Create a climate-ready supply chain.
You must have noticed that there were hardly a few thunderstorms this year, but in your childhood, there would be thunderstorms every night during this season.
Climate change is affecting the lives of people everywhere. It is no surprise that it has started to affect Nepalese businesses as well. Governments all over the world are working towards solutions to reduce climate change. Businesses also have their parts to play.
How successful the effort to reduce climate change will be is up for debate, but requiring companies to prepare their supply chains for climate risk is not. Supply chain efficiency is crucial for manufacturers, and climate hazards are potent. It can interrupt production, raise costs and prices, and hurt overall corporate revenues.
By taking into consideration the following measures, manufacturers can mitigate climate-related risks.
Map your supply chain in depth. You need to have in-depth information about all your sites that support manufacturing, warehousing, and distribution. There are costs, risks, delivery times, and carbon footprints. This data should be updated annually. The most recent data will aid in making the best choices.
Conduct a comprehensive risk assessment of each site. One strategy for mitigating climate risk cannot be applied to all the sites. Hence, all the sites require their own assessment. This assessment should include information regarding vulnerability to a local natural disaster, economic indices, geopolitical risk factors (safety, security, corruption), proximity to suppliers and customers, access to stable energy sources, availability of natural resources, and long-term labor (skilled and unskilled), etc.
Think beyond your sites. The importance of a business network becomes highlighted in this aspect. The companies should pay attention to the locations of their suppliers and the suppliers’ suppliers. By managing the extended supplier network well, a business can quickly switch to a different supplier if something goes wrong, and it will also be able to use the system much better than those that don’t.
Create a business case for preventing problems before they happen. Companies need to figure out how much it would cost to make their supply chains more resilient, and how to prioritize those investments based on how much they would lose in revenue if they lost each site.
Conduct simulations of how extreme climate-related events will affect your supply chain. Such exercises can help make playbooks on how to handle different situations. They can also help executives compare and analyze different supply-chain network configurations and sourcing options to deal with climate risk better.
Transfer risk with insurance. By figuring out how much each site is affected by the disruption, businesses will be able to figure out which sites are at risk and should be insured.
Strengthen your suppliers’ business continuity plans. It becomes critical to inform and contractually obligate suppliers to necessitate having backup plans, alternate production sites, and a mutually accepted recovery timeframe. It prevents risks like suppliers getting sued, losing their business or export licenses, having shipments stuck in port, or being disrupted due to environmental or labor laws and government mandates.
Take it a step forward by simulating these plans by simulating events through desktop drills.
Invest in early-detection systems and the associated expertise.
AI-powered monitoring of climate news and events can inform us about new climate risk events and developments weeks or months before they happen. Monitoring and predicting the weather have become important parts of running a global supply chain. It’s also important to have seasoned experts on board who can look at incoming climate data critically and give real-time advice on what to do.
Nepal is highly vulnerable to natural disasters, especially earthquakes and floods. So businesses and executives should start preparing their supply chains sooner rather than later, or inevitably risk the impacts of climate change.