Heavy rain may bring more pain for the U.S. supply chain

As climate change raises the temperature of the Earth, some parts of the United States will see more incidents of extreme precipitation, increasing the likelihood of flooding. If they haven't already, supply chain managers had better start preparing for this eventuality—and that means doing a lot more than buying an extra umbrella to keep at the office, asserts a new paper from the commercial property insurer FM Global.

"Coping with Extremes: The Impact of Climate Change on Extreme Precipitation and Flooding in the United States and How Business Can Prepare Now" presents current data about changes in rainfall in the United States and reviews the leading scientific explanations for why this is occurring. It shows, for example, increases in extreme rainfall incidents in the Northeast, Great Plains, Midwest, and Southeast. The report also urges companies not to wait until a flood occurs to react but to take steps now to reduce the impact of flooding on both their and their suppliers' operations.

"The consensus among the technical community is that [climate change] is happening," said Louis A. Gritzo, vice president and manager of research at FM Global, in an interview. "You need to think about whether your suppliers are located in flood-exposed regions and go the extra mile to protect the integrity of your supply chain."

Previous research by FM Global found that while 90 percent of companies have operations located in regions exposed to floods, more than 60 percent of the respondents said their organizations were not well-prepared for a flood. This is a mistake, said Gritzo. He and the report recommend the following steps:

• Understand your flood exposure. Companies need to know if their facilities and/or their suppliers' facilities are located in a flood zone. They can get this information from maps provided by the U.S. Federal Emergency Management Agency (FEMA), Gritzo said. Be sure these maps were created recently, he cautioned. Climate change and urbanization can change the location of a flood plain, and maps that are 15 to 20 years old may be outdated.
• When possible, locate new facilities and move existing ones outside the 500-year flood zone. Previously, it was considered good practice to look at whether facilities were located in a 100-year flood zone. But with the increased risk of incidents of heavy rainfall, FM Global is suggesting that companies broaden their search to include those facilities in the 500-year flood zone range.
• If facilities can't be moved, minimize their exposure to flooding. Some steps companies can take to mitigate flooding include creating flood barriers and drainage systems and moving key equipment off the ground. They should also ask their suppliers what mitigation efforts they have in place.
• Don't forget about transportation infrastructure. Companies need to be concerned not only about protecting their facilities and products but also about whether they'll be able to move their goods out and their employees in if there's a flood. This is a great opportunity to work with local and state emergency agencies, Gritzo suggests. "Make sure you have plans for rerouting goods and services through different networks and paths if you need to," he said.
• Practice geographic diversity. If possible, avoid having all of your key suppliers located in a flood-prone area such as the Mississippi River basin. That way, if there's a disaster, you'll still have some production capacity.
• Think ahead when it comes to suppliers. "In addition to having an emergency response plan, companies need to discuss what their plan is if they lose a supplier, and what impact that will have on their business," Gritzo said.
• Expand your skill set. "It might not be top of mind for supply chain managers to know about flood hazards and terminology and to be able to read a flood map, but these are good things for them to have in their back pocket," Gritzo said.