For the average electronics OEM, the holiday season brings increased sales from holiday shoppers -- and pressure on the supply chain. In some parts of the world, winter weather can bring other supply chain worries, as well.
(Image: A. Duie Pyle)
"Last year, when temperatures in the Northeast United States got cold for long periods of time, we started recognizing that every supply chain we death with was impacted," Randy Swart, COO for A. Duie Pyle, a transporter and logistics company specializing in less-than-truckload services, told us.
The losses certainly can add up. Adverse weather can cost trucking companies $2.2 billion to $3.5 billion annually, according to an Allianz Global Corporate and Specialty report released last year.
A cold snap can lead to a variety of supply chain challenges, from delayed shipments to damaged products. Some freight companies don't have heaters in trailers; they prefer passive measures, like blanketing freight, that do less to protect delicate cargo. "We saw general snow delays and slowed transportation," Swart said. "Carriers weren't set up to deal with it. Freight companies stopped picking up products, and that caused problems for logistics."
Cold can damage products, from temperature-sensitive electronics to solvents and liquids used in manufacturing that can separate or expend beyond the containers. "Last year, we had a customer with a supply of peel-off adhesive labels," Swart said. "They had been in subzero temperatures. Once they thawed, the adhesive was different, and the labels wouldn't come off of the wax paper backing."
In the Northeast United States, for example, truckers are required by law to remove snow from the top of their trailers. "We noticed more and more trucks in parking areas or truck stops because they had no way to get snow off the rooftops. The heavy fines made it not worth the risk."
Extended cold temperatures can delay shipments for days and leave manufacturers scrambling for new partners with room on heated trucks. However, early planning can ease or even eradicate the problem.
Until recently, many customers left specialized shippers off the list until a need arose -- only to find that the company had no capacity to meet that need. "A lot of customers were surprised that package carriers, like FedEx or UPS, don't offer freeze protection."
Savvy OEMs build relationships with specialized carriers throughout the year to ensure that capacity is available when hard times hit. Shipments in specialized trucks carry only a small premium -- usually about $50 per 1,000 pounds of product, Swart said. "The secret is understanding what you have to ship and finding the mode needed to move it well ahead of time. Having a relationship with the carrier is critical."
When planning risk management ahead of time, organizations need to proactively and carefully take weather-related risks into account. "Weather-related items require a deeper thought process than most people give it."
OEMs need to consider if a delay of several days (or weeks) is tolerable. What might a delay caused by snow or cold cost? Also, figure out the cost of the potential destruction of a temperature-sensitive product. Finally, think about the cost of quality erosion caused by cold and freezing. "It's possibly worse if a manufacturer uses a product not knowing that it is ruined, because there are long-term ramifications to poor product quality.".
Do you have any stories of weather-related supply chain disasters? Share them in the comments section below.
— Hailey Lynne McKeefry, Editor in Chief, EBN