From the floods in Valencia to hurricanes Helene and Milton in the United States, natural disasters can disrupt global supply chains, the effects of which can even be felt as far away as the Netherlands. Bart De Muynck, strategic advisor at project44, explains more about the impact of these natural disasters and why a preventive approach is key. "For companies in high-risk areas, it is smart to set up a broad network of transporters," he says.
The floods in the Valencia region caused more than 200 casualties at the end of October. Not only the local society, but also the logistics infrastructure was disrupted. Spain's second-largest port closed temporarily, while a large number of access roads had to be closed. As a result, trucks were stranded or had to turn around.
$100 billion
The number of natural disasters like Valencia is on the rise. As many as 66 natural disasters were recorded worldwide in 2023, a record. The total damage runs into billions of euros. Earthquakes caused the greatest economic damage, while persistent storms in Europe and the United States caused high costs for insurers.
These natural disasters also have a major impact on global trade. Earthquakes, storms and floods cause disruptions and delays in supply chains. It is estimated that the additional costs to business worldwide run to $100 billion. This includes costs due to production delays, transport disruptions, loss of inventory and increased procurement costs.
Helene and Milton
What exactly the consequences can be is shown in project44's report on Hurricane Helene, supplier of supply chain visibility software. Helene was a fourth-category hurricane that swept across Florida and adjoining states on 24 September. Two days after, only 47 per cent of truck shipments in South Carolina arrived on time. The port of Jacksonville went on lockdown for two days, extra annoying because of the port strikes that followed shortly afterwards. Ten days after Helene, the east coast of the United States was hit by Milton, a fifth-category hurricane.
Bart De Muynck emphasises that the effects of hurricanes can be devastating. "Depending on the strength, a hurricane causes housing loss, infrastructure damage and flooding in affected areas," explains the strategic advisor at project44. "But the impact extends beyond the directly affected area. Hurricanes disrupt freight traffic and sea container handling, significantly affecting global supply chains. Storm Milton eventually shut down all operations at the Port of Tampa, which had a major impact on industries that use the port for transport to Europe and China."
Precautions
Hurricanes also caused disruptions to supply chains in previous years. "During Hurricane Ida in 2021, only 60 per cent of truckloads arrived on time. Container transport was also badly affected. For exports, dwell time at ports increased by 65 per cent, from 8 to 14 days. For imports, dwell time even increased by 380 per cent, from 5 to 24 days," De Muynck knows.
De Muynck advises companies to take preventive precautions. "Given the potential disruptions that hurricanes can cause, it is essential for companies to prepare well for hurricane season. Consider creating transparency. When companies receive tropical storm alerts, they can continuously monitor conditions. With real-time tracking, companies can track their deliveries, learn from data and apply best practices to prevent disruptions."
Building emergency reserves
Another piece of advice concerns diversification of transport networks. Engaging multiple transport companies helps companies cope better with crises. "During the pandemic, capacity problems caused shippers to use more carriers. For companies in high-risk areas, it is therefore smart to set up a broad network of transporters," De Muynck argues.
The latest advice is about building up safety reserves. "With these reserves, companies in vulnerable sectors can still keep running in case of supply chain disruptions. This gives them time to monitor the situation and make adjustments where necessary before the disruptions cause further damage."
Working on resilience
Global supply chains are an organisational challenge for companies, concludes De Muynck. "They connect many people and companies, but are also vulnerable to external influences. Because of their dependence on imports and exports, Dutch companies need to build resilient supply chains. By leveraging 360-degree data transparency, companies can improve their resilience and better prepare for natural disasters."
