The world has seen some pretty brutal effects of climate change this summer — including the fact that the hurricane season got off to an early start back in May. Climate journalist Jason Samenow (@JSamenow) reported, “Packing winds of 105 mph, Agatha slammed into Mexico’s southern west coast as a dangerous Category 2 hurricane — the strongest the country has endured in the month of May.”[1] Unlike many events that disrupt supply chains, hurricanes can be anticipated and plans can be put in place to mitigate their effects. This year’s hurricane season couldn’t come at a worse time. Zachary Elfman, a freelance finance consultant, notes, “For the last few years, breakdowns in the global supply chain have been front and center in world news. Cascading product shortages have affected everyone from major industries to individual consumers facing the now-familiar sight of empty store shelves. The short-term effects of supply chain disruption have severely impacted all manner of businesses worldwide.”[2] Elfman, however, is an optimist. He writes, “I firmly believe the world economy is likely to emerge from this period stronger than before.” He’s correct — IF companies implement strong risk management programs.
This Year’s Hurricane Season Could Be Intense
If floods, heatwaves, and droughts aren’t enough to keep supply chain managers up at night, “forecasters at NOAA’s Climate Prediction Center, a division of the National Weather Service, are predicting above-average hurricane activity this year.”[3] Forecasters note that if their predictions come true, it would be “the seventh consecutive above-average hurricane season. NOAA’s outlook for the 2022 Atlantic hurricane season, which extends from June 1 to November 30, predicts a 65% chance of an above-normal season, a 25% chance of a near-normal season and a 10% chance of a below-normal season. For the 2022 hurricane season, NOAA is forecasting a likely range of 14 to 21 named storms (winds of 39 mph or higher), of which 6 to 10 could become hurricanes (winds of 74 mph or higher), including 3 to 6 major hurricanes (category 3, 4 or 5; with winds of 111 mph or higher).”
After NOAA published its prediction, journalist Doyle Rice (@usatodayweather) advised people to “buckle up.”[4] According to the Editorial Board at the Washington Post, there are good reasons to buckle up. They explain, “Scientists are only just coming to grips with the monster storm seasons of the recent past. The 2020 one brought a record 30 named storms to the North Atlantic, including 12 that hit the United States, causing some $40 billion in damage. A recent study published in the journal Nature Communications finds that climate change made these storms far worse than they would have been without human-caused global warming.”[5] Rice reports, “Meteorologists from Colorado State University, among the nation’s top hurricane forecasters, predicted nine hurricanes would form this year.”
The Washington Post Editorial Board goes on to note, “Predicting climate change’s effects on hurricanes has long been controversial. It is unclear, for example, just how rising world temperatures might alter the frequency of these battering storms, a fact that deniers of climate change often cite in their effort to play down its risks. But there is increasingly little doubt that human-caused warming is heating ocean-surface temperatures, which fuel big storms. The result appears to be stronger hurricanes.” You’ve been warned. As a result, Rice recommends following common sense advice provided by the National Weather Service, “The time to prepare for a hurricane is now, when people [and companies] have the time and are not under pressure from an approaching storm.”
Hurricane Preparations
A few years ago, Jennifer Nastu (@JenniferNastu), Vice President of Content for news sites Environmental Leader and Energy Manager Today, reported a 2017 study found, “Nearly two-thirds (62%) of executives at companies with more than $1 billion in revenue said they were ‘not completely prepared’ to deal with climate risk and the effects of … hurricanes, and 64% said [past] hurricanes had an adverse impact on their operations. … One of the reasons cited by executives on why they weren’t prepared? Denial of risk.”[6] Fortunately, that seems to be slowly changing. “In a recent survey from Gartner, conducted from December 2021 to January 2022, it was found that 27% of supply chain leaders have conducted a climate change risk assessment to identify their most critical supply chain risks.”[7]
Even though the hurricane season is predictable, the exact dates of when hurricanes will develop and make shore aren’t predictable. As a result, Elfman reports one of the changes many supply chain managers are implementing is a just-in-case (JIC) approach. Elfman discusses a number of other things companies can do to address supply chain disruptions beyond the threat of hurricanes and his article is worth the read. Below are few other recommendations experts have made about preparing for an intense hurricane season.
