Frigid winter impact profits: plan for delivery delays
Next year arrange for inventory at strategic positions in supply chains.
TORONTO — Severe winter weather should be seen less as an excuse for poor performance and more as opportunity by companies to fix problems before Mother Nature brings any more surprises, management experts and others say.
This winter, characterized by record low temperatures, ice storms and heavy snowfall across the country, closed stores and restaurants for days at a time, shut down major transportation routes and kept consumers housebound.
But Mastracci and Fraser Johnson, supply chain and operations management expert with the Ivey Business School at Western University, both say that while the weather undoubtedly caused headaches for many companies, it’s not the only culprit.
“At the end of the day, it’s always a management issue,” said Johnson.
“We can’t control the weather but we can control our ability to be able 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.”
He says this winter should be seen as a wake-up call to organizations, prompting them to think about how to improve the way their goods are delivered from suppliers.
Storms that shut down major highways delayed the delivery of parts to manufacturers and the shipment of finished products to market.
“The automotive industry in January and February was hit really hard by the bad weather,” Johnson said.
“Every minute a typical car plant will produce an automobile, so the cost of shutting (it) down has huge financial implications for the organization.”
According to Johnson, there are measures companies can take to avoid similar problems next year. He suggests ensuring inventory is available in strategic positions in supply chains, so that companies are not held hostage by weather-related problems, as well as working with suppliers to have inventory available in locations close to the company’s distribution centre.
It’s also possible that this downside will bring some upside in the spring, as manufacturers try to make up for lost production.
© 2014 The Canadian Press