Higher Hurricane Activity Could Hit Supply Chains Hard This Year: Report
Date: Wednesday, May 20, 2020
Source: Sourcing Journal
If battling the symptoms of coronavirus hasn’t been enough for supply chains, many may have a new kind of storm to contend with: hurricane season.
While it’s early yet for details on specific storms, they’re coming, according to Resilience360’s 2020 Tropical Storm Season Outlook report.
“Our experts forecast that during the upcoming tropical storm season, companies should expect above normal activity in the Atlantic (Gulf of Mexico, Caribbean, and Atlantic),” said Jon Davis, chief meteorologist for Riskpulse. “As the tropical storm season approaches, organizations faced with balancing the impact of oncoming storms while attempting to maintain efforts to contain COVID-19 will need to prioritize resources and develop contingency plans in advance.”
The back half of 2020 will already be one entire contingency plan for most brands and retailers as many are scrambling to address what has been both a supply and demand crisis in light of coronavirus-related closures and depressed consumer spending. Cargo movement was already strained with some ports shuttered, travel bans and restrictions curbing airfreight capacity, and a shortage of port workers and truckers either plagued by the pandemic or forced to stay indoors to stop its spread.
All of this has slowed productivity at ports, and a storm season will only add insult to injury. In certain regions, like the Atlantic Basin, risks are expected to be steeper.
“Computer models are indicating that a La Niña event is a distinct possibility by the late summer/early fall, which is the peak of the season,” Resilience360 said. A La Niña event typically occurs in the Atlantic when sea surface temperatures are cooler than normal, whereas El Niño happens when they are unusually warm. “From an atmospheric standpoint, the season looks to feature more of a La Niña flavor than an El Niño one. As a result, the risk in the two primary basins that most impact global supply chains are opposite from each other. The Atlantic Basin has an increased risk of activity, while the West Pacific has a decreased risk.”
While the storm season may be more active in the Atlantic Basin, it can be clearly determined how individual storms will impact supply chains, but according to the report, the risk of disruptions will be higher than the norm.
Beyond the Atlantic, the top 10 cities most at risk of supply chain disruptions include most of the key sourcing countries—as well as those, like India, that companies are looking to as they pull back on China. Manila tops the risk list, followed by Hong Kong; Xiamen, China; Tokyo; Busan, South Korea; Shanghai; Kolkata and Chennai in India; Ho Chi Minh, Vietnam; and Houston.
More specifically, the top five most at-risk ports are all in and around China—Kaohsiung, Taiwan; Hong Kong, Shenzen; Guangzhou, Xiamen—where supply chains still aren’t fully recovered from the impacts of COVID-19 lockdowns, and now that a second wave seems to be emerging in the country, the challenges may be far from over. And the ports in the southeastern region of China are considered among the busiest in the world.
The Port of Hong Kong, oft regarded as the economic gateway to mainland China and critical in connecting cargo from China to the rest of the world, handled up to 19.8 million TEUs, according to Resilience360. The Port of Guangzhou handled 18.9 million TEUs, Shenzhen 24 million, and Xiamen handled 9.6 million TEUs.
“Despite their importance for global ocean freight movement, the ports are prone to typhoons coming from the South China Sea. Category 5-equivalent Typhoon Mangkhut in September 2018 took this route, after making an initial landfall in the Philippines, and battered China’s southern area, prompting massive port closures and berthing delays,” the report noted.
Bangladesh, the world’s second-biggest producer of clothing, could see disruptions this storm season, too, right around the May to June period when brands and retailers may look to unpause production as stores start to reopen. At present, the country is also emerging from the Islamic holy month of Ramadan, which has historically been a busy time for trade.
“The port is as its busiest for import and export activities during this time, thus, severe vessels’ congestion amid the lockdown combined with the start of the cyclone season is highly likely to disrupt the port’s capacity,” the report noted, adding that ports in the Indian Ocean, because of their proximity to key manufacturing hubs in region, are being considered at high-risk for supply chain diversions, even though they’re at “medium risk of cyclonic activities.”
In short, the summer season will be strained for apparel players that already have a glut of inventory to contend with and may now have to build in additional contingencies if they can’t get goods in time to sell at what will likely already be a loss for many.
“In light of COVID-19 and in anticipation of different geographical regions experiencing additional waves of infection and the possibility of subsequent lockdown measures being imposed to contain them, organizations are advised to consider planning inventory in diverse locations to minimize the risk of not being able to quickly access or ship the inventory when needed,” Resilience360 advised.
Moving through the balance of 2020 will require the agility and flexibility supply chain players have been talking about for years. Now, however, there’s no luxury of a slow transition to the new and necessary model.
“COVID-19 has tested and strained the resilience of global logistics and production operations that will now be forced to also respond to an unpredictable storm season,” said Shehrina Kamal, product director of risk monitoring for Resilience360. “Amid these challenges, supply chain professionals will have to plan in advance on how to address production delays and logistics bottlenecks and be prepared to make quick decisions.”