Recent earthquakes in the past year in China and Japan have shutdown production at hundreds of manufacturing facilities, not to mention causing significant transportation delays. But earthquakes are only one form of weather related supply risk. Much of the Midwestern United States has undergone significant flooding from early summer storms in the past two weeks, resulting in significant transportation related delays according to this article in the Wall Street Journal. The article notes that "flooding in the Midwest is causing a host of problems for U.S. freight carriers, forcing railroads to divert or delay shipments and docking tugboats and barges that use the Mississippi River to transport a range of goods including grain, coal, fertilizer and scrap metal ... Railroads are encountering problems, too, with floods washing out major rail lines in Iowa, Wisconsin, Minnesota, Missouri and Illinois. Customers have been told to expect delays in their shipments ranging from a few days to indefinitely."
In some cases, logistics providers are in triage mode. The story notes that "Union Pacific Corp., the nation's largest freight railroad by revenue, said at least six of its lines have been out of service at some point over the past several days. Rail damage also has limited the railroad's ability to reroute cargo. It has given priority to coal freight because of its importance to the country's energy supply". What's the most important supply chain and Spend Management takeaway from all this? Katrina, earthquakes, typhoons and now Midwestern rain storms are proving out that supply chain risk goes beyond simply supplier financial viability, quality and performance related areas. Weather can wreck havoc with a company's overall supply chain, yet few organizations I know of factor in supplier and route geographic concentration and potential weather related constraints into their network design decisions. But as this latest weather tragedy is proving out, they should -- or least develop mitigation plans for when disaster strikes.
- Jason Busch