A heatwave does not have to bring a supply chain to a standstill to cause problems for procurement. Extreme temperatures can change what businesses need almost overnight, while making it harder to move the goods already in the supply chain. Retailers may see demand jump for fans, cold drinks and other seasonal products. Warehouses and logistics operators have to protect people and equipment from the heat. Transport networks can become less reliable or come to a halt almost entirely.
We have already seen what that can look like in the UK. The Met Office has highlighted how previous periods of extreme heat have caused rails to buckle, overhead cables to sag and road surfaces to soften. During heatwaves, water companies also experience sudden increases in consumption that are significant enough to put pressure on networks, even where underlying water supplies are healthy.
The same pressures can be seen further along international supply chains. During this summer’s European heatwave, falling water levels on the Rhine restricted diesel barges passing through Kaub in Germany to around 45% of their normal carrying capacity at one point. European automotive logistics also faced low river levels, rail restrictions and wildfire-related transport disruption, although the sector largely managed to absorb the impact.
CPOs need to think more strategically about supply chain resilience. Aside from preventing a major supply chain failure, there are a series of smaller pressures in procurement that can have a significant impact and pose risks.
Visibility gaps come to the fore
When demand shifts unexpectedly, organisations may suddenly need additional equipment, spare parts, replacement transport capacity or specialist contractors. Existing suppliers may not have sufficient or even the right stock or capacity, forcing procurement teams to look elsewhere. The challenge becomes for procurement teams to find alternative suppliers that they are confident in using quickly enough.
This is where emergency purchasing can expose weaknesses that are much less obvious during normal operations. A new vendor may be able to provide what the business needs, but procurement still has to establish whether it can meet the required timescale, whether its commercial terms are acceptable and whether appropriate compliance checks have been completed.
There is also a good chance that the organisation already has a suitable supplier somewhere within its network. Large businesses can have thousands of supplier relationships spread across different sites, functions and geographies. Information about those suppliers may sit across procurement platforms, finance systems, contract repositories and spreadsheets. One part of the business may already have onboarded and worked successfully with a supplier that another part urgently needs, without either team knowing that relationship exists.
Many of these transactions also sit within tail spend, the large volume of relatively low-value purchasing outside an organisation’s biggest strategic supplier relationships. Tail spend typically represents around 20% of procurement expenditure and can encompass thousands of suppliers, making it difficult for internal teams to manage with the same attention given to strategic spend.
During an emergency, that lack of visibility becomes much more significant. Businesses can end up repeating supplier searches and due diligence they have already undertaken elsewhere, or buying from unfamiliar vendors because the information needed to identify an existing alternative is not readily accessible. Connecting supplier information is a key element of resilience planning. If procurement can see which vendors have already been approved, what they supply and where they operate, teams have a much stronger starting point when the usual supply route comes under pressure.
Finding alternatives faster
When it comes to emergency procurement, AI has an increasingly practical role, particularly around scale. Procurement teams cannot manually search thousands of supplier records, contracts and previous transactions every time an urgent requirement arises. AI can help connect fragmented procurement information, analyse supplier data and bring potentially relevant vendors to the surface much faster. It can also support administrative processes around onboarding and compliance, reducing the time required to turn an alternative supplier into a usable one.
That does not mean handing emergency procurement decisions to an algorithm. A system might identify a supplier offering the required product at an attractive price, but that is only part of the decision. Procurement professionals still need to understand whether the supplier has capacity, can deliver to the affected location and can meet the organisation’s commercial and compliance requirements.
Context becomes particularly important during disruption. The cheapest supplier is of little value if it cannot deliver for several weeks when the business needs something tomorrow. A slightly more expensive local vendor may prove the stronger option if it can respond immediately and has already demonstrated its reliability.
AI is most valuable when it gives procurement professionals better options, faster. Technology can handle much of the work involved in processing data and identifying possibilities. People provide the commercial judgement needed to decide which of those possibilities will actually work. That combination of AI and human procurement expertise is particularly relevant in tail spend, where apparently straightforward purchases can quickly become more complicated.
Resilience starts before temperatures rise
The experience of logistics operators during Europe’s recent heatwave shows why preparation matters. Automotive supply chains largely continued operating despite pressure on river, rail and road networks. DP World, for example, said its European port and terminal operations avoided material disruption, with preparations including enhanced equipment monitoring, adjusted working patterns and additional measures to protect employees during extreme heat.
Businesses cannot know exactly where the next disruption will occur or what they will suddenly need, but they can improve the information and options available when it happens. This requires looking beyond the strategic suppliers that receive most procurement attention. Smaller and specialist vendors can become unexpectedly important when normal supply routes are constrained. Greater visibility across the tail can help organisations identify those alternatives without abandoning normal standards of governance simply because time is short.
This takes the issue beyond operational procurement. If a business cannot obtain essential goods or services because extreme weather has disrupted its usual suppliers or transport routes, the consequences can quickly reach customers, employees and the bottom line. Climate-related disruption is becoming part of the environment businesses have to operate in. Procurement cannot prevent the next heatwave, flood or storm, but can determine how well prepared the organisation is to respond. This is not about predicting every disruption. The most resilient businesses will be the ones that know their supplier options well enough to act when circumstances change.
By Oliver Norman, Chief Revenue Officer, Nomia.
- Procurement Strategy
- Sourcing & Procurement