Collaborate with Suppliers to create a Resilient Supply Chain

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Recent floods in Cumbria are another grim reminder of the United Kingdom’s vulnerability to extreme weather natural disasters. In the past decade, there have been several instances of floods, tornadoes, hurricanes, and tidal surges, which have caused a lot of devastation to life and economy in the country. The U.K. government has taken preventive steps of late to minimise damage, but the Cumbria situation has shown that much more needs to be done.

For Cumbria, the recent floods caused by Storm Desmond is the third major flooding incidence in the past decade. The estimated cost of these floods, according to PwC, will be around GBP 500 million, including insurance and economic costs. This compares with GBP 275 million for the 2009 floods and GBP 272 million for the 2005 floods.

Around 4,000 of the 25,000 businesses in Cumbria have been impacted by these floods, and for some businesses, the situation has deteriorated to a point where the owners are considering moving out of the region.  In such a situation, the negative impact will not be limited to these local businesses only, but will also be felt across the supply chains of large firms that source from Cumbria-based suppliers.

We believe that moving out of the region (for suppliers) or changing suppliers (for buying organizations) is not a sustainable solution to this problem. Instead, businesses and supply chain managers must a) recognize and understand the challenge posed by natural disasters; and b) work collaboratively to minimise the damage and disruptions.

One part of the challenge is that such disasters still come as a surprise to most businesses.  However, an equally important part of the problem is that many businesses, especially smaller ones, still lack a plan to prevent, manage, and recover from such disasters. The combination of the two factors results in business disruption and loss (material as well as financial).

Buying organizations that have their critical suppliers in such vulnerable regions (such as the coastal regions in the northern U.K.) need to move from a pure commercial relationship to a collaborative relationship. The relationship should be aimed at engaging and improving the supplier’s ability to deal with such situations and build a resilient supply chain. We call this a collaborative relationship because all buyers and suppliers might not have the expertise or resources to tackle natural disasters on their own.

• It can start with creating a framework to analyse the risk exposure of a supplier based on its location, mobility (ability to relocate if required), and resources.
• The next step can be to assess if the supplier has the appropriate emergency preparedness plans, business continuity plans, and disaster recovery plans in place. Also, check if the supplier has mapped its extended supply chain and is aware of the risks that can emanate from n-tier suppliers.
• Once the supplier’s exposure to and preparedness for a disaster is established, the next step is to fill the gaps in the supplier’s emergency preparedness against such disasters. This can be achieved by learning from the best practices which have been adopted by organizations worldwide, and customizing them to the local needs of each supplier.

So while predicting and reducing natural disasters may be beyond the scope of buying and selling organizations, adopting a collaborative approach can help make supply chains resilient to natural disasters, including those related to extreme weather disasters.