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A Critical Factor for Supply Chain Risk Management

Abstract on Climate Change

This article aims to offer a wide-ranging indication of the effect of micro and macro climate change on supply chain of any company. A systematic categorization of the literature reviews is done to find the insights for factors affecting climate change on supply chain management for business at large. A context is drawn for methodically evaluating the impact of climate change upon supply chains and their management, through conceptual model. Supply chain systems run corporeal, functioning and reputational risks accredited to climate change. Appreciation in guidelines, market services and shareholders’ compressions are pavement the technique for the zero-carbon emission of supply chains with understandable inferences for supply chain risk management. Supply chain administrators should pay consideration to the influences of climate change on supply chains and scholars should supplementary discover the interrelations between climate change and supply chain design and procedures. Embryonic robust departure outlines for supply chains will also demand a better empathetic of several issues like logistics managers’ discrimination and responsiveness for climate change, the set of organizational, legislative, institutional and financial barriers impeding the implementation of adaptation practices, any challenges of actually implementing variation observes and pertinent expenses, and the scalability of the variation approach

Introduction to Climate Change

During the 4th National climate assessment (NCA. 2019), United States of America administration has released predictions of climate change the world at large on business of several countries. The prediction indicates that US Economy will shrink by 10% during 2100 and will affect all sectors negatively owing to climate variation.(NCA, 2019) It will not only affect the professional life but also will impact the private life of human being. These comprise not only mutual difficulties from natural catastrophes such as wildfires and tornados but also collapses in dangerous logistics structure, topographical modifications in reserve accessibility and unpredictability in global transaction associations. The COVID-19 epidemic damaged how breakable drawn-out, multifaceted supply chains can be—and how much civilization has equestrian on their continuous smooth operational. In current scenario, World supply chains have progressed in traditions that dispensation them more unprotected to tremors. Some businesses, including communiqué apparatus, computers, and fabrics, have full-grown two to three times more geologically rigorous since 2000. Approximately 80 % of world-trade now streams through republics with diminishing political-stability notches, as restrained by the World Bank. More international manufacture materializes in zones that are exceedingly defenseless to microclimate and macroclimate change. And the world has fully-fledged more consistent: when catastrophe attacks in one district, streams of goods, finance, people, and data rapidly communicate undulation effects far-flung and widespread.

Previously the epidemic, companies were pebbledash escalating fatalities from intermittent supply-chain blockages and cessations. Those sums aren’t “unforeseen” anymore. Manufacturers in some trades can expect unanticipated measures to expunge the mainstream of a year’s proceeds over the course of a period—and that’s just the point of departure, secretarial for possibilities like periodic tempests and distribution snafus [Carbon Disclosure Project. (2011b)]. Life-threatening one-off actions can be far additional destructive for corporations and civilizations at huge. A mounting mindfulness of jeopardy may root cause for some corporations to reorganize and decentralize their stream. Managements, too, may act to increase national manufacture of goods that are considered indispensable or imperative to nationwide attractiveness, redesigning businesses in behaviors that market navies unaided would not lead to sustainable benefits for all. Many CEOs are swiftly arising to this new certainty. Supply-chain procedures were infrequently on their sensor; but now, they are at the top of their schedule [World Resources Institute & World Business Council for Sustainable Development. (2011)]. The unfilled hypermarket tables and deficiencies of medicinal supplies of recent months have determined home the statistic that supply-chain constancy is not just a business question. It’s also about shielding the public concentration. Policy architects have a part to performance and can aggressively shape the probability and harshness of supply chain shudders. Governments have competences at their pleasure to accomplish menace that specific companies do not, such as construction structure to alleviate overflowing and other environment risks, capitalizing in early threatening proficiencies, and preserving cutting-edge alternative supervision competences. States that want to shape robust supply chains will require to make long-term obligations to espousing unconventional engineering knowledges, emergent staff assistances that bring into line with industry desires, and building digital and corporeal organization.

Climate Change has occurred in topical eons as the utmost life-threatening matters at virtually all echelons of decision making, both sequestered and community. This establishes a fundamental modification equated to the mutual discernment only a threatened age. Due to global warming, the climate change is impacting to all human spices, business procedures and the atmosphere at a large. In fact, industries need to accomplish their climate change procedures in a more dynamic and hazardous atmosphere where organized, resource-based, supply chain communities, pecuniary investor and society at large, all understand corporate strategic rejoinders to a sustainability issue. Sussman & Freed (2008) has given typology of risk which are associated with supply chain at larger extent. 

