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3 Ways El Niño Could Impact Your Supply Chain and What You Can Do about It

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Editor’s note: This blog post was originally published on Transportfolio®. Since this topic is relevant to the carrier community, we are also publishing it here on The Road.

Long destructive events—whether they’re caused by humans or nature—are hard to predict and even harder to plan for. California is getting pummeled with flooding, tornados, and mudslides right now. The cause? El Niño. And it’s not just any El Niño. The National Oceanic and Atmospheric Administration (NOAA), predicts this year’s El Niño will be among the strongest on record. One with impact that spans the entire North American continent—but none more than California.

When your company is based halfway across the country or across the globe, it’s hard to imagine that the conditions in Southern California could impact your business. However, as the storms continue, there’s a high likelihood that your supply chain could be impacted—because El Niño is even more powerful farther out in the ocean. So if your ocean shipments travel along Trans-Pacific lanes to get to the United States, they might already be affected. How you’re affected depends on your specific supply chain, but most likely you’re feeling added pressure in these three areas:

Speed of Delivery
While surfers rejoice because of the epic waves El Niño is bringing to California’s beaches, those same swells are magnified deeper at sea and could potentially cause problems for ocean vessels carrying your goods. Rather than venture into hazardous waters, ocean liners may have to change course, which quickly opens the door for delays. Once your goods make it to port, you’re potentially at risk for additional delays on the roads. Despite being in a drought, the record amounts of rain California is now receiving in such short periods can quickly wash away roads and railways, which could further delay your shipments.

Mode of Transportation
These types of events also lead to capacity shortages. Often we see a snowball effect by mode of transportation. From a domestic standpoint, if a mudslide or tornado wipes out the rail lines, then intermodal shipments are shifted to trucks. When truck capacity gets tight, shippers switch to less than truckload (LTL), and when that fails they move to air freight and charters. Globally, it’s the same thing; when ocean shipments are consistently delayed, shippers will switch to air shipping in order to keep inventory in stock and shelves full.

Budget
Both delays and capacity constraints chip away at the old transportation budget. What happens when a shipment (or multiple shipments) that were supposed to come via ocean must be changed to air at the last minute or else risk empty shelves? Or what if your carriers start rejecting shipments for more profitable loads? Your transportation budget starts to break down. The longer these conditions last, the tougher it can be to maintain your budget.

What Can You Do about It?
When market-changing events that are out of your control occur—like El Niño, winter weather, or a port strike—it’s easy to feel as though there’s nothing you can do to help protect your supply chain. The key to riding out a situation like El Niño is to have a supply chain that is flexible enough to adapt. With an efficient and accurate inventory process, you’ll know what must be shipped by air and what can wait the extra week to arrive via ocean. With real time track and trace capabilities, you can see delays as they occur (sometimes before), and schedule an extra LTL shipment to keep shelves stocked for another week. With the right amount of lead time, you set yourself up as a favored shipper with carriers and possibly better acceptance rates. All of this is possible with a logistics provider who has the industry knowledge, carrier relationships, and advanced technology to get the job done.

I’ll keep watch as El Niño continues—possibly well into spring—and update you as needed on its impact on market conditions.

Discover how you can build resilience into your supply chain in this white paper.

- Director of Air Freight Services, C.H. Robinson

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