Natural disasters and your supply chain

What type of natural disasters can affect your supply chain?

By their very nature, natural disasters are unpredictable and can have a devastating impact on your manufacturing supply chain. 123 Insight ourselves were at the mercy of such a disaster when our own offices were flooded over a bank holiday weekend in 2017, forcing the office to be closed for several week and staff working from home. So, what impact might natural disasters have on your manufacturing supply chains?

Disruption of Production Facilities

Natural disasters such as flooding, earthquakes or wind damage can cause significant damage to production facilities, resulting in a halt in manufacturing operations and perhaps even a temporary shut-down of the facility, bringing production delays.

Delayed Delivery of Raw Materials and Finished Goods

The next link in the chain will be your transportation networks. Any disruption here will cause delays in delivering raw materials and finished goods. Floods and landslides can block roads, while hurricanes and typhoons will cause port closures, making it difficult for manufacturers to receive shipments of raw materials. The US, Japan and Australia have all seen their infrastructure hit hard, with events such as Hurricane Katrina, taking out roads and bridges. The Tohuku earthquake and subsequent tsunami damaged roads, ports, airports, and railways all along the north-eastern coast.

Cost increases

A by-product of these issues is that they are likely to lead to increased costs for manufacturers. For example, if a manufacturer's production facility is damaged, they may have to invest in repairs and equipment replacement. Additionally, manufacturers may have to pay more for transportation and logistics services, perhaps also finding alternative routes due to the disruption caused.

Reputational Damage

A side effect that is not always considered is that this can also lead to reputational damage. If you are unable to deliver products to customers, it can lead to customer dissatisfaction and damage to the manufacturer's reputation. Of course, this cuts both ways – if you have better management of your supply chain and have potential alternatives available should the worst happen, you’ll be in a better position than your competitors to meet demand when it becomes more critical. 

Contingency plans against natural disasters

It’s worthwhile investing time to examine your exposure to supply chain issues of any kind. Not only will you be better-prepared when the worst happens, but this due diligence also helps you to ensure that your current methods and vendors are still competitive. Our own ‘natural disaster’ of 2017 did not impact on our customer base, as we already had mechanisms in place that meant that our IT infrastructure and telecoms were back up and running in under 60 minutes, with most customers unaware of any issues. The first time they heard about it was in a subsequent newsletter! A little planning goes a long way.

Summary

From disruption of production facilities to delayed delivery of raw materials and finished goods - manufacturers need to have robust contingency plans in place to mitigate the impact of natural disasters. By building resilience and redundancy into their supply chains, companies can minimise the impact of natural disasters and ensure business continuity when the unexpected rears its head.