The weather, procurement and supply chain risk, and 20 Tonnes of milk fat

We’ve never felt equipped scientifically to comment on the ‘global warming’ debate here, but we’ve certainly seen what we might call ‘local watering’ recently in the UK. This January has been the wettest in many parts of England since records began, hundreds of years ago. There have been amazing floods in parts of Somerset, for instance, leaving villages cut off for weeks by the surrounding waters. The problems are spreading now, with homes evacuated in Pisa, Italy, flooding in France and deep snow stranding people in Serbia.

But does this have any relevance for procurement people, I hear you say? Well, there may be some small effect on the overall economic performance if matters continue in this way for much longer. We saw different weather problems in the southern states of the US last week, and my colleague Thomas Kase wrote here about the snowstorms they suffered in Atlanta and the lost economic value arising from people unable to get to work and so on.

It’s always hard to quantify those effects, but generally the extreme weather in the US this winter, including record low temperatures, is unlikely to be good news for the economy , although the recovery in the US and UK seems firm enough withstand a few weather related shocks.

There are also obvious supply chain risk issues around severe weather.  I’ve probably mentioned before the stress I sufferer many years ago when my insulated but unheated tanked full of Anhydrous Milk Fat (AMF) was stuck in a snowstorm in Kent many years ago on its way to our factory! Luckily, the snow stopped and it got going again before we were left with a 20 Tonne lump of solid butter fat. Blocked roads, frozen lakes or canals, staff stuck at home – all can lead to supply chain delays and issues.

Then we have the potential effect on prices. For instance,  if the weather continues in this vein, we may see pricing pressure on some food commodities – it’s not a time of year when much is still in the ground, but some late winter / spring vegetables crops may suffer. Or sowing seeds in the Spring might be delayed by the condition of the ground. Certainly, I’ve never dug up my leeks this time of year from quite such sodden ground, and there is no immediate prospect of digging ready for the 2014 vegetable crops!

And  I was involved in conversations last week about milk prices: whilst most cattle in the UK are indoors at this time of year, we may see milk production being lower than forecast in the ‘flush’ spring period if the rains continue. But it is hard to predict even in this relatively simple market. The mildness of the winter means that where the ground isn’t flooded, early grass growth and therefore milk yields may actually be better than usual, if it is not too wet to put the cows out into the fields.

So, all in all, keep aware and alert is the best advice as always to procurement people. Understand your suppliers and supply chains, and keep an eye on the relevant weather forecast. Oh yes, and don’t schedule your AMF deliveries for the middle of a blizzard!

 

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