The 2021 Hurricane Season Will Impact Supply Chains

Stephen DeAngelis

June 22, 2021

The tragic, fiery, multi-vehicle crash on a storm-slicked highway in southern Alabama over the weekend reminds us how disruptive and destructive the hurricane season can be. The accident, which involved more than a dozen vehicles and resulted in 10 fatalities, including nine children, occurred during the third named storm of this year’s Atlantic hurricane season. Science writer John Schwartz (@jswatz) reports, “Federal scientists forecast that 2021 could see in the range of 13 to 20 named storms, six to 10 hurricanes, and three to five major hurricanes of Category 3 or higher in the Atlantic.”[1] Schwartz continues, “This year’s announcement comes after a record-shattering 2020 season of 30 named storms — so many that we ran through the alphabet for only the second time and resorted to using Greek letters. Hurricanes have become more destructive over time, in no small part because of the influences of a warming planet. Climate change is producing more powerful storms, and they dump more water because of heavier rainfall and a tendency to dawdle and meander; rising seas and slower storms can make for higher and more destructive storm surges.” Because the number and severity of destructive storms appears to be on the rise, supply chains need to ensure they are prepared to mitigate the negative consequences of storm-related disruptions.

 

Prior Planning is Essential

 

Hurricanes are not so-called “Black Swan” events. Although the exact timing and specific paths of hurricanes can’t be predicted, we know tropical storms are seasonal. William B. Cassidy (@WillB_Cassidy), Senior Editor at The Journal of Commerce, writes, “US shippers and transportation providers need to start preparing now for a potentially destructive 2021 hurricane season along the East and Gulf coasts, according to digital freight marketplace Convoy. The warning came as Colorado State University released a forecast predicting an above-average hurricane season this year.”[2] Aaron Terrazas (@econvoynomics), Convoy’s director of economic research, told Cassidy, “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.”

 

Journalists Jen A. Miller (@byJenAMiller) and Roberto Torres (@TorresLuzardo) report that Forrester predicts climate-related disruptions will continue to plague supply chains.[3] They write, “While COVID-19 might have temporarily shelved concerns about climate change, it hasn’t solved the problem. … For climate change, that means thinking about locations of data centers [and] disaster recovery.” They also insist looking at historical weather patterns is insufficient. Changing climate patterns mean flooding and high winds could occur in places where it has not previously been a problem. Miller and Torres suggest, “Companies should look at what climate models say about flood plans, what changes could be coming in average temperature and frequency and strength of hurricanes.” A Resilinc-sponsored article notes, “Hurricanes are becoming more powerful and lasting longer. The last several years of intense storms are not anomalies but what appears to be the new normal. Businesses must therefore take stock of the new standards for natural disasters and prepare accordingly — or risk being caught off-guard.”[4]

 

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.” 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. The Resilinc team notes, “Bridging information and functional gaps between various departments (e.g., logistics, supply chain and procurement) is essential to speeding up response time, and the final team must have clear, established roles for each individual. Winning buy-in to make critical decisions from company leaders in times of disruption can also streamline the disaster response for organizations.”

 

Resilinc suggests supply chain disaster response teams develop “a playbook of questions to answer for assessing a situation and actions to take in each scenario.” They recommend asking question like: Does our organization have any upstream or downstream dependencies that this storm could affect? Are there any single-sourced components that we need to diversify in case of an event? What alternate sources of transportation or routes could we use if our primary option is eliminated? Could we shift supply out of an affected region to somewhere else that can keep the production schedule on track? Could inventories at sites outside of the affected area handle production needs? For how long? What suppliers are particularly vulnerable, and how could we help them plan for recovery? How could the event cause demand fluctuations, and how does that play into production needs?

 

Some of those questions 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, like building supplies, generators, pumps, food, and other necessities people will need to ride out the disaster. 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.”[5] When it comes to moving inventory into disaster-prone areas, historical data can help. McDonald explains, Supply chain managers can turn to data analytics to deal with forecasting. Predictive algorithms give a highly accurate picture of issues that could become pressing in the near future, using weather information to help leaders plan for storms the way they would any other seasonal fluctuations in interest. There is pressure on organizations to make adjustments before severe weather hits, rather than during such an incident. … 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.” Chances are moving things into an area after a storm has hit will be difficult or impossible. Another consideration companies must take into account is communication. Because communication systems could be wiped out in a disaster, people need to know what to do if they can’t communicate.

 

Concluding Thoughts

 

Analysts from the Strategic Sourcerer note, “Severe weather has always been a critical threat to supply chain integrity. Recent years have seen organizations continue to grapple with the risk posed by nature, as the emergence of increasingly unpredictable and threatening storms has coincided with the development of new and more accurate models for prediction and mitigation. Organizations’ supply lines stretch around the globe, necessitating complex systems of redundancy and backup strategies in case of disruption.”[6] They add, “[Artificial Intelligence] is useful for taking calculations, projections and forecasts beyond a level of speed and detail attainable through human effort. This allows supply chains to make adjustments that would have been impossible through manual data analysis. When trying to deal with the effects of severe weather, the extra layer of speed and accuracy may be the difference between setting a supply chain up for success or suffering a costly disruption.”

 

Footnotes
[1] John Schwartz, “Scientists Predict an ‘Above Normal’ Atlantic Hurricane Season,” The New York Times, 20 May 2021.
[2] William B. Cassidy, “Coming US hurricane season heightens supply chain risks: Convoy,” The Journal of Commerce, 9 April 2021.
[3] Jen A. Miller and Roberto Torres, “Hurricanes, global tensions shape Forrester’s 9 security priorities for 2020,” CIO Dive, 3 June 2021.
[4] 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.
[5] Staff, “Supply Chain Risk Management Must Be Ready To Handle Hurricanes,” Strategic Sourcerer, 31 August 2018.
[6] Ibid.