The literature review supports three risks which are associated with core operations, second it leads to the value chain and, finally, it leads to the economy and organization. Furthermore, climate change vindication and reworking strategies may supplementarily disturb business procedures in a moderately unintended technique. Climate change motorists like conservational contracts, stakeholders’ value and buyers’ changing procurement outlines are pretentiousness pressures and prospects for industries and their supply chain links. Throughout the previous few years principal companies from miscellaneous subdivisions have comprehended the intimidations and prospects obligatory by climate change and they are enchanting action stages towards instigating more vigorous climate change schemas.

As per IPCC(2000), Climate change is well-defined as “a transformation in the state of the environment whether micro or macro that can be acknowledged by fluctuations in the callous and unpredictability of its properties and perseveres for protracted epochs eras or lengthier” Climate change linked proceedings are dangerous meteorological conditions such as high temperature, floods, hurricanes and famines and other natural climates. Nikolaou (2015) stated in his article about financial and economical losses due to climate change events which leads to unemployment, poverty, hunger and other state and central level issues in the society. Administrations and establishments have documented the requirement to espouse strategies to alleviate climate change issues. It is requiring to have imperative necessity for emerging diagnostic representations to accomplish the effect of climate change.

Notable scholars have documented presence of heavy losses in supply chain management due to climate change. (Dekker, et al, ). Variations in temperature, extreme weather conditions, tsunami, flood or drought impact heavily on crops and food items at agriculture. Carbon foot print effects on business like agriculture, port, shipping, coffee, rice production, tea production and so forth and others which leads to direct impact on current and future prospects of business at large (Jones, White, et al 2005). Amalgamated tactics measured to evaluate issue of climate change noted in different sectors as well in the setting of supply chain. The textile sector, the automobile sector, waste management, road transportations, air transportation, ship-port transportation were significant impact were measured due to change in climate. (Piecyk & McKinnon, 2010). Few studies recognized major consequence of climate variation on sea foods industry where supply chain risk is majorly been documented. Additional literature reviews scrutinize the ecological effects of both online and offline merchandizing supply chains which is connected with carbon inspecting of these retail channels (Edwards, McKinnon, & Cullinane, 2011). Hoen, et al, 2012 studies have surveyed on decisions of transportation planning for supply chain where majority of decisions are impacted by Carbon facets are also being incorporated into supply chain decisions like procurement and suppliers’ selection. In addition, aspects of suppliers’ engagement towards disclosing climate change information have also been studied

Climate Change Typological Impact of Risks on Supply Chain

Climate change and its effects vigor industries to contest in an atmosphere unfluctuating and more volatile than till lately. Song et al. (2010)mentioned in their article about customers concern for carbon footprints. And energy efficiency. Recently, Apple has stopped adding charge with mobile handset to not have more carbon emission exposure to the customer. Apple is defending this decision to not provide any freebies s an environment friendly measure. No accessories inside box will allow Apple to deliver small iPhone containers and also diminish electronic waste.

Companies deteriorating to include this message into their own supply chain approach or disinclined to discourse climate change questions will be ultimately “penalized” by biologically delicate customers. Supply chain management do play a significant role in meeting the customer requirements, company would like to become supply chain compete and enable those strategies which can minimize the threats of climate change [Carbon Disclosure Project. (2011b)]. In the era of low carbon, a good supply chain can create competitive advantage for the customers. Governing, corporeal and marketplace chauffeurs curtailing from climate change produce intimidations and prospects for supply chains in business at large.

There Are Certain Typologies for Climate Change Which Impact on World Supply Chain Networks

Manufacturing and Agriculture sectors: Due to climate impact on manufacturing, large amount of damage on infrastructure and assets happens. This leads to large liability risk on the companies, sometimes it many downs coping the entire or parts of business units. The disruption of plants and production lines may largely impact to the realization of orders through the supply chain. The climate change effects largely on decision of modes of transportation. Ports, for example, are at risk for the effects of “land sinking” and flooding, since most critical U.S. shipping centers are constructed in sea-level zones, thus divulging them to increasing sea heights. Meanwhile ports attend as the entryway for 99% of ultramarine trade (CDP Global 500 Report, 2011), supply chains will be developed predominantly defenseless to climate impacts from life-threatening weather proceedings connected with rising sea levels and steamy storm movement. And even if goods achieve to make it past harbors, attainment those to manufacture or supply conveniences will also become more thought-provoking. Increasing temperatures are probable to cause tarmacadam to wear and depreciate faster, as well as fastener rail positions. Transformation of busy roads is probable to cost administrations noteworthy expanses of cash, and in cases where the logistics tracks are confidentially preserved, corporations may choose to merely leave the ways unrepaired.

