The Drought Strains Supply and Demand

California is no stranger to drought conditions. The lack of rainfall continues to affect the area and threaten the residents and businesses residing in the area. California residents have been asked to decrease their water consumption by 25% to even 50% in some cities¹. The risk of unavailable water raises concerns that trickle far past the Golden State. The indirect result of the drought presents challenges for supply chains and meeting consumer demands.

Crop Growth Suffers

The lack of rain has altered the quantity, quality, and price of produce. In some instances, produce has ripened far earlier than expected. Farmers have to shift their plans for maintaining their current crops and readjust their distribution and strategies for the future. Produce serves as ingredients for other products so any disruption in their supply chain may affect other businesses. For instance, rice farmers are planning to plant less which reflects drought expectations in the coming seasons. Some farmers have even considered nearshoring to other areas where water is more accessible². Farms in California provide 90% of the green vegetables that the rest of the country consumes throughout the winter³.California agriculture uses about 80% of the state’s water which isn’t surprising when popular grown vegetables like broccoli takes about five gallons of water to nourish a single head⁴. Although residents were asked to cut down on their water usage, farms were exempt as the state tries to keep up with demand and maintain their pre-drought production.

Manufacturing Seek Alternatives

Manufacturers aren’t immune to drought conditions. Like the agriculture industry, manufacturers have to strategize ways to be successful when conditions aren’t ideal. Many companies have been manufacturing in the state of California for years, but now have to make huge changes to their operations to be more conscious of their usage of resources. Industries like denim and bottled water are among those the hardest hit. In fact, Ethos water, a water brand owned by Starbucks, has actually moved its facility across the country to Pennsylvania which offers more natural resources to continue to manufacture⁵. Meanwhile, denim companies are looking for alternatives to treat the denim that uses less water while still being environmentally conscious.

Transportation Challenges

Drought isn’t only affecting the production of goods, but also the transportation of those goods. It’s affecting water levels in places like the Panama Canal where a maximum draft depth of ships has been mandated to ensure that ships can safely make it through the canal. As the water levels continue to decrease so will the size of ships that can utilize the canal. The change has already affected about 18.5% of ships. Shippers have to reduce their cargo which can disrupt other aspects of their supply chain and hinder the ability to meet demand⁶. If companies are choosing to get their ingredients or products from different sources they may have to rework their network to ensure it remains profitable.

How long is this drought expected to last? Researchers are calling for a wet winter; however it may not break the drought or solve all of the issues the drought has caused. Extreme drought may be the new norm for California and just proves that we should be more prepared to respond to these conditions. Manufacturers, farmers, and businesses alike should strategize for the future in all areas of their supply chain. In a 2014 study, 73% of shippers surveyed felt their relationship with 3PLs have grown to be more collaborative or even exceeding that⁷. Having the right partners that are collaborative and flexible will be vital in helping your supply chain weather these types of conditions.