Supply Chain 2024: Extreme Weather Emerges as the Greatest Disruptor
- Details
- Published: Sunday, 21 January 2024 01:16
The global supply chain faces its most significant threat in 2024, with extreme weather disruptions taking the lead, according to a recent report from Everstream Analytics. As unforeseen events, like the mass rerouting of container vessels away from the Red Sea, continue to impact supply chains, logistics executives must now contend with a range of challenges in the coming year.
Everstream Analytics assigned a 100 percent "risk score" to extreme weather patterns, highlighting their potential to disrupt delivery times significantly. The report emphasizes that the frequency of billion-dollar weather events in the U.S. has accelerated, occurring every three weeks today compared to every four months in the 1980s.
In 2023, weather-related disruptions hit major logistics players such as Amazon, FedEx, and UPS, with Hurricane Idalia causing significant disturbances in Florida. Internationally, a prolonged drought in the Panama Canal led to a backlog, restricting traffic since the previous summer.
Jena Santoro, Senior Manager of Supply Chain Risk at Everstream Analytics, advises shippers to leverage predictive weather forecasts and disruption alerts when planning. Predictive estimated time of arrivals (ETAs) can also enhance the ability to forecast delivery dates accurately. Santoro suggests that switching modes or increasing the utilization of intermodal transport could be alternatives, especially if ocean disruptions persist.
Environmental Regulations Emerge as the Second Biggest Risk
Everstream's annual Risk Report identifies disruption from growing environmental regulations as the second most significant supply chain risk, scoring 92 percent. With a 38-fold increase in environmental laws from 1972 to 2019, governments and businesses are under pressure to adopt net-zero emissions and energy policies.
The report highlights production stoppages and litigation due to environmental violations, with the U.S. experiencing 41.7 percent of such incidents in 2023. Protectionist measures, including growing export controls and sanctions, present a risk score of 85 percent, particularly between the U.S. and China.
Everstream advises shippers to uncover potential sub-tier bottlenecks where sanctions can shut down a supply chain. Multi-tier visibility into extended supply chain networks is crucial, especially amid trade tensions.
Taiwan Tensions and Commodity Shortages Round Out Top Five Risks
Taiwan tensions, with a 75 percent risk score, could lead to export restrictions and blockades in the Taiwan Strait, affecting half of the world's container ships. While disruptions may be less severe than the Red Sea crisis, supply chain managers are urged to consider Tier 2 supplier diversification.
Commodity shortages of sugar, rubber, and rice rank as the fifth major risk, scoring 72 percent. High input prices, farm profitability concerns, protectionism, and extreme weather events contribute to this risk. Everstream recommends companies fix prices where possible, build a multinational sourcing strategy per commodity, and monitor the market for cost-saving opportunities throughout the year.
As the supply chain navigates these challenges, proactive measures, including technology adoption, diversified sourcing, and continuous monitoring, become imperative for resilience and adaptability in an unpredictable environment.