Similarly, the regulation with regards carbon emission in environment may have significant impact on manufacturing process at the SBUs. It leads to changes in effectiveness and efficiency of production process and material used in the products. High illnesses play a dangerous role in swelling the rate of dearth commencement, complete scarcity concentration and drought impression through transformed water convenience and mandate. Augmented vanishing rates caused by high temperatures, in association with drought, will aggravate plant pressure, yield reduction, fire risks, and exhaustion of superficial and groundwater capitals. Enlarged cost and energy lead to obligatory price rise of the unit per sold which may impression on viable scale for the business. 

Agricultural supply chains have already commenced pebbledash the penalties of such conditions. The 2012 U.S. dearth, which caused more than 2/3rd of provinces to announce themselves as adversity zones, suggestively abridged produces for cattle, wheat, corn and soybean manufacture in the Great Plains and Midwest. Around loss of $14.5 billion to be paid by centralized crop insurance program which lead to heavy losses to the country [EPA Climate Leaders. (2010)]. 

Logistic and Transportation Management: High temperatures can root asphalt to unstiffen and inflate. This can generate rutting and depressions, predominantly in high road traffic zones and can place pressure on bridge linkages. Heat waves can also limit construction actions, particularly in areas with high dampness and humidity. With these vicissitudes, it could become more overpriced to build and maintain roads and highways. On the other hand, convinced areas may involvement cost savings and better-quality suppleness from reduced snowstorm and less-frequent winter tempests since warmer midwinters may lead to bargains in snow and ice exclusion, as well as salting supplies. In addition to causing conclusions, submerging may damage amenities, including airfields. Numerous airfields in Alaska are constructed on permafrost. Heat temperatures will melt permafrost and reason for the ground to settle down, potentially destructive the groundwork and construction of key organization.

Ships are delicate to many factors, with the penetration of a frequency and the degree of sea ice. Cumulative temperatures could decrease the quantity of sea ice in many significant shipping paths, spreading the shipping term. Warmer winters will possible lead to fewer snow and ice buildup on vessels, decks, and rigging in marine transportation. In the Arctic, warmer temperatures could also open up the likelihood of a Northwest Passageway during half percentages of the year, which could decrease shipping times and detachments. Shipping lanes feeling sea level rise will be able to billet larger ships, dropping shipping costs.

Warehouse Management

Warehouses play a dynamic role in supply chains and is the main elements of operative competence and commercial accomplishment. Thus, it is comprehensible that research on warehouse project and organization has continuously been rising over the last eras. Though, a topic within warehousing investigate that has been disregarded to a large amount is the ecological effect of warehousing procedures. Though it has been documented that logistic happenings, such as transport, are main drivers of CO2 productions globally [Benjaafar, S., Li, Y., & Daskin, M. (2013)], the whole thing that have absorbed on warehouse-related productions. This is astonishing given the fact that warehouses necessitate a noteworthy quantity of energy owing to light, heating system, preservation and air condition as well as immovable and moveable substantial handling apparatus. This energy ingesting leads to a substantial amount of carbon dioxide emissions and may thus enable many occasions for educating the CO2 footmark of warehouses and thus for decarburizing warehousing processes

Consequences of Climate Change at the supply chain management

Climate change pressures add hesitation to supply chain systems, particularly for globalized ones functioning across landmasses. McKinnon (2009), stated that the concentration of inventory experienced during the past 40 years has augmented the defenselessness of supply chains to thrilling weather decorations like swamping. Therefore, climate change dangers should be taken into deliberation during the enterprise phase of supply chain grids in order to protect them from interruptions and vulnerabilities to both corporeal and governing risks.

With respect to supply chain conformation, lean, agile and legible prototypes have been projected to be the most predominant patterns under which supply chains may be shaped and function. It is also tough to outline which paradigm is more strong or weak to climate change tensions. Each paradigm has its own features and therefore different acquaintance devices to climate change threats may spread over. Therefore, in view of climate change, all three paradigms are subject to weights as the conformation of their construction of pre-determined level of both harmonization and configuration, while aspects of organization, partnership and knowledge sharing may also ascend [Füssel, H.M., & Klein, R.J.T. (2006)].

Lastly, the same navies that are predictable to rinsing food supply chains are expected to create communal trouble and politically aware struggle. In precise, climate change upsurges jeopardies to national security through direct impacts on any country military substructure, , and by distressing factors like food and water availability. Although Direct connections between climate-related anxiety and struggle are uncertain, but climate capriciousness has been publicized to disturb battle through transitional procedures, including resource rivalry, product price shockwaves, and food diffidence.

