5 Ways Companies Can Prepare Their Supply Chains for El Niño

The El Niño phenomenon is behind extreme weather patterns seen from India to Panama. With the effects, ranging from heavy rains to severe drought, expected to last for months, companies are reprogramming their supply chains to ensure they can handle whatever storms come their way.

#1: Know Your Suppliers

As industries have grown increasingly globalized, so have their sources of raw materials and component parts. Experts advise companies to map out supplier networks so they’ll know what’s at risk of being cut off by extreme weather. “A bad day halfway around the world could result in a really bad month or a bad half a year on our end,” said Bindiya Vakil, with Resilinc, a consulting firm.

#2: Stock Up

Companies can prepare for weather disruptions by building up inventories of key supplies that come from regions expected to be affected by El Niño. That goes for even the smallest components, says Nader Mikhail of supply chain software company Elementum. For example, when the tsunami hit in Japan, automotive companies ran out of black paint, glue and other basic supplies – what Mr. Mikhail calls “the long tail of the supply chain.”

#3: Identify Alternatives

Companies should secure backup sources before something goes wrong. But simply knowing an alternative supplier isn’t enough, says William Schmidt, a management professor at Cornell University’s business school. “When you have big disruptive event, suddenly your supplier’s competitor is fielding calls from all kinds of companies,” he said. If you haven’t already established a relationship, that back-up firm might not be able to meet all its new demand.”

#4: Research at the Ready

Tonya Jackson, head of global supply chain at laser printer manufacturer Lexmark, said the company prepares for weather disruptions by identifying the most critical technology that can’t easily be replicated by an alternative supplier. The company’s in-house engineers can “redesign on the fly” in cases where critical component manufacturing needs to be moved quickly to facilities that might not have access to the same equipment or raw materials.

#5: Plan Alternate Routes

Floods and storms also disrupt logistics networks that bring goods to market. Mr. Mikhail of Elementum says before the busy fall and winter seasons, companies should reserve extra space on ships, trains, planes and trucks on routes where El Niño could cause delays. “The company that buys space on a plane ahead of time … won’t be ‘blindsided’ by price volatility when the storms hit,” he said.