3 Ways Weather Impacts the Electronics Supply Chain
- Forecasts leading to potential disruptions
- Component production stalled by weather events
- Examples of weather events creating delivery issues
No one expected a week of ice and snow in Texas.
Weather is as volatile and difficult to predict as a toddler. Tropic storms and winter snowfalls keep supply chain procurement teams up at night. Maybe we can help some procurement folks sleep a little better. Let's take a look at 5 key ways weather impacts the electronics supply chain.
Before we kick things off, here's an encouraging quote from American Baseball executive Frank Lane to help with the matter:
"If you want to see the sunshine, you have to weather the storm."
The impact of weather forecasting on supply chains is almost paradoxical. The simple anticipation of a storm can lead to extreme fluctuations in consumer demand. If suppliers are not properly forecasting and prepping their supply for an upcoming storm, they will be unable to meet the increased demand for a product or even be unable to supply a steady demand.
And it's not just for food or toilet paper. When people know they're going to be stuck at home with potential power and internet outages, they go out and look for generators, battery backups, flashlights, heat lamps, and other products powered by electronic components.
Yet sometimes forecasting and tracking the weather isn't enough. An extra step needs to be taken.
Extreme weather events are on the rise. These are the types of weather events that become difficult to predict. According to the Yale School of the Environment, "from 2000 to 2019 there were 7,348 major natural disasters around the world, killing 1.23 million people and resulting in $2.97 trillion in global economic losses."
To put those numbers into context, the previous 20 years had "4,212 natural disasters, claiming 1.19 million lives and causing $1.63 trillion in economic losses."
If there are any consolations in those numbers, it's that the drastic increase in natural disasters has not resulted in a substantial increase in deaths. The numbers indicate we have gotten better at anticipating extreme weather events, and it's no wonder why.
The advent of the internet and social media has allowed for greater coverage of global weather events. People weren't tweeting about hurricanes in the 80s.
While companies can help prevent extreme weather events by reducing their carbon footprint, they can also invest in tools that track weather events and issue alerts—like Z2Data's Supply Chain Watch—while also analyzing weather risks for a supply chain, depending on where the suppliers are located.
Z2Data helps electronics companies forecast the forecasts. Meaning, Z2Data works to analyze the regions of a company's suppliers. Are their suppliers located in tropical regions with a propensity for hurricanes or typhoons? Or are they located near fault lines and at a higher risk for earthquakes? A company that knows its risks for certain storms can better anticipate them, even in the condition of an extreme weather event.
Forecasts go beyond "see storm, anticipate storm."
What is your supply chain team doing to forecast and mitigate extreme weather events?
Electronics supply chains are also impacted when weather events lead to issues in production. Think back to Thailand in 2011. The country had its worst floods in 50 years, with 3 meters of water rising in the high-hazard areas. The worst part? Most of Thailand's manufacturing and production was located in high-hazard areas.
The flooding in Thailand lasted for up to 60 days and resulted in losses totaling from $40 to $50 billion. Industrial output dropped nearly 50% during the floods, while 70% of the damages and losses hit manufacturers due to their proximity to the high-hazard zones.
Most manufacturers were located in the same area due to Thailand's "supercluster strategy," where tax breaks and other incentives encourage manufacturers to construct their buildings in specific regions. This resulted in substantial manufacturer co-location within the Chao Praya river basin.
And it doesn't take a geography expert to infer that a river basin presents high susceptibility to flooding.
Companies impacted by the floods learned a likely lesson: analyze the area-specific risks of a supplier/manufacturer. If a supplier has factories located in a river basin, steps need to be taken by supply chain teams to secure alternate supplier sources—especially during monsoon season.
A more recent example of weather impacting the electronics supply chain comes from the snowstorm in Texas and Mexico. That's a weird sentence to write.
The frigid weather caused power outages affecting ODM production lines in Northern Mexico. While most of the outages are in the rearview mirror, delivery of the parts is still hindered by disruptions in local transportation methods. Datacenters located in Texas are unable to receive any deliveries from the Mexico manufacturers until roads, rails, and runways are cleared.
Delivery issues often present some of the greatest supply chain challenges, especially during unprecedented weather events. A company in Texas during the winter storm, for example, cannot do much until modes of transportation are cleared to move. One potential method to prevent delays due to delivery issues is to build inventory for high-moving, valuable commodities.
How Z2Data Can Help Mitigate Extreme Weather Events
Z2Data's Supply Chain Watch provides increased supply chain visibility so companies can easily view tier 1 and sub-tier suppliers. This information allows companies to better analyze potential weather-related risks, depending on where the suppliers are located. Mitigate weather risks today with a free trial of Z2Data's Supply Chain Watch.