Conclusion on Climate Change

Probable impacts of climate change upon explicit procedures along the supply chain were acknowledged and insinuations of climate change drivers for supply chain strategic and operational decision-making were explored. Embryonic robust departure outlines for supply chains will also demand a better empathetic of several issues like logistics managers’ discrimination and responsiveness for climate change, the set of organizational, legislative, institutional and financial barriers impeding the implementation of adaptation practices, any challenges of actually implementing variation observes and pertinent expenses, and the scalability of the variation approach. Other stimulating fields for research could be the study of coordination aspects of supply chains in view of climate change and specifically the relationships between dealers and consumers and how carbon management disturbs aspects of harmonization and configuration among them. Finally, more robust trade-off contexts should be developed where certain performance metrics (cost, lead time, quality, service level and carbon) would be prejudiced out in such a way that a certain level of effectiveness and receptiveness is maintained athwart the perfect supply chain.

References for Climate Change

Edwards, J., McKinnon, A., & Cullinane, S. (2011). Comparative carbon auditing of conventional and Improving Service. Second ed. London: Financial Times/Pitman Publishing.

Australian Greenhouse Office. (2005). Climate Change Risk and Vulnerability: Promoting an efficient adaptation response in Australia. Retrieved October 10, 2012 from http://www.sfrpc.com/Climate%20Change/4.pdf

Benjaafar, S., Li, Y., & Daskin, M. (2013). Carbon footprint and the management of supply chains: Insights from simple models. IEEE Transactions on Automation Science and Engineering, 10(1), 99-116. http://dx.doi.org/10.1109/TASE.2012.2203304

Carbon Disclosure Project. (2011b). Migrating to a low carbon economy through leadership and collaboration. Retrieved October 4, 2012 from https://www.cdproject.net/CDPResults/CDP-2011-Supply-Chain-Report.pdf

CDP Global 500 Report(2011). Accelerating Low Carbon Growth. Retrieved October 02, 2012 from https://www.cdproject.net/enus/results/pages/cdp-global-500-report-2011.aspx

Christopher, M. (1998). Logistics and Supply Chain Management: Strategies for Reducing Cost

conceptual thinking. Climatic Change, 75(3), 301-329. http://dx.doi.org/10.1007/s10584-006-0329

Dekker, R., Bloemhof, J., & Mallidis, I. (2012). Operations Research for green logistics – An overview of aspects, issues, contributions and challenges. European Journal of Operational Research, 219(3), 671-679. http://dx.doi.org/10.1016/j.ejor.2011.11.010

EPA Climate Leaders. (2010). Managing Supply Chain Greenhouse Gas Emissions. Lessons Learned for the road ahead. Retrieved October 7, 2012 from http://www.epa.gov/climateleaders/documents/resources/managing-supplychain-emis2010.pdf

Füssel, H.M., & Klein, R.J.T. (2006). Climate change vulnerability assessments: An evolution of

Hitchcock, T. (2012). Low carbon and green supply chains: The legal drivers and commercial

Jacxsens, L., Luning, P.A., van der Vorst, J.G.A.J., Devlieghere, F., Leemans, R., & Uyttendaele,

(2010). Simulation modelling and risk assessment as tools to identify the impact of climate change on microbiological food safety - The case study of fresh produce supply chain. Food Research International, 43(7), 1925-1935. http://dx.doi.org/10.1016/j.foodres.2009.07.009

McKinnon, A. (2010). Product-level carbon auditing of supply chains: Environmental imperative

NRC (2008). The Potential Impacts of Climate Change on U.S. Transportation. Transportation Research Board Special Report 290. National Research Council (NRC).

Song, J.S., & Lee, K.M. (2010). Development of a low-carbon product design system based on embedded GHG emissions. Resources, Conservation and Recycling, 54(9), 547-556. http://dx.doi.org/10.1016/j.resconrec.2009.10.012

Sussman, F., & Freed, J. (2008). Adapting to climate change: A business approach. Pew Center on Global Climate Change. Retrieved October 12, 2012 from http://www.pewclimate.org/docUploads/Business-Adaptation.pdf

USGCRP (2014). Climate Change Impacts in the United States: The Third National Climate Assessment. Melillo, Jerry M., Terese (T.C.) Richmond, and Gary W. Yohe (eds.). United States Global Change Research Program. 841 pp.

White, A. (2007). A New Wave of SCM Innovation Must Address Climate Change Concerns. Gartner. ID Number: G00149710. Retrieved October 10, 2012 from http://www.lexian.com.au/upload/Gartner%20New%20Wave%20of%20SCM20Innovation.pdf

World Resources Institute & World Business Council for Sustainable Development. (2011). Product Life Cycle Accounting and Reporting Standard. Retrieved November 02, 2012 from http://www.ghgprotocol.org/files/ghgp/Product%20Life%20Cycle%20Accounting%20and%20Reporting%20Standard.pdf

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