The technology and algorithms used to accurately predict the weather have become highly sophisticated over the past two decades and we are increasingly relying on weather forecasts to make informed decisions – not just in a personal, but also in a business context. As the use of technology and intelligent insights to support business decision-making grows, forward-thinking companies are monitoring natural weather events and their impact on the supply chain by Clyde Buntrock, VP Sales & Marketing, Allport Cargo Services.
Weather disrupts and influences supply chains globally on so many levels; from growing crops to driving consumer behaviour. We only need to look at what happens to transport and logistics networks in the UK when the weather takes a turn for the worst to know the power it has: trucks get stuck in the snow, trains can’t get through and planes can’t take off or land. That’s without even considering the effect of storms on containerships, which can experience loss or damage to cargo and severe berthing delays that impact importers. And that is just looking at the UK; a country that doesn’t even experience the most violent of meteorological conditions, when compared with other global weather phenomenon.
Unplanned downtime is extremely expensive for any business, especially as it’s uneconomical to hold excess contingency stock. Whether it’s a temporary economic slowdown, disruption of the electricity grid or devastated crops, the subsequent incorrect stock levels can effect costs and efficiencies across the whole supply chain.
A recent report from the Met Office found half of UK companies cite the weather as one of the top three factors external to their business that drives consumer demand. Despite this, a third do not use meteorological data in their supply chains. The report stated that the UK’s changeable weather could have a significant impact on retail performance.
The statistics in support of using meteorological data for supply chain planning speak for themselves. Of the 16 per cent of respondents who do use paid-for meteorological data services, 57 per cent had better sales forecast accuracy, 51 per cent had better on-shelf availability and 43 per cent had reduced waste. The survey found the top uses for weather data among retailers were short-term sales forecasts, planning stock availability, product deliveries from depot to store and promotional planning.
Understanding consumer reactions to weather is also vital to provide a 360-degree view and progressive companies are partnering with weather analysts to assist supply chain planning. To be truly effective, weather data should be applied early in the supply chain so that companies can adjust raw material purchasing, production scheduling, advertising and promotion, allocation and distribution and special offers.
What about Climate Change?
The report Business-not-as-usual: Tackling the impact of climate change on supply chain risk found that while climate change and increasing temperatures now seem inevitable, the size of their impact and real implications is uncertain. What is for sure, is that climate change will have a multiplier effect on supply chain risk. It obviously depends on the industry concerned as to how easy it is to gauge the impact; agriculture, for instance, may suffer to a greater extent than petroleum or metal ores. However, to effectively manage supply change disruptions created by climate change risks, the report states that organisations must assess all connected risks, ensure risk management procedures are in place and develop global collaborative strategies to deal with resource scarcity.
In 2015 extreme global weather events included: severe floods in South America, prolonged drought in Ethiopia, a cyclone in Yemen, a mega-typhoon in the Philippines and a heat wave in the Middle East and Pakistan. If we look at longer-term analysis of historical weather data, we can see the impact of similar extreme weather on the supply chain. In 2010 a US drought destroyed crops, leading to a scarcity of feed stock, affecting meat and dairy prices and subsequently increasing global food prices by 10% between June and July 2012; the 2011 floods in Thailand led to global price increases of hard disk drives and delayed the launch of several new car models. Heat waves and drought in Russia in 2010 resulted in economic losses of $15 billion. It’s clear that easy access to ‘big data’ on historical weather patterns can better inform and predict likely disruptions in the supply chain planning phases. These large data sets can be analysed to reveal key patterns, trends and associations.
Organisations like MeteoGroup already supply complicated weather algorithms to governments and people managing road, air and sea transport networks. These meteorological advances mean that weather can now be predicted to a higher degree of accuracy and huge databanks of historical information enable predictions to be made for better planning. Cutting-edge science has transformed weather forecasting accuracy and in the UK, the Met Office has changed the way it works and evolved to embrace the importance of working with partner organisations, meaning it’s easier to plan ahead, minimise disruption and increase the bottom line.
However, this data isn’t really being used on a national or global basis in retail, even though weather is the greatest unpredictable risk in the supply chain. Access to this data means we can be much smarter with supply chain planning; a European apparel company, for instance, might look to East Africa for garment sourcing if Bangladesh is under water. Weather services help retailers optimise operations and mitigate the impact: it’s not just to improve demand forecasting on particular products affected by the weather, but also historical ‘big data’, accurate forecasts and severe weather warnings that influence imports and stock levels.
Already a leader in Technology-enabled Supply ChainTM, our team at Allport Cargo Services is investigating how we can incorporate meteorological insight into our innovative systems to assist customers both in the pre-planning and execution phases of the supply chain. Robust technology is essential to alleviate the effect of weather disruptions and enable retailers, wholesalers and producers to remain agile and respond flexibly to unpredictable weather.
Anyone involved in supply chain planning needs to think carefully about action planning in the event that a link in the chain is broken. Bad weather is inevitable and although we can’t always prepare for major natural disasters, being as prepared as possible will enable swift adjustments to be made and guarantee a resilient supply chain.