Winter Weather Illustrates the Importance of Supply Chain Flexibility

March 7, 2014

It’s March, so everywhere we go we hear the same refrain: people are sick of the winter weather. Statistically, this winter has been one of the coldest in the past few decades in Canada. The home stretch is always when winter seems like it’ll go on forever. Well, according to a new article from the CBC today, it looks like some of Canada’s top companies are sick of winter weather as well.

 The article, titled “Winter Weather Not to Blame for Low Profits, Say Experts” outlines how some Canadian companies are attributing low profits to inclement weather. It quotes Adrian Mastracci, a portfolio manager with a B.C. wealth management firm, who says: “The weather is being used a lot more this year as an excuse, whether it’s real or not. Everybody’s getting on the weather bandwagon…even [U.S. Federal Reserve Chairman] Janet Yellen was talking about the weather. Maybe the weather bandwagon is being overdone.”

According to many companies, cold weather and accumulated snow impacts employee absenteeism, and keeps customers housebound instead of out and shopping, both of which have an impact on profits. Which is fair enough. But cold weather also makes for instability in production and deliveries. Many of the organizations the CBC identifies as using weather as a justification for poor earnings this year are very Supply Chain-Dependent: Canadian National Railway, Red Lobster, and Sears for example. Some of the experts interviewed in the CBC’s article make a great point, which is that failure to adapt to inclement weather is ultimately a Supply Chain Management issue.

The CBC quotes Fraser Johnson, a Supply Chain expert with Ivey Business School, as saying: “We can’t control the weather but we can control our ability to react to problems related to the weather: problems related to natural disasters, a problem related to an unexpected disruption in the Supply Chain, which could be as minor as a truck breaking down while it’s in transit.”

Some well-prepared companies have thrived in this year’s brutal weather. In some cases, it’s been companies like Canadian Tire and Mountain Equipment Co-op (the latter of which was mentioned in this other article from CBC about winter’s effect on the economy) who offer products like gloves, road salt and other goods that customers demand when the mercury drops. But ultimately, many companies’ successes in the harsh winter have come down to more sophisticated inventory planning and overall Supply Chain flexibility. Johnson says that some companies have been punished this year for being too lean in their inventory planning, exposing themselves to shortages (both in finished products and materials used in production) when supply chain disruptions take place.          

One of the key features in international Supply Chain flexibility is adaptability to emergencies and disruptions that inevitably arise. Whether it’s political upheavals disrupting overseas production, or monsoons disrupting shipping, the strongest Supply Chains have measures in place to deal with instability. They build extra inventory at strategic locations or diversify their supplier bases.  Within Canada, winter is undoubtedly the biggest possible Supply Chain disruption. The CBC’s article makes an excellent point: you can blame low profits on the weather, or you can beef up your supply chain in the first place and make sure that the weather doesn’t affect your bottom line. I think next year, for companies, the choice between those two options will be just a bit clearer.

Time to definitely BEEF UP in the talent department in Supply Chain. Argentus, a very very specialised Supply Chain Search firm has the rich network of connections globally to help companies achieve their goals.

Here’s looking forward to warmer weather.

Thanks to my partner in crime here at Argentus, Sam White for this great piece of editorial

Over and Out



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