How To Reposition Inventory to Better Respond To Natural Disasters

There’s nothing we can do to prevent natural disasters. Climate change has increased the number and severity of weather phenomena such as hurricanes, tropical storms, droughts, and floods. Earthquakes and volcanic eruptions will always be a part of how this world works. What we can do is plan how we will respond when such disasters hit.

When it comes to supply chain management, a natural disaster can lead to major upheaval and affect your business financially. If you’re not prepared for how a disaster could impact your operations, you won’t be able to bounce back quickly enough to prevent serious damage. Your business plan should include a supply chain policy and contingency plans based on what disasters are likely to impact you, and details for how those plans can be executed.

Here are the elements to consider:

1. The Full Supply Chain

It’s vital that you understand the full supply chain, and not just your company’s role within it. You need to know:

● Where raw materials come from
● Where and how components are manufactured
● Where they are stored
● How they are shipped
● Where they are shipped
● Who sells the product?
● Who the end user is?

If a natural disaster hits any of these areas, it could impact your part of the supply chain. For example, if you sell coffee beans to restaurants, you need to know where they are grown, who packages them, and how they are shipped to you. Then, you need to know which restaurants you supply, and how you ship to them. If there’s a natural disaster that impacts where the beans are grown or packaged, you’ll need a contingency plan in place to source other beans. If there’s a problem on the client side for your business, they may not be able to pay for a new supply of beans, and you may need a contingency to keep your income flowing in.

2. Transparency Of Your Supply Chain

Transparency across the full supply chain is critical for disaster management. It’s also important to have real-time access to information. If you know there is a hold-up on one part of the chain, you can actively make decisions to reroute it, or to switch to a different supplier while the hold-up is addressed and rectified.

Being able to see snapshot views of where your entire chain stands can put your business, and each business along the supply chain, in a position of power. This ensures that all parties can be proactive in times of natural disasters.

3. Your Source Of Information

Natural disasters come with little warning. And they bring chaos to the area they hit, making it difficult to get accurate information about what’s happening. It’s important to nail down your trusted sources of information for all regions involved in your supply chain. This should be agreed upon across the chain, so you are all operating from the same information and making decisions based on that data. If there’s one core point of contact, you can be assured that everyone is receiving the same information and can work to plan.

4. A Business Continuity Plan

Chaos and lack or organization after a natural disaster can cause massive delays in getting your supply chain operational again. You need to have a person, or a group, already appointed to get your business continuity plan up and running, and to make the snap decisions based on the available information. These stakeholders should be the ones who create this plan and continually monitor its viability as the business grows or changes over time.

This continuity plan should include an accurate assessment of all elements within the supply chain, especially with regards to location. The assessment should look at how likely the region is to experience a natural disaster, and what that might look like. For example, they could be in a hot spot for earthquakes or tsunamis. Alternatively, they may be in a region that experiences heavy storms, or hurricanes during a particular season.

Your continuity plan can include what to do should a particular part of your supply chain get hit by one of these disasters. You may need to expedite shipping, or source an alternate supplier. If you have these contingencies in place, you will know how much these changes are likely to cost, and can calculate if you’ll need a loan to cover them. If you’re aware that you will need a loan to continue operating, ensure you have all the required documentation ready to apply and secure the necessary funds.

Operating without a business continuity plan can see costs skyrocket as you scramble to make alternative arrangements on the fly. This could decrease your profits, and could even put your business in serious financial trouble.

5. Your Supply Chain Partners

The companies you do business with throughout your supply chain are part of your success. If you look at them as partners rather than cogs in your machine, you’re likely to survive natural disasters together. This is because they’re more likely to want to help you through tough times if you all have the attitude of being in it together.

It’s better to build up this partnership before disaster strikes, so they’re willing to be more lenient on payment terms, negotiate new rates, or work harder to find alternative options when it’s crunch time.

6. Flexibility And Adaptability

Having contingencies in place is essential to staying afloat when disasters strike. However, sticking rigidly to that plan, and not reading the exact circumstances will very likely cause your business to sink.

Natural disasters rarely happen exactly the way people predict they will, and recovery operations can take longer than expected, or get hampered by a secondary disaster. It’s important to use all the information at your fingertips to stay on top of the situation and use your business continuity plan as a guide for how to do so.

By being able to reposition your inventory at short notice, you’ll be better equipped to weather any storm. A solid plan, a good relationship with stakeholders in the supply chain, and a firm grasp of contingency measures will all contribute to your business’s survival.