Ensuring your supply chain is ready for natural disasters
Engineering and Manufacturing businesses are constantly subject to risk. Natural disasters in particular create a significant external challenge for supply chains. By 2030, DHL has estimated that the annual global economic impact of natural disasters could be up to €328 billion.
A recent example is Iceland’s biggest volcano, Katla, which is expected to erupt following a series of earthquakes in the country. In 2010 the eruption of another Icelandic volcano Eyjafjallajokull, caused chaos to the global air industry delaying both commercial and industrial flights as a result of the dangerous ash cloud that had formed. DHL had contingency plans in place that enabled us to fulfil our customers’ orders through alternative freight transportation, but for many businesses this unexpected disruption posed significant challenges to the supply chain.
So what role can the supply chain play in helping to manage the risks posed by natural disasters? The World Economic Forum has suggested that significant disruption to the supply chain is likely to impact a company’s share price by 7% on average. E&M businesses should prioritise supply chain risk management by preparing for, predicting and managing risk in the supply chain.
Preparation is key – get ready to face risks today
The supply chain is central to the success of any large-scale Engineering and Manufacturing business. Without this strong backbone, operations can be subject to more significant disruption and external volatilities are more likely to have a devastating effect. Businesses should assess the impact of natural disasters and consider what steps should be taken to prevent significant disruption. Having a contingency plan in place should be a priority – and businesses should insist that their suppliers are equally as prepared.
Engineering and Manufacturing businesses across the industry are often made up of complex, global networks. This is where supply chain transparency comes in – visibility makes it easier to understand where products are, how shipments could be disrupted by a natural disaster, and what must be done to mitigate for this.
Look to the future – predict the potential of a natural disaster
Supply chain risk management works best when companies have the earliest possible notice of potentially disruptive incidents, such as a volcanic eruption or severe flood. Data analysis is a key element. By analysing past data, Engineering and Manufacturing businesses can develop a better understanding of what disruption they might face at any given time, and ensure they are protected in the future.
Data should be centralized across the business so that it can be most effectively analysed. It is important that communication across divisions is fluid to enable this and collaboration should therefore be encouraged. Businesses should also run simulations on their supply chain to understand the pressure points and where a natural disaster is most likely to have an impact on operations.
Taking on the challenge – managing risk in your supply chain
Natural disasters are often impossible to predict so sometimes it is inevitable that disruption will impact the supply chain. We know that the impact of climate change is already severe and the environmental landscape today is highly volatile. Whilst it is important that companies prepare for and predict the effects of disruption, crucially businesses need to manage these incidents when they strike. Again, communication across the business, and also with suppliers, is imperative as employees need to react quickly, but carefully, during a crisis.
Businesses that are well prepared will have necessary and robust data on hand. Their supply chain will be transparent so they will understand where the natural disaster might have the greatest impact. Together this will help them to manage challenging situations quickly and efficiently.
Ensuring your supply chain is ready for risk
Ultimately, businesses will never completely avoid disruption caused by natural disasters but if they prepare they can potentially reap rewards. Companies that get supply chain risk management right have a strong foundation on which to develop their overall risk management strategy. With it, they can often gain advantage by filling the gaps left by their less-agile competitors. By investing in more resilient supply chains, E&M businesses will not only reduce the impact of disruptive events, they will also have the potential to boost overall business performance.
Written by Reg Kenney, President of Engineering and Manufacturing at DHL
Pandora and IBM digitise jewellery supply chain
Pandora has overhauled its global supply chain in partnership with IBM amid an ecommerce sales boom for its hand-finished jewellery.
The company found international success offering customisable charm bracelets and other personalised jewellery though its chain of bricks and mortar retail destinations. But in 2020, as the COVID-19 outbreak forced physical stores to close, Pandora strengthened its omnichannel operations and doubled online sales.
A focus on customer experience included deploying IBM’s Sterling Order Management, increasing supply chain resiliency and safeguarding against disruption across the global value chain.
Pandora leverages IBM Sterling Order Management as the backbone it its omnichannel fulfilment, with Salesforce Commerce Cloud powering its ecommerce. Greater automation across its channels has boosted the jeweller’s sustainability credentials, IBM said, streamlining processes for more efficient delivery. It has also given in-store staff and virtual customer service representatives superior end-to-end visibility to better meet consumer needs.
Jim Cruickshank, VP of Digital Development & Retail Technology, Pandora, said the digital transformation journey has brought “digital and store technology closer together and closer to the customer”, highlighting how important the customer journey remains, even during unprecedented disruption.
"Our mission is about creating a personal experience and we've instituted massive platform changes with IBM Sterling and Salesforce to enable new digital-first capabilities that are much more individualised, localised and connected across channels and markets,” he added.
Pandora’s pivot to digital
The pandemic forced the doors closed at most of Pandora’s 2,700 retail locations. To remain competitive, it pivoted to online retail. Virtual queuing for stores and virtual product trials via augmented reality (AR) technology went someway to emulating the in-store experience and retail theatre that is the brand’s hallmark. Meanwhile digital investments in supply chain efficiency was central to delivering on consumer demand.
“Consumer behaviour has significantly shifted and will continue to evolve with businesses needing to quickly adapt to new preferences and needs,” said Kareem Yusuf, General Manager, AI Applications and Blockchain, IBM. “To address this shift, leading retailers like Pandora rely on innovation to increase their business agility by enabling and scaling sustainable supply chain operations using AI and cloud.”
Yusuf said Pandora’s success was indicative of how to remain competitive by “finding new ways to create differentiated customer experiences that protect their enterprises from disruptions to help mitigate risk and accelerate growth”.