More Natural Disasters Is a Trend Supply Chains Should Take Seriously

Natural disasters are getting more expensive and more frequent. For supply chains, this is a major cause for concern.

According to some recent data from the NOAA National Centers for Environmental Information (NCEI), 2020 and 2021 are now the two worst years on record for the majority of natural disasters. In 2020 alone, an incredible 22 weather events occurred that caused over $1 billion in damages, while 2021 saw 20. Over average, there are 26 billion-dollar weather-related disasters per year since 1990.

Of these disasters, over 90% are related to flooding, while fires, tornados, and other such disasters accounted for the remaining 10%. Notably, however, wildfires continue to move up the rankings; according to data from the insurance broker Aon, insured losses from U.S. wildfires reached $5 billion in 2021, which is the seventh consecutive year wildfire losses have exceeded $2 billion in a given year.

Although the risk to human life is, of course, the top priority when analyzing natural disasters, arguably the next highest priority is to account for how much damage these trends are doing to the global supply chains. The effects have been quite pronounced, and each year it seems to get worse.

Take, for example, the now regular shuttering of factories in China, which act as a critical lynchpin of the global supply chain for everything from completed products, to electronic components and semiconductors, to raw materials. Since 2020, such shutdowns have been a frequent result of China’s “Zero COVID” policy during the pandemic, but in August 2022, the shutdowns occurred for a different reason: drought. With hydropower production in the region slashed, production estimates for goods such as electronics, automobiles, and automobile parts were drastically reduced.

According to many experts, risks such as drought, hurricanes, and wildfires are only going to become more prevalent. “What we just went through with Covid is a window to what climate could do,” said Kyle Meng, an associate professor at the Bren School of Environmental Science and Management and the department of economics at the University of California, Santa Barbara, in a New York Times article.

In an effort to diversify by degrees the world’s reliance on China for critical inventory, the Biden administration has made efforts to boost domestic production, particularly in the chip industry — but the United States has been far from immune from natural disasters. In Texas, for example, 2021 saw major winter storms that caused major disruptions in semiconductor production.

Based on this overwhelming evidence, now is the time to be thinking not just about business continuity within the supply chain, but guaranteed business continuity. Should natural disasters such as floods or wildfires compromise your company’s critical inventory, how much would it cost in not just inventory costs but in long-term revenue? If this scenario sounds financially devastating, it might be time to consider utilizing a solution such as Partstat’s storage solution, which features the use of the industry’s only vault designed specifically to house even the most sensitive inventory from fire, flood, electromagnetic interference, earthquake, and any other known natural disaster.

For more information on our vault and any other inventory solution offered by Partstat, don’t hesitate to reach out to one of our experienced representatives.