How Supply Chains Can Be Resilient To An Increasingly Unpredictable Climate

Supply chains need to be prepared for the impact of climate change


The Global Climate Report recently revealed that 2017 was the warmest year without an El Niño present since records began. Global warming has caused increasingly erratic weather across the board, with one alarming statistic from the UN estimating that climate change has cost the global economy $1 trillion in the last ten years. No area has been affected more than the supply chain, where the erratic conditions can affect many areas, in particular transport and agriculture. In 2017, Hurricane Harvey – and the subsequent Atlantic storms – saw major upheaval to global supply chains. Yet many companies have responded by simply burying their heads in the sand. According to a survey commissioned by risk management firm DNV GL, just 25% of businesses have begun adapting their supply chains to be resilient against climate change, despite it being vital to the continuity of their organization.

'Because of the extreme weather changes, there’s no real separation between spring, fall, winter and summer,' designer Jason Wu told the Wall Street Journal. The fashion industry typically has supply chains with long tails, so with these radical changes to the climate, designers are having to make drastic alterations within their supply chain to ensure they don't create surplus stock and lose money. A disaster like this had a profound impact on the Australian economy in early 2017. A warm winter followed by an unseasonably cold spring forced fashion retailers to cut prices to move stock, causing domestic apparel companies to struggle. This led to the collapse of four Australian apparel chains in just two weeks, according to American Express. Yet the resilient, global 'fast-fashion' retailers managed to stay afloat, thanks to their efficient supply chain routine and regular stock drops.

Zara were one of the chains that was able to weather the storm on this occasion. Regularly cited as an apparel company with an outstanding strategy, they have managed to develop an incredibly fast supply chain to respond to climate change. According to SCM global, new items can be designed and out to the stores in 4-6 weeks because their supply chain is vertically integrated to ensure optimal efficiency. Other designers, such as Vince, are responding to the erratic weather by creating 'seasonless' clothing that can be sold all times of the year. Recognizing the trend towards extreme weather, in 2016, The Fashion Institute of Technology in New York launched a course called 'Predictive Analytics for Planning and Forecasting: Case Studies with Weatherization'. They are already preparing a new generation of supply chain workers for the impact of weather on supply chains in the future.

Preparing for the worst-case scenario is without a doubt the most effective method of ensuring your supply chain is resilient to the upheaval caused by climate change. 'Understand where in the world your key assets reside, what exposes them and where are you vulnerable', advises Russ Kirby, a Global Senior Account Manager at FM Global on their website. 'If you take that basic approach, you can work out things you can do to look after your own interests and protect yourselves. So, it’s a case of identifying the risks, quantifying what is my worst-case scenario and then looking at mitigation strategies.' Fully appreciating your supply chain's vulnerabilities will help you prefer for any unexpected disaster that could befall it. In response to global climate change, the Antea Group predict that the Netherlands will invest around €80 billion to adapt to the increasing risk and frequency of flood which will unequivocally damage supply chains operating in the country.

Other ways supply chains can make themselves resilient is by having alternative travel routes planned, so in case of disaster they can get operations up and running quicker. Taking steps to prepare for outages is also recommended, investing in back-up supplies of water and electricity will limit down-time in the event of an unexpected crisis. As the weather changes, crops may no longer grow in the same areas, so renegotiating your contracts in areas at risk of flooding or drought would reduce your risk. Most importantly, you can become part of the solution by investing in innovation to deal with the effects of climate change, or, better yet, technology being developed to actively prevent the impacts of global warming.

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