The West Coast has taken a real beating lately in terms of supply chain perception: The port strike and temporary closure alone has some big names looking to reroute and avoid history repeating itself when the current agreement expires. When beleaguered supply chain managers turn their eyes skyward for sign that the West Coast will simmer down, they're finding disappointment there, too, as California's drought swiftly emerges as yet another major problem and liability for supply chain risk mitigation.
How Much Water Are Your Products "Drinking?"
When you're not directly overseeing the manufacturing process of the products you guide from factory to end-consumer, it's easy to shrug off the longest edge of the path they're traveling. Water is a large part of the manufacturing and finishing processes, and if part of those operations go through the California area, it's only a matter of time before slowdown catches up to your chain. When a single pair of denim jeans requires nearly 3,000 gallons of water to produce, it's not hard to imagine how much more the intricate materials used in more modern innovations soak up.
According to environmental business resource Growing Blue, the availability of water doesn't just impact current operations, either—by 2050, an estimated 45% of businesses (up from 22% today) will be located in water-scarce areas like California, driving up competition and restricting growth potential. If you aren't sure how much water your entire supply chain uses, it's time to find out and draw up a contingency plan that lays out actions to take when the tap threatens to run dry.
Will Your Ethics and Eco-Stances Float?
Part of supply chain risk mitigation is ensuring that your supply chain will stand up to social and ethical scrutiny. Are your California-area vendors and fulfillment partners respecting or flouting water restrictions? Industry news source The Strategic Sourceror points out that crimes such as water theft are being enforced with a vengeance as the Golden State's reservoirs dwindle. If your supply chain partner runs afoul of those restrictions, it's bad press for you and may even end up entangling you in the ensuing liability.
One water-logged misstep won't take long to make the rounds on social media, and future company claims of sustainable sourcing and operations won't—no pun intended—hold water with your customers.
Other Resources Are At Risk Too
Beyond the immediate effects of water shortage—less for manufacturers to use and troublesome restrictions for high-capacity factories, among others—there are whole collection of secondary effects that could be just as devastating.
According to Business Insider's Jennifer Welsh, the current drought conditions in California will cost the state some 2.2 billion dollars and over 17,000 jobs. The state will attempt to recoup that money at some point, and that may take the form of higher taxes, tolls, tariffs or a hundred other fees that could touch your supply chain. Displaced workers could place a huge burden on the state's unemployment coffers, further emphasizing the possibility of financial disruptions and recovery efforts. This means that even if none of your product components are manufactured in the state, you're still at risk for a negative economic impact as the effects trickle down.
2015 is the fourth year in a row where drought conditions have threatened the flow of commerce in and through California. If part of your supply chain weaves through the Golden State and your supply chain risk mitigation plans don't factor in the persistence of their drought, you're behind the times. Strengthen your company's own "water reserves" by having ready sourcing alternatives on hand to maximize efficiency and minimize the impact of a switchover. Even if rains start to fall more steadily soon, there's a very real chance that 2016 and beyond will bring similar water struggles to the table.