Severe storms are a part of life, but as they become more severe, they increasingly threaten the overall supply chain.
Hurricanes, tornadoes, ice storms, and other threats can be unpredictable. Depending on where they hit, these storms can range from an inconvenient hassle to an unmitigated disaster – all within a few short miles.
Whether you expect them or not, weather-related incidents can throw the global supply chain off balance, leaving suppliers, manufacturers, distributors, and end users scrambling. When natural disasters like hurricanes, tornadoes, and flooding occur, it can cause millions of dollars in damage and take years to recover from. Small businesses and homes may never recover, and even large companies face an uphill battle to reopen, bring back workers, and ramp up.
Though we can’t stop hurricanes, tornadoes, or errant ice storms, we can implement methods to reduce downtime and delays. Even when disaster strikes, it’s possible to keep operations moving through planning and a rock-solid communication plan.
When we think about storm damage, our minds typically wander to the structural or environmental damage we see at first glance, but it often goes much deeper. Like a virus, the impact of a natural disaster can quickly spread throughout the chain, crippling everything it touches for days, weeks, or even longer.
When we think of storm damage, we think of physical impacts on buildings, roads, and the grid.
Whether a flood washes out parts of the road or a hurricane takes down power lines, damage to infrastructure can create a series of supply chain disruptions. Moving goods from Point A to Point B becomes harder, adding delays to lead times. If storms damage facility equipment, making products could be impossible.
In the meantime, demand doesn’t slow down, leading to product shortages and potentially higher costs.
Beyond buildings and vehicles, industries like ours could suffer from mine closures because of damage. One month ago, Hurricane Helene shut down two quartz mines in Spruce Point, NC. The facilities have since reopened but are not at 100% capacity.
Producing goods and materials becomes difficult when factories, distribution centers, or retail outlets suffer damage.
The most common problems are delays, product shortages, and market instability because fewer products are available.
Unfortunately, demand doesn’t slow down because of natural disasters, leaving companies scrambling for new partners. The longer a company is on the sidelines, the worse the damage becomes.
Additionally, when manufacturers can’t keep up with shipping and production, it can lead to higher short-term pricing. Partners further down the supply chain still need to sell products, making them more willing to pay a premium to secure stock. As a result, everyone further down the chain pays more for the same goods.
When disasters occur, they affect more than physical property.
Workers may have suffered damage to their homes, leaving them unable to come to work. Meanwhile, it could be unsafe for workers to do their jobs inside a damaged facility.
Other times, the facility or warehouse is fine, but the power grid has taken a hit. If there’s widespread damage to the grid, outside labor crews may have to restore power to thousands of homes and businesses.
Following Hurricanes Helene and Milton, electrical workers from as far away as California came to help repair line damage in Florida and other surrounding states.
When supply isn’t meeting demand, the market sees short-term price hikes.
When mining or processing facilities take damage, the supplier must make repairs. During repairs, capacity dips, and production time increases. As a result, buyers face longer lead times and less available purchase stock.
Manufacturers relying on the supplier for raw materials may need another partner with potentially higher prices. From there, distributors pay more for finished goods, which they pass on to the consumer.
However, some price hikes are avoidable with proper long-term risk mitigation strategies.
Although we can’t control the weather, we CAN control how we act following a natural disaster.
Mitigating potential risks is about reducing damage, downtime, and delays. It means having a backup plan for any situation – weather or otherwise. Risk mitigation plans also help companies identify weak points in their operation, giving them time to shore up weaknesses.
A little planning now can prevent numerous headaches in the future.
A Supply Chain Resilience Plan, one example being FEMA’s Five-Step Plan, can take most of the guesswork out of the process. FEMA’s risk reduction plan has five steps: research/mapping, analysis, outreach, action, and refinement. But what does each step entail in the greater scheme of management?
Research/Mapping – Identify every step in the supply chain and determine who the critical players are. Next, follow the flow of goods from one step to the next and find fail points in the ecosystem. Lastly, determine where potential threats may live and document them.
Analysis – At this stage, the data should help determine who the partners are and offer a good idea of potential processes, possible traps, and areas of opportunity. There should also be a list of key stakeholders who can help make decisions and implement changes.
Outreach – At this point, shareholders have the information they need to make informed decisions. These can be internal or external partners throughout the supply chain. The goal is to develop a plan, keep everyone informed, and prepare for implementation.
Action – This is where all the data and planning pay off. Take time to develop or redesign current emergency plans and share them with key partners and stakeholders. Though no one wants to reach for their emergency plan in a real crisis, acting includes practice runs and other activities.
Refinement – Nothing in business is a one-and-done job; the same applies to a risk avoidance plan. Look back on your risk management process periodically and make changes when necessary.
Having one provider or manufacturer you trust is great when everything runs smoothly. Unfortunately, the partnership can quickly fall apart when they have an issue and cannot deliver on time.
This was the case with two high-quality quartz mines in North Carolina. When Hurricane Helene shut the mines down temporarily, it brought entire industries to a screeching halt. The two mines are among only a handful supplying quartz for global microchip and semiconductor production.
Without them, the industry grinds to a halt.
Avoid single supplier issues by finding multiple partners at every level. More partners means a more vibrant ecosystem, allowing companies to quickly pivot when facing concerns.
Internally, risk mitigation processes may include adding another facility to the mix. Doing this can help maintain supply, shipping, and warehouse functionality if another location is inoperable.
When companies operate from within a silo, they tend to miss important information that could help them identify risks.
Integration opens communication lines across the entire supply chain, keeping everyone on the same page. While integrating with other companies helps during an emergency, companies benefit from several other competitive advantages.
“It’s impossible to know what could happen at any given time,” Kris-Tech’s Supply Chain Director, Marcus Tagliaferri, said. “One of our critical raw materials we need for production comes from the Gulf Coast region. During the hurricane season, from early June through November, we build a small safety stock of material to avoid potential issues if the Gulf area is impacted by a storm causing delays.”
“Not only are we looking after ourselves and our customers by maintaining a buffer stock, but we’re also constantly communicating with others in the supply chain. This helps us plan correctly, stay prepared, and launch mitigation strategies when needed.”
For example, aligning with other supply chain partners simplifies forecasting, planning, coordination, and communication. Integrations let each partner view the same data from different angles, helping identify potential problems in real-time.
Accidents happen, but a Business Continuity Plan keeps the company moving forward.
If you’re unfamiliar with a continuity plan, it contains valuable information for use during emergencies. A well-designed continuity plan highlights potential risks, mitigation strategies, and recovery methods. In the case of an emergency, the BCP can help reduce downtime and lost productivity and give the business an opportunity to recover quickly.
Though it may sound simple, good continuity plans take months to develop, including customer and supplier communications. However, during a crisis, companies can quickly deploy information to their partners and customers. This keeps everyone in the loop, limiting reputational damage and mobilizing recovery efforts.
Generally, companies with thought-out and consistently updated plans recover faster and suffer fewer losses than their competition.
Although it’s impossible to eliminate all business risks, we control how we respond to them.
It all comes down to good communication and proper game planning. Like creating a playbook for an opponent before a football game, successful companies have playbooks for different types of emergencies. They don’t act impulsively – they rely on plans and strategies they’ve developed over several years.
Beyond simply having a plan, companies should always find ways to develop deep, diverse relationships throughout their supply chain. This means collaborating and communicating regularly, eliminating single points of failure, and constantly monitoring risks.
With diligent planning, building resilient supply chain networks is possible.
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