• Make and exercise contingency plans. Aaron Terrazas (@econvoynomics), Convoy’s director of economic research, states, “I think we’ve learned over the last few years with the trade war, hurricanes, and the pandemic that there are no islands in the supply chain. No matter where you are, we’re all connected. You need to have alternatives worked out if things don’t go according to your first plan. Do you have options lined up if things start to break down because of a storm? Businesses need to inventory the risks, as well as materials and products, in their supply chains in order to plan for and, in theory, mitigate those risks. They need to know which suppliers or customers are in areas that are vulnerable, ensure they’re prepared if a supplier or customer is shut down for days or weeks, and be certain they can communicate quickly with those partners.”[8]
According to Resilinc, the most important thing supply chain risk managers can do is gain “deep visibility into lower levels of the supply chain and how they could be affected by severe weather.”[9] Armed with that information, mitigation strategies can be developed. Even the best plans won’t anticipate all contingencies, which is why they should be exercised for insights and shortfalls. Well-run disaster exercises also help prepare everyone involved to deal with the unexpected. Communication systems could be wiped out in a disaster, people need to know what to do if they can’t communicate.
• Determine whether things need to move into or out of storm-affected areas. Although most hurricane preparation plans focus on moving things “out of” disaster-prone areas, there are companies that need to consider what things they need to “move into” disaster-prone areas. Products like building supplies, generators, pumps, food, and other necessities people will need to ride out the disaster need to be in place ahead of the storm. Patty McDonald (@Patty61916978), Global Solution Marketing Director at Symphony RetailAI, explains, “In a retail context, storms tend to create imbalances in supply and demand, with shoppers going to their local stores to get ahead of the storm and companies potentially unable to move inventory in time to serve their needs. The systems needed to manage stock levels ahead of severe weather are extensions of the demand-forecasting tools used all year long.”[10] When it comes to moving inventory into disaster-prone areas, historical data can help. McDonald explains, “By the time a hurricane makes landfall, it’s too late to change the supply chain for maximum effectiveness. There may be shortages of essential goods that last for days unless logistics teams preempt the disruption and get shipments where they’re needed.” Moving things into an area after a storm has hit will be difficult or impossible.
Concluding Thoughts
Patrick Brosnan (@PatrickJBrosnan), Founder and CEO of Brosnan Risk Consultants, writes, “Hurricanes are a potential threat to every business. Whether you are in the path of a storm or not, you may have customers and vendors in the affected region. These catastrophic storms can cause supply chain disruptions due to port and airport closings, flooding of major roads, communication disruptions and power outages.”[11] He suggests five ways companies can secure their assets, employees, and supply chain. They are: 1) Assess your risk. 2) Develop an evacuation and security plan for employees. 3) Move assets and goods outside the storm impact zone. 4) Put a business continuity plan in place. And, 5) monitor real-time intelligence from local and national authorities. He concludes, “It only takes one storm to cause catastrophic damage to your business.”
Footnotes
[1] Jason Samenow, “Agatha strikes Mexico as its strongest May hurricane,” The Washington Post, 30 May 2022.
[2] Zachary Elfman, “Supply Chain Lessons and Opportunities: Notes on a Crisis,” Toptal Blog, July 2022.
[3] Staff, “NOAA predicts above-normal 2022 Atlantic Hurricane Season,” National Oceanic and Atmospheric Administration, 24 May 2022.
[4] Doyle Rice, “The 2022 Atlantic hurricane season starts today. What’s the forecast? How to prepare?” USA Today, 1 June 2022.
[5] Editorial Board, “Another monster hurricane season looms as we dawdle on climate change,” The Washington Post, 29 May 2022.
[6] Jennifer Nastu, “Big Companies Unprepared for Big Storms but Vow to Do Better, Says Study,” Environmental Leader, 19 January 2018.
[7] Staff, “Supply Chain Officers Are Conducting Climate Change Risk Assessment,” Material Handling & Logistics, 18 July 2022.
[8] William B. Cassidy, “Coming US hurricane season heightens supply chain risks: Convoy,” The Journal of Commerce, 9 April 2021.
[9] Spend Matters Brand Studio team, “With High Intensity Hurricanes the New Normal, Procurement Must Plan Ahead or Suffer the Consequences,” Spend Matters, 20 November 2018.
[10] Staff, “Supply Chain Risk Management Must Be Ready To Handle Hurricanes,” Strategic Sourcerer, 31 August 2018.
[11] Patrick Brosnan, “Five Ways To Secure Your Business During Hurricane Season,” Forbes, 17 October 2019.
