
You miss a supplier and everything stops, or how the Climate Performance Diagnostic strengthens operational resilience.
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⛈️ During the weekend of June 29 and 30, a critical supplier suffered a climatic hazard, and its customers, Porsche, BMW, Jaguar, Mercedes-Benz, found themselves at a standstill. Porsche announced that it was revising its sales forecasts, the sanction was final, financial analysts did not like surprises, the stock plunged (see L'Usine Nouvelle of July 23, 2024).
❓“It was a biblical flood that wiped out Porsche’s IPO gains,” said Stephen Reitman, an analyst at Bernstein Research. Act of God. Nothing to be done?
📉 It is surprising that it took until July 23 for Porsche to revise its sales downwards due to an unexpected shortage of aluminum alloys caused by flooding at a supplier site, without specifying which one[1]. According to analysts at Bernstein Research, the flooding would result in the loss of production of at least 10,000 to 17,400 vehicles in the second half of 2024. The shortage has also affected the supply chains of BMW and Mercedes-Benz, but both have been able to find alternative suppliers. Spokespeople for BMW and Mercedes-Benz declined to provide further details.
🏭 “This raises some questions about Porsche’s supply chain management,” said Patrick Hummel, an analyst at UBS, “who is surprised to see that Porsche is frequently hit by supply chain issues, while supply chains have remained very stable for most automakers since the end of the semiconductor crisis.” It is equally surprising that analysts and asset managers ultimately do not know the risk of the stocks they follow that well and are forced to wait 23 days between the time the disaster occurs and the correction of Porsche’s stock on the markets. This was not “a biblical flood,” but just a 50-year flood.
📝The Climate Performance Diagnostic could have been and still can be an essential tool for the industrial resilience of Porsche, BMW, Jaguar and Mercedes-Benz.
Could have, because when choosing the site for the Novelis plant in Sierre, Switzerland (which appears to be the supplier not mentioned by Porsche) in 2004, these manufacturers could have assessed the vulnerability of the site to flooding, for which we provide the heights in and around the buildings, and estimate the probