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Tuesday, March 13, 2012

One Year Later, Natural Disasters Still Rattling Supply Chains

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 Just a little over a year ago, on March 11, 2011, a magnitude 9.0 earthquake and ensuing tsunami crippled Fukushima, Japan.

According to Kathrin Winkler, vice president of operations and chief energy officer for EMC Corp., the disaster “made us pull out our playbook in how we deal with supply chain disruptions.”

Winkler, who spoke at a Climate Change Leadership conference March 1 in Fort Lauderdale, Fla., said the biggest risk EMC faces in regard to climate change is protecting its supply chain.

EMC is one of the largest providers of storage hardware for data and cloud computing.

The company has diversified its supply network by receiving parts from many geographic areas to minimize risks associated not only with climate change but also political disruptions, volcanoes and other natural disasters, and even pandemics, she said.

However, after the Fukushima quake, company operations were still affected because one part was available only from Japanese suppliers.

Another natural disaster that impacted the EMC supply chain was flooding in Thailand during 2011’s monsoon season. Some regions experienced their worst floods in over 50 years.

According to Jan. 20 article in the New York Times, while the flood waters have receded, only 15 percent of the 227 factories that produce electronics and computer components, such as hard drives, have restarted production.

Furthermore, foreign investors are uncertain whether the Thai government will be able to prevent future floods that break the record books. The next monsoon season begins in May.

According to a survey prepared by the Climate Disclosure Project and Accenture, extreme weather events disrupted 30 percent of responding companies’ supply chains in 2011 and 53 suppliers identified certain or likely exposure to increased operational costs as a direct result of climate change.

The survey results were published in a report released in February, A New Era: Supplier Management in the Low-Carbon Economy.

According to the report, companies that become resilient to the effects of climate change and reduce emissions from their supply chains will be in a better position to make gains in the marketplace in the long term.

Gary Hannifan, Accenture’s global sustainability lead for supply chain, summed it up this way: “As companies examine and modify their supply chains to make them more flexible and able to withstand the winds of economic change and the ripple effects of natural disasters, they need to also consider how their supply chains will stand up under environmental scrutiny.” View our selection of International Environmental products.

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