BIBLIOGRAFIA ESPECÍFICA

The previous section identified disruptions related to the supply chain as one of the negative impacts associated with EWEs. In fact, previous studies (Norrington and Underwood, 2008; Woodman, 2008) have noted that supply chain related disruptions to be one of the most significant negative impacts of weather extremes on business organisations.

2.5.2.1 Vulnerability of supply chain

Supply chains face disruptions of various sorts (Snyder et al., 2006) and such disruptions are a common phenomenon (Svensson, 2000). Natural disasters, industrial disputes, terrorism (Christopher and Peck, 2004), dependence on a single supplier, supplier bankruptcy, terrorism, war, and political instability (Wilson, 2007) have all resulted in serious disruptions to supply chain activities. Recent events such as fuel protests in 2000, foot and mouth disease in 2001 (Peck, 2005) and the hot summer of 2003 in the UK, hurricanes Katrina and Rita (Snyder et al., 2006), September 11th terrorist attack (Sheffi and Rice, 2005) in the USA etc, have demonstrated that a disruption affecting an entity

50 anywhere in the supply chain can have a direct effect on a businesses’ ability to continue operations, get finished goods to market or provide critical services to customers (Jüttner et al., 2003).

Snyder and Shen (2006) declare that supply chain disruptions can have significant cost implications (e.g. damage to facilities, inventory, electronic networks, and infrastructure) and subsequent losses due to downtime. Merchandise costs due to obsolescence, markdowns and stock-outs can be significant (Christopher and Lee, 2004). Moreover, a company that experiences a supply chain disruption can expect to face significant declines in sales growth, stock returns, shareholder wealth, and customer goodwill (Snyder and Shen, 2006). Therefore, it is critical to account for disruptions during the design of supply chain networks so that they perform well even after a disruption (Snyder et al., 2006).

2.5.2.2 Vulnerability of supply chain to EWEs

Extreme weather events like floods, hurricanes, storms, earthquakes etc can have significant effects on supply chains (Christopher and Peck, 2004; Kleindorfer and Saad, 2005). Whilst extremes affect both large firms and SMEs equally, they may affect SMEs disproportionately hard because of their size and limited resources (Finch, 2004). Therefore it has to be clearly identified what negative impacts might be levied upon businesses by the vulnerability of their supply chains to EWEs in order to improve their resilience.

Businesses may have to suffer, even without having a direct impact from an EWE, due to the vulnerability of supply chain, utilities and transport infrastructure (Burnham, 2006b).

51 If the supply chain of a particular business is affected by an EWE occurring elsewhere, it may affect the performance of the business, even though the particular business is not directly affected by the actual physical EWE. Therefore it has become a must for organisations to consider not only the direct impacts on their business but also the wider implications of EWEs. Metcalf and Jenkinson (2005) in their report “A changing climate for business” have presented a checklist (BACLIAT) for businesses to assess the effects of climate change on all aspects of a particular business. Of the six business areas considered on this checklist, logistics is given a top priority.

Vulnerability of supplies of goods and services (e.g. raw materials, components), disruption to utilities (electricity, water supply and sewage) and vulnerability of transport and delivery systems for goods and services are identified as major threats listed under logistics (Metcalf and Jenkinson, 2005). Table 7 shows some of the threats faced by different industry sectors as identified by Metcalf and Jenkinson (2005).

Table 7 - Threats faced by different industry sectors due to the vulnerability of supply chain (Adapted from Metcalf and Jenkinson, 2005)

Industry sector Threats

Agriculture Disruption to transport infrastructure in short and long term, creating problems with raw materials in and goods out.

Building design and construction

Disruption of transport for site deliveries. Vulnerability of utilities

(Motor)

Manufacturing

Supply chain interruptions to intensive production schedules, and resultant cost implications.

Vulnerable transport systems, on which distribution depends for carrying high value products.

Financial services Difficulty in dealing with claims due to prolonged extreme weather. Vulnerability of agents’ operations due to impacts of weather

52 extremes and unpredictable electricity supply etc

Although the list identified is not comprehensive, it provides some idea about the disruptions that can be caused by EWEs to the supply chain of a business. All these disruptions can cause negative impacts on businesses as mentioned in the previous section (e.g. costs, losses due to down time, loss of customer goodwill etc). Therefore, it is important that businesses clearly identify these risks and take necessary remedial actions.

A publication by UKCIP (2003b) has proposed businesses ask themselves a list of questions in order to identify how vulnerable they are to climate change and how can they respond. Some of the questions drawn from that list are given below and which appear to help organisations to assess how vulnerable their supply chain is to EWEs.

 To what extent does the business rely on various transportation networks and can the risks be reduced through the use of alternative suppliers, transportation networks, etc?

 How might raw materials be affected and is there the need or scope to change the types of materials used?

 How might customer demand change and what impacts will this have on the products/services provided by the business?

In addition, Burnham (2006) proposes asking the following questions;

 How important are scheduled deliveries of supplies, uninterrupted power supply and clear roads in your business?

53 If the organisations see themselves as vulnerable to disruptions in supply chain they may have to plan for remedial measures. The probabilities of EWEs such as flooding, hurricanes, earthquakes etc can be estimated from historical data (Sheffi and Rice, 2005). They can access information with regard to future projections of such weather extremes (e.g. Met Office, UKCIP publications, and various other sources), and prepare themselves using such historical data. Using such information, SMEs can assess the vulnerability of their supply chains based on the probable weather extremes that might affect them. A range of options are available for them to design resilient supply chain networks and their choice of approaches will depend on the financial resources available, the decision maker’s risk preference, the type of network under consideration, and other factors (Snyder et al., 2006).

UKCIP summarises its experience of working with SMEs, with regard to climate change and EWEs, by identifying that “key risks are often related to markets and supply chains” for SMEs (2009). This issue is one of six key issues identified by UKCIP with regard to climate change adaptation for SMEs. The importance of the effects on the supply by EWEs was also highlighted in a workshop session (organised by the London Climate Change Partnership) and facilitated by the “Community Resilience to Extreme Weather – CREW” research team; of which this doctoral research forms a part, for representatives of SMEs and support organisations for SMEs. Furthermore, the need to have coping mechanisms to deal with supply chain disruptions was also highlighted by the SME representatives as it is often difficult for SMEs to control its supply chain due to their limited scale of operations. The other key issues raised was the need for specific and simple business

54 advice, continuous help in implementation, enhanced awareness and a medium to discuss supply chain related issues.