If Australia’s bushfires are the new normal, how should companies manage risks?
Every year, Australia experiences a bushfire season during the dry summer. Except 2019 was not any other year.
It was Australia’s driest and hottest year on record, exacerbated by a prolonged drought and scorching temperatures that have fueled a months-long climate crisis since last September.
As the country fights to contain the bushfires that have killed 28 people, burnt 27 million hectares of forest, and destroyed over 2,500 homes, companies have been forced to develop contingency plans to avoid disruptions to their supply chains.
The wildfires have ravaged much of New South Wales, Victoria, and South Australia, and have quickly escalated to become one of the worst bushfire seasons on record. The severity of the crisis has prompted widespread interruptions such as highway closures, production stoppages, power outages, as well as flight cancellations and delays — all of which inevitably cause significant disruptions to logistics activity.
To mitigate the risk of potential disruptions during seasonal bushfires in the future, companies with supply chain operations in Australia should consider adopting the following steps:
1) Create visibility through mapping of vulnerable suppliers and transportation lanes
The ability to maintain visibility of suppliers in areas vulnerable to bushfires allows supply chain managers to quickly assess the potential impact within the manufacturing network before disseminating communication about a potentially disruptive event. This can help to trigger business continuity plans for affected sites promptly.
More importantly, the consideration of alternative transportation lanes and the assessment of secondary production impact through the mapping of vulnerable highways and railways are also necessary.
Organizations should identify priority shipments early on as wildfires disrupt overland transport while low visibility caused by the ashes may result in cancellations or delays to flights and berthing delays at ports. By identifying alternative routes ahead of time, organizations can avoid delays to critical shipments.
2) Ensure that suppliers in Australia are not single-sourced
Where possible, sourcing managers should consider dual-sourcing strategies and identify alternative suppliers to minimize the impact on production schedules.
During the process of selecting suppliers, the geographical location(s) of the suppliers’ base should also be a factor for consideration to determine how they can adequately plug the gap in the case of higher demand in times of emergency.
Having alternative suppliers in place can ensure that production schedules are not held up indefinitely due to a single, prolonged event.
3) Verify that alternative suppliers can deliver increased volumes
Understanding the capabilities and capacities of alternative suppliers, and ensuring the required contractual agreements are in place, are critical for companies to respond quickly when supply chain disruptions occur.
“It is vital for companies to maintain agility and flexibility in the face of disruption to minimize the impact on its operations,” said Tobias Larsson, CEO of DHL Resilience360, a supply chain risk management software. “Understanding the risks ahead of time will help companies build a resilient supply chain capable of managing unforeseen circumstances.”
Establishing effective communication channels with alternative suppliers can also help speed up supply chain operations and prevent confusion during a disruption.
4) Monitor weather forecasts, be mindful of seasonal conditions, and plan capacity ahead
Given the residual impact of catastrophic events like bushfires, companies are encouraged to follow real-time weather patterns in Oceania or track the latest status of bushfires online when the situation calls for it.
To prevent last-minute hiccups, companies should factor in back-up plans when planning production and shipping schedules, and evaluate backup production and cargo capacity where possible.
5) Set up emergency communication systems
Intermittent power outages have occurred in severely affected areas as a result of the bushfires.
For businesses that rely on uninterrupted communication for production, trading, the supply of goods, and services, there should always be back-up communication channels ready for use to communicate with employees and suppliers in the event of major disruptions.
You can show your support for those impacted by making a donation to the DHL Australian Bushfire Fundraising Appeal today. DHL has committed to match all donations dollar-for-dollar up to a total of AU$500,000 (€308,641), with the goal of raising AU$1 million together to help the relief efforts.