transportation. Elevated temperatures, increased rainfall, frequent flooding and landslides can damage infrastructure, creating serious disruptions, or worse, creating large-scale natural disasters.
A recent survey found 97% of the scientific community believes that humans are causing global warming, so from a supply chain perspective, the safest thing to do is to assume there will be increased instances of disruptions and natural disasters. How can you prepare for the effect climate change will have on transportation?
First, it’s best to know how each mode will be affected.
How Climate Change Affects Each Transportation Mode
Over-the-road (OTR) transportation will be significantly affected by flooding, storms and rising sea levels. The structural integrity of roads, bridges, and tunnels will be damaged which will create severe accidents and disruptions. There are approximately 60,000 miles of coastal roads in the U.S. that are highly susceptible to flood damage. Events like the 1993 flooding of the Mississippi River, which halted east-west truck traffic for six weeks, can reduce economic activity nation-wide, alter production schedules and can even cause manufacturing plant shutdowns.
Elevated temperatures are a major problem affecting OTR and rail transport. During prolonged exposure to high temperatures, asphalt softens, rails buckle and steel structures expand, all leading to rapid road degradation, train derailments and transport interruptions. Bridges are also compromised in high heat due to thermal expansion, which creates safety issues. High temperatures ruin infrastructure and stop transportation in its tracks.
High temperatures combined with low precipitation will lead to frequent droughts in some areas. This will have a major impact on barge transport. Water levels will significantly decrease and limit or halt barge traffic. It’s estimated that by 2050, decreased water levels in the Great Lakes and the Saint Lawrence Seaway could increase shipping costs by 13 – 29%. The Mississippi River experienced a prolonged drought in 2012 which severely affected grain and coal exports.
The increased frequency and intensity of storms also poses a severe threat to waterborne transportation. Ports are located in low-lying areas and are at extreme risk of damage from flooding, sea level rises and hurricanes. Six of the nation’s top 10 freight ports are threatened by climate-induced sea level rises. Imports and exports of food, petroleum products, and nearly all other goods are at risk. Rising sea levels can also lower bridge clearances, potentially further limiting waterborne traffic.
Many climate change-related events pose threats to airborne transportation. Efficient aviation relies on strict schedules with thousands of aircraft aloft at the same time. Delays in one part of the system could have national or even international repercussions. Airfreight is very sensitive to supply chain disruptions due to the extreme safety conditions required for flight.
Changes in the incidence of thunderstorms, tornados, and snow will affect flight schedules. Many of the nation’s major airports are located in low-lying areas at risk of climate-induced flooding: New Orleans, New York City, Miami, and San Francisco. High temperatures can damage runways, leading to frequent repairs and more congestion.
Using Climate Change Knowledge to Prepare
Different modes are affected differently by climate change. Now that you understand the threats each transportation mode faces, you can determine the most likely disruptions your freight might encounter.
No company can entirely avoid all disasters, but when you’re prepared, you can significantly reduce the number and severity of disruptions that affect your supply chain.
How can you be proactive about natural disasters?
Know Your Disaster Risk Management Plan
If you want to minimize the impact of climate disruptions, then you’ll have to plan ahead and be ready to act on your risk mitigation plan.
There are four parts to a good disaster risk management plan:
First, assess the likelihood of a disruption happening, what part of the supply chain it would impact, and how badly it would be impacted. Then, determine a level of preparedness based on the likelihood and severity of the particular event. This could mean anything from knowing the best alternative transport mode to training employees for emergency situations.
This part of the overall plan addresses the way you will immediately respond to an event. What will be your first step: redirecting drivers or pilots out of danger or to a quicker route, canceling shipments headed towards a dangerous or congested region, or notifying customers of delayed freight? The goal is to minimize or avoid damage to the supply chain as much as possible.
After a disaster, how will operations proceed in the short-term? In this portion of the plan, you’re looking at a few weeks or months after the disruption and attempting to keep productivity high. You can determine what routes, modes, additional equipment, and extra service will be needed to stay profitable.
The last step of the plan involves recovering assets lost to the disaster. What services can be resumed; what can be repaired and what can’t; and how will customers get their lost goods? In the recovery phase, you are moving away from short-term survival and returning to normal operations. How can it be done most cost-effectively? This may involve considering many different potential scenarios and valuing certain equipment and services so you can quickly determine the best course of action should a disaster occur.
Climate change will increase the occurrence of weather-related disruptions and natural disasters. It’s important to prepare now before your supply chain is damaged or your business has to close.
Have you had a natural disaster drastically affect your supply chain? Let us know in the comments below.
Keep Reading: Supply Chain Disruption: 3 Future Solutions
PLS Logistics can help you prepare and avoid all types of transportation disruptions in your supply chain.