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2024 has already proved challenging for global supply chains, with extreme weather events wreaking havoc on transportation, production and agriculture. The repercussions are being felt across industries, causing delays, shortages and escalating costs. As we navigate the rest of the year, the specter of continued weather disruptions looms large, demanding vigilance and adaptation from supply chain professionals.
Socioeconomic and geopolitical events continue to impact global supply chains. Some of those impacts can be remediated by human intervention. One thing we cannot control is the weather. The weather has already made a huge impact on the supply chain.
Scorching heat waves across Europe and North America have disrupted manufacturing and agriculture. Factories have been forced to shut down or reduce output to protect workers, while crop yields have plummeted, leading to food shortages and price hikes. The economic impact of the European heat wave alone is estimated to exceed $10 billion.
Devastating floods in China and India have crippled transportation infrastructure and inundated factories and warehouses. The series of hurricanes in the Atlantic has further disrupted shipping lanes and impacted port operations. The total cost of these events on supply chains is still being assessed, but early estimates suggest it could reach tens of billions of dollars.
Raging wildfires in California and Australia have not only caused direct damage to infrastructure but also led to widespread air pollution and respiratory problems, impacting worker productivity and logistics operations. The economic cost of wildfires in California alone is projected to reach $50 billion.
As we enter the latter half of 2024, the anticipated El Nino event threatens to exacerbate weather-related disruptions. This climate pattern is expected to bring intensified weather patterns, including droughts in some regions and heavy rainfall and flooding in others.
El Nino-induced droughts could severely impact agricultural production in regions like Australia and South America, leading to shortages and price volatility for commodities like wheat, coffee and sugar.
Heavy rainfall and flooding could disrupt transportation networks, leading to delays and increased shipping costs. This could impact the movement of goods across various industries, from manufacturing to retail.
The cumulative impact of these weather events has been staggering. Supply chain disruptions in 2024 are estimated to have cost companies globally upwards of $100 billion. This includes costs associated with production delays, transportation disruptions, inventory losses and increased procurement expenses.
The increasing frequency and intensity of extreme weather events underscore the need for supply chain resilience and adaptability. Companies must proactively address the risks posed by climate change and build robust strategies to navigate disruptions. Conducting thorough risk assessments and implementing mitigation strategies can help companies identify vulnerabilities and prepare for potential disruptions. This includes diversifying supplier networks, building inventory buffers and developing contingency plans.
Investing in technology offerings such as visibility and risk management solutions that use advanced technologies like AI, machine learning and predictive analytics can help companies anticipate disruptions, optimize operations, and make data-driven decisions in real time.
Fostering strong relationships and open communication with suppliers, logistics providers and other stakeholders can facilitate collaboration and problem-solving during disruptions. Embracing sustainable practices, such as reducing carbon emissions and optimizing resource utilization, can help mitigate the impact of climate change on supply chains in the long run.
The 2024 weather events serve as a wake-up call for the global business community. Building resilient supply chains capable of withstanding the challenges of climate change is no longer a luxury but a necessity. By adopting proactive strategies and embracing innovative technologies, companies can navigate the turbulent waters of an increasingly unpredictable world.
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About the author
Bart De Muynck is an industry thought leader with over 30 years of supply chain and logistics experience. He has worked for major international companies, including EY, GE Capital, Penske Logistics and PepsiCo, as well as several tech companies. He also spent eight years as a vice president of research at Gartner and, most recently, served as chief industry officer at project44. He is a member of the Forbes Technology Council and CSCMP’s Executive Inner Circle.