In an article in CFO Magazine, Russ Banham demonstrates how the rise of extreme weather and natural disasters is forcing businesses to re-engineer their supply chains
The article cites a survey in which 77% of senior-level executives at 196 diverse companies said their organisations experienced at least one unexpected supply chain disruption in the past 24 months.
Significantly, more than half of the respondents said the disruption was “serious enough” to draw their sustained attention and intervention.
Two events in 2011 particularly compelled companies to act: the tsunami in Japan and the floods in Thailand.
As one director at Accenture said: “CFOs suddenly realised how exposed their supply chains were”.
One of the problems many companies faced was getting insurance coverage for the potential devastation of an entire region. This meant that some companies diversified their supplier base, but without fully considering the other environmental risks that this posed.
This has led to the concerning recognition from 63% of executives that their suppliers are located in areas of the world known for high-impact natural disasters, extreme-weather events or political turmoil.
Some companies are ensuring that their key suppliers have contingency plans in place in case of severe weather events.
Other measures include knowing who suppliers buy from and having comprehensive procurement contingency plans.
However, in light of the environmental threats that the world faces, not enough businesses are taking such action.
You can read the full article here.