Researchers have found a statistically significant global hurricane trend - and it’s not good news. A group of researchers at the National Oceanic and Atmospheric Administration and the University of Wisconsin at Madison conducted a study that provides observational evidence that the odds of major hurricanes worldwide are rising due to climate change.
The study found that each decade hurricanes become 8% more likely to develop into major hurricanes: Category 3, 4, and 5 storms. With mightier storms on the rise, one can expect accompanying costs (both monetary and loss of life) to surge as well.
Extreme weather is on the rise, but what does this mean for food, supplements, and CPG companies?
Food Manufacturers and Extreme Weather
Extreme weather conditions and natural disasters can take a toll on any business in the affected area. But with increasingly complex global supply chains, manufacturers can be affected by massive storms thousands of miles from their plant floor.
Extreme weather events that could affect your supply chain include:
Hurricanes: These powerful storms can ravage coastal ports and interfere with food transportation. Bananas and other imported fruit are often affected as South American ports are especially hammered during hurricane season.
Flooding: Even after floodwaters recede, headaches continue. Erosion, deposition of debris, and the loss of vital beneficial fungi can all cause crops to have increased disease issues.
Drought: Among the costliest natural disasters, droughts cause annual average losses of $10 billion to $14 billion in the United States alone. Experts predict these losses to rise in future years as droughts become more severe and frequent due to climate change.
How to Mitigate Risks in Your Supply Chain
When a region is unable to supply the volume of certain ingredients due to extreme weather, the global supply chain is affected. There must be a steady balance of supply and demand to keep operations flowing consistently. When extreme weather hits, demand can suddenly outweigh the supply, affecting the economy as well. With unpredictable events all but inevitable, how does one attempt to mitigate these types of risks? Companies that take the following steps can reduce the chances of something critical happening to their supply chain.
Conduct Research: Doing ample research before selecting suppliers is key to predicting future environmental threats. Historical data regarding certain global regions can be extremely beneficial when it comes down to making final supplier decisions.
Diversify Suppliers: You don’t want to put all of your eggs in one basket, especially if that basket is in a volatile area. It’s crucial to diversify your supplier base. Having a number of qualified suppliers at the ready allows you to proactively authorize production on an as-needed basis, giving you options in an unpredictable time of need.
Perform Risk Analysis: Frequent risk analyses help to determine which suppliers put your organization at the most risk. Conduct risk and performance profiling to learn how certain suppliers and shipments affect your company’s risk, quality, and profitability.
Every step along the supply chain offers opportunity and risk. Create contingency plans for each step should one of the links in your supply chain break. For example, if an ingredient supplier is in Florida and happens to be hit by a devastating hurricane, do you have a secondary supplier in place? Once these plans are in place, it’s equally important to test them. While it might look good on paper, you won’t know how effective the plan is without putting it through its paces.
Find out how TraceGains can help your company mitigate risk by reading our eBook, “Managing Risk in the Global Supply Chain.” Download it here.