Special thanks to Source One Management Services for this guest post
Mother Nature has been giving people qualms for centuries and bad weather can have a significant negative impact on your supply chain. For example, this year, grocery stores found it difficult to stock their aisles with enough canned pumpkin pie filling for their customers – just in time for Thanksgiving.
The reason for this shortage stems from a series of record-breaking rains in the summer that impacted the Midwest, severely impacting the pumpkin crop in Illinois. Research shows that about 90% of the sugar pumpkins grown in the U.S. are raised within a 90-mile radius of Peoria, Illinois, a region affected by the rain. Therefore, if you consider a company like Nestlé, who owns Libby’s pumpkin processing plant, and the region where they source the canned pumpkin pie filling experiences a very terrible winter, their production and sales may suffer if they do not have a back-up plan in their supply chain.
Whether is a record shortage of rain or a tropical storm disrupting production, it is critical to prepare your supply chain for the worst Mother Nature can offer. The key? Stay prepared. Here are 7 tips for preventing a disaster of a supply chain when Mother Nature happens:
1. Identify your suppliers: Make a list of all your suppliers, the goods/services they deliver to your company and their geographic location. Then prioritize them in order of importance to the operation of your business. In our pumpkin example; a supplier that grows the pumpkins would be considered a higher priority than say a supplier who provides the can labels to the Libby plant.
2. Consider potential threats: For each supplier, brainstorm the natural disaster that could affect them, keeping in mind their geographic region. A pumpkin farm in the Midwest may be affected by floods or droughts, but a farm on the East Coast may more likely be affected by snow storms.
3. Analyze demand: After listing potential risks that may affect your company and suppliers, consider if these products sold by either your company or your suppliers would be in higher demand after a disaster. Then scrutinize if you have the ability to meet these demands.
4. Verify supplier insurance: Ensure that your suppliers have sufficient insurance in order to protect themselves and rebuild after a disaster.
5. Look at your contract terms and business continuity plan: Make sure that your company has a clause in the contract about force majeure, protecting your company from meeting service levels in the event of a disaster. Also make sure your suppliers have a plan to continue operations if unexpected weather does strike.
6. Fill the gaps: After analyzing all your suppliers and potential threats, look to diversify your supply base, meaning make sure that you have alternate suppliers in other geographic regions. If you have two suppliers in the Midwest, it could be likely that they might be affected by the same natural disaster, as apparent in our pumpkin pie filling example, therefore it is always beneficial to have a back-up supplier in another region. Not only do you want to diversify based on geography, but you also want to consider secondary suppliers that use different ports than key vendors, use different modes of transportation or use different routes. If you have a supplier that transports their product via air and there is a severe snow storm delaying or even cancelling flights, these will have a harmful effect on your supply chain. Therefore, be sure to have secondary suppliers who utilize alternate modes of transportation.
7. Delegate responsibilities: Assign personnel to communicate between your company and your various suppliers during a crisis situation to maintain awareness and to ensure that all necessary precautions and actions are taking place.
It is not a matter of if, but a matter of when Mother Nature will affect your company and your suppliers at some point. Natural disasters are inevitable and it is crucial for you to have a plan in place to maintain the continuity of your company. Properly preparing your supply chain will help your company ensure stability, even during a crisis.