During natural disasters, media gives an account of the damage of human life and infrastructure but very often, the need to cover the losses in business is overruled. Supply chain risk management now, with frequent destructions is not only about business relationships and economic uncertainty. Logistics Insider, in this special feature, intends to bring to light the damage that a disaster causes to the supply chain of businesses.
Natural calamities and disasters are almost unknown and unpredictable and India as a country is prone to many disasters. Whenever a calamity hits a country, it causes tremendous damage to human life, livelihood, business and economy.
Natural disasters, which were earlier rare in supply chain risk management, now, with extreme climate change, pollution and human damage to nature are more frequent than ever due to which numerous
businesses find their supply chains shaken in times of disasters. For any supply chain to have a rock-solid foundation, it is imperative that the changes of the environment are taken into consideration. The profoundness of the dictum “Prevention is better than cure” cannot be stressed more with regard to this.
The rise in river water due to massive rainfall in 2019 monsoon left Rajasthan, Maharashtra, Karnataka, and Gujarat etc. flooded. Logistics, the commercial activity of transporting goods to customers was left broken due to the massive loss of infrastructure and transportation during the disaster.
The Impact
The unpredictability of natural disasters is the root cause of magnanimity in terms of the damage that any business or enterprise experiences. It creates havoc in any business and swipes it away in the blink of an eye. According to reports, 40% of organisations that lack a business continuity plan, fail immediately after a disaster because they are unprepared strategically and financially to cover the cost of extended downtime.
The impacts of natural disasters reach far and beyond the local damages of affected areas. When disaster strikes, the company in the affected region experiences a massive dip in its profit and creates a domino effect where the impact from one firm is transferred to the suppliers and then to the customers, in all harming the overall logistics chain from the manufacturer
to the end customer.
The infrastructural damage, the inability of employees to get to work and financial losses during disasters disable companies from delivering raw materials, consumer goods and other components on time and the bottom line of both internal and external businesses are harmed.
For instance, a shoemaking company struck by a natural disaster might buy fewer soles, thus manufacturing less and further shipping small amount to retailers. In this way, the companies and customers associated with the firm which suffered natural disasters are also harmed and this converts the microeconomic effect on the business to a macroeconomic effect.
Further, a disaster due to loss of supplies leads to a dip in import and export activities and causes an overall downfall in the country’s economy. For instance, in India after the 2019 monsoon floods, the country saw a rise in the prices of onion and thus forcing the government to imply a ban on its export.
Guarding the supply chain
With the increase in natural disasters, ensuring that your business is prepared for the potential disruption is very important. In order to maintain business continuity after a disaster, the three crucial steps are: Planning, technology and transparency.
This is an abridged version of the full story published in our December issue of the Logistics Insider magazine. To read the full story, get a copy of your e-magazine now.
