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<\/a><\/p>\nClimate change and its impact on supply chain operations Climate change is increasingly causing significant operational supply chain disruptions, as rising\u00a0sea levels (see figure 2) and a\u00a0warmer atmosphere cause more destructive weather events (e.g. hurricanes, floods droughts).[1]<\/a> Between the 1980s and the 2000s global flooding increased by 230%.[2]<\/a><\/p>\n With 300+ stores scattered across Texas, H-E-B is particularly vulnerable to extreme weather shocks. Moody\u2019s estimated that the cost of lost output from Texas workplace closures in the wake of Hurricane Harvey this year was US$6-$8B,[3]<\/a> and H-E-B had nearly 100 stores in its path.<\/p>\n In addition to avoiding lost productivity, private businesses play a critical role in improving communities\u2019 climate resiliency by providing critical goods in the wake of a disaster.[4]<\/a> By accomplishing these things H-E-B can grow customer loyalty, generate earned media, and protect their sales.<\/p>\n <\/p>\n H-E-B and disaster response: Turning operations nightmares into golden opportunities <\/strong><\/p>\n H-E-B\u2019s emergency supply chain protocols have allowed them to adapt to climate disasters and remain open and well-stocked while their competitors experience multi-day closures.[5]<\/a><\/p>\n As an example of these protocols in action, four days before hurricane Harvey arrived, H-E-B began halting deliveries of less storm-friendly items (e.g. frozen food, flowers) to make more space for essentials (e.g. bread, canned meat).[6]<\/a><\/p>\n Next, H-E-B reduced the variety of their offerings to increase output and speed-up distribution. Their in-house bakery manufactured 3 types of bread instead of 50, reducing downtime for product changeovers, and buyers ordered Frito-Lay to manufacture only four of their best sellers (e.g. Fritos, Doritos) and send everything they could produce.[7]<\/a><\/p>\n As the storm hit, H-E-B transformed their delivery network to do whatever it took to distribute product, including:[8]<\/a><\/p>\n H-E-B also mobilized a fleet of mobile disaster trailers with on-board kitchens, pharmacies, and ATMs, inspired by one employee\u2019s prior experience as a military line cook.[9]<\/a><\/p>\n The plan has been highly successful, and 5 days after Harvey 79 out of 83 affected stores were re-opened with management projecting positive<\/em> yoy sales growth for the week of the storm.[10]<\/a><\/p>\n To build a sustainable competitive advantage in long-term disaster relief H.E.B. consolidates new learnings from every major storm into their \u201cH-E-B Emergency Playbook.\u201d[11]<\/a> They\u2019ve also established a \u201ccommand center\u201d in San Antonio to house a multi-functional SWAT team during crises.<\/p>\n <\/p>\n Future operations: how H-E-B can expand adaption measures and implement mitigation measures to further combat climate change<\/strong><\/p>\n In the short-term H-E-B should continue to implement and refine their emergency playbook, and should share learnings with other stakeholders in disaster-prone areas.<\/p>\n In the medium-term, H-E-B should help suppliers further up the supply chain adapt to climate change. Increasingly, food and beverage companies are facing unpredictable availability, quality, and price of agricultural and livestock products due to extreme climate events, such as the 2012 US drought.[12]<\/a> One option H-E-B could pursue is partnering with suppliers to experiment with more climate-resilient food varieties, creating a more reliable supply of goods less prone to price shocks.[13]<\/a><\/p>\n In addition, H-E-B should mitigate climate change by reducing the carbon footprint of their distribution and delivery operations. They could protect profitability by cutting costs and\/or passing some costs on to consumers. As one proxy, Walmart claims that over the last decade, \u201cits stores reduced energy use by 20% for a total savings of US$1B\u201d through sustainable energy technologies.[14]<\/a> Recent surveys of US consumers also show that \u201c45% are willing to pay more for a product from a company known for being environmentally friendly.\u2019\u201d[15]<\/a><\/p>\n <\/p>\n Open questions for readers<\/strong><\/p>\n \u00a0<\/strong><\/p>\n (word count: 800)<\/strong><\/p>\n Sources<\/p>\n [1]<\/a> Henderson, Rebecca, Sophus Reinert, Polina Dekhtyar, and Amram Migdal. \u201cClimate Change in 2017: Implications for Business.\u201d 性视界 Business School, June 27, 2017.<\/p>\n <\/a><\/p>\n [2]<\/a> Grossman, David, Jeff Erikson, and Neeyati Patel. \u201cGEO-5 For Business: Impacts of a Changing Environment on the Corporate Sector.\u201d UNEP, Green Light Group, and SustainAbility, 2013.<\/p>\n <\/a><\/p>\n [3]<\/a> Zumbrun, Josh. \u201cHurricane Harvey Will Cost Tens of Billions of Dollars.\u201d The Wall Street Journal<\/em>, August 29, 2017.<\/p>\n <\/a><\/p>\n [4]<\/a> Castillo, Carlos, Lauren Cook, and Oz Ozturk. \u201cA New Framework for Disaster Reduction.\u201d Resiliance: A Journal of Strategy and Risk<\/em>. PwC and UNISDR (UN Office for Disaster Risk Reduction), 2013.<\/p>\n [5]<\/a> Morago, Greg. \u201cH-E-B\u2019s Lessons Learned from Hurricane Harvey.\u201d Houston Chronicle<\/em>, September 7, 2017.<\/p>\n [6]<\/a> McClelland, Scott. The inside story of what it took to keep a Texas grocery chain running in the chaos of Hurricane Harvey. Interview by Chip Cutter, September 2, 2017.<\/p>\n [7]<\/a> McClelland.<\/p>\n [8]<\/a> McClelland.<\/p>\n [9]<\/a> Knapp, Gwendolyn. \u201cHigh Efficiency: How H-E-B Delivered Relief After Harvey.\u201d Houston Press<\/em>, October 11, 2017<\/p>\n [10]<\/a> McClelland, Scott. The inside story of what it took to keep a Texas grocery chain running in the chaos of Hurricane Harvey. Interview by Chip Cutter, September 2, 2017.<\/p>\n [11]<\/a> Morago, Greg. \u201cH-E-B\u2019s Lessons Learned from Hurricane Harvey.\u201d Houston Chronicle<\/em>, September 7, 2017.<\/p>\n [12]<\/a>Grossman, David, Jeff Erikson, and Neeyati Patel. \u201cGEO-5 For Business: Impacts of a Changing Environment on the Corporate Sector.\u201d UNEP, Green Light Group, and SustainAbility, 2013.<\/p>\n <\/a><\/p>\n [13]<\/a> Grossman, Erikson, and Patel.<\/p>\n [14]<\/a>Henderson, Rebecca, Sophus Reinert, Polina Dekhtyar, and Amram Migdal. \u201cClimate Change in 2017: Implications for Business.\u201d 性视界 Business School, June 27, 2017.<\/p>\n<\/a><\/strong><\/p>\n\n
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