How Climate Change is Impacting the Supply Chain

How Climate Change is Impacting the Supply Chain

Let’s look at how climate change is impacting the supply chain. From droughts to floods, wildfires, hurricanes, and more, climate change is getting bigger and deadlier every passing day. It’s also becoming more disruptive, and the supply chain is feeling that impact. The fallout this year alone has disrupted transportation both over land and over water, so much so that the U.S. Senate recently convened a hearing on the topic, titling it “Bottlenecks and Backlogs.”

Budget committee leaders who led the hearing made note of the cost of climate change stemming from disrupted supply chains. Working with numbers provided by CDP, a non-profit that monitors environmental impact for companies, cities, and more, the budget committee shared that in just a few years—2026—climate-related disruptions will cost companies $120 billion.
The committee used recent disruptions as case studies to highlight how much loss companies and even the GDP stand to lose. Using the recent drought affecting the Mississippi River, researchers estimate that the event alone cost the annual GDP more than $18 million. Likewise, potential rising sea levels at busy ports like New York and New Jersey, and Los Angeles and Long Beach could cost the nation tens of millions of dollars in disruptions.

And then there is manufacturing. Sharing the example of microchip production, which largely takes place in Taiwan, bigger and more frequent storms that batter the island nation could easily shut down production for extended periods of time. All serve as reminders that the supply chain has many points of vulnerability in the midst of a warming planet.
All of these disruptions come at a time when the consumer is increasingly demanding and has little patience for delayed deliveries. Companies, then, must figure out how to prepare for disruptions and pivot when necessary.

Ports might be one of the most vulnerable points in the supply chain. Take the example of Hurricane Sandy and its impact on the ports of New York and New Jersey. Battling massive flooding to warehouses, delayed cargo arrivals, and the port’s ability to foster intermodal transportation, the port was essentially paralyzed for days.
When it comes to road and rail transportation, climate change is joined by crumbling infrastructure. Recent reports and incidents highlight the fact that bridges are some of the most vulnerable spots in the supply chain. When coupled with bad weather, it’s a one-two punch that supply chain managers must prepare to face. One mitigation strategy is to begin moving equipment ahead of storms. Using a combination of onboard computers, weather forecasts, and potential road and rail routing interruptions, managers can pull their equipment out of the region before a storm arrives. While it might not necessarily prevent all delays, it can at least shorten them.

Finally, taking climate change seriously and aligning with supply chain partners to share ideas, innovations, and visibility is a good area to place your focus. Preparing and reacting is one thing, but joining forces to help keep climate change in check will deliver the most bang for your buck.