In 2014 alone, 328 natural disasters affected more than 107 million people and caused nearly $100 billion in damages, according to the Brussels-based Centre for Research on the Epidemiology of Disasters. As climate-related incidents increase, natural resources become scarcer, and volatility and risk intensify around the globe, successful companies actively identify and manage risk, while developing robust contingency plans.
Mitigating environmental risks is crucial for manufacturing executives to safeguard material flows upstream in the supply chain. Integrating manufacturing with risk management for the entire corporate supply chain is a strong first step. Winners will be those companies that understand what drives risk and build in resilience and effective response mechanisms.
Toyota is among the first companies to address this strategic trend, following the disastrous 2011 earthquake and tsunami in Japan. Even though the automaker cannot predict the exact nature of future supply chain disruptions, its risk management plan now ensures that it can recover within two weeks of any disaster.
It is vital to fully understand the environmental changes and risks in your supply chain, not only as they could occur within your industry, but also as they could affect the industries of your suppliers and customers. Constant monitoring of risks and swift adoption of corrective measures as soon as early warning signs are detected is an excellent first measure. Also, it is wise to develop aligned mitigation plans that span all functions.