Climate Change causes Supply Chain Disruptions

Food manufacturers need mature systems with real-time agility to dynamic changes

Climate change has become more and more present in everyday life and international media. In fact, climate change was a central theme at the recent World Economic Forum in Davos, Switzerland. The dilemma for the companies meeting in Davos is that they don’t yet know how much economic growth they are willing to sacrifice to deal with the risks of rising temperatures.

How much should climate change matter?

This is definitely a debated topic. According to the report of the International Panel on Climate Change (I.P.C.C.), the rise of our planet’s temperature by 1.5 degrees Celsius will lead to unavoidable and disastrous outcomes. Among these severe weather outcomes could be storms and droughts. In contrast, a survey of CEOs by PricewaterhouseCoopers found only 24% are “extremely concerned” about climate change.

One thing is certain on this topic: The aftermath can neither be fully prepared for nor prevented. For any company, the challenges caused by climate change require detailed preparation and successful risk management.

Extreme Weather influences Food Supply Chain

These discussions should raise the eyebrow of food producers, as Food supply chains are directly disrupted by extreme weather phenomena. Their products are weather-dependent and highly perishable. According to the UN Conference on Trade and Development, the world depends on a complex interlinking of transnational enterprises that together make up 80% of global trade. In other words: disruptions in one country or one worldwide supply chain influence other regions as well. This is why no region is left unaffected by climate change

Imagine how this could affect the Food Supply Chain. In case of a natural catastrophe, it will, for example, be difficult for companies to receive planned deliveries from the affected regions in time or at all. Another challenge arising besides the sourcing challenge is the shipment of finished goods. Limited transport facilities and compromised rails and roadways make it harder to get supplies and also lead to difficulties in logistics. This impacts the distribution of several products: in case the shipment takes longer than expected, food goes bad. This results in high potential losses for the company as they cannot sale their goods anymore.

To help companies react to natural disasters and protect themselves from high costs and loss of goods, transparent processes are required along the entire supply chain.

Transparency creates the basis for risk management

Of course, natural disasters and extreme weather conditions cannot be prevented or compensated for, but companies can protect themselves from losing huge batches and missing important delivery dates. To achieve this, a mature system is required that includes real-time agility to dynamic changes in supply and demand signals including early warning and network assessment.

In order to create the conditions for managing disruptions, companies need to participate in a Digital Supply Network (DSN), like Elemica, together with their suppliers and customers. Being part of a DSN means eliminating manual communication and replacing it with machine to machine communication of critical data and information. Extending supply chain data via a Digital Supply Chain Network gives manufacturers and participants the upstream and downstream visibility needed to drive operational efficiency in food and beverage.

This visibility is a prerequisite to understand and detect the impact of disruptive events. The DSN platform and visibility applications intertwines risk incidents with a customer’s network assets, orders and shipments. Through Elemica API and their partnerships with DHL Resilience360 global incidents can be tracked and exposure and risks can be mitigated. These measures enhance safety and preparation during uncertain times. Applied to the food supply chain, this form of proactive activities is crucial. By detecting potential disasters, such as prolonged droughts that threaten crops, in time. Companies gain the possibility to react to that situation and contact alternative sources of supply. Food-waste or missing products in the country of destination can be minimized because real-time reaction to changes in end-customer demands based on threat detection and early warning ensure a smooth process along the whole food supply chain.

More information about Elemica Digital Supply Network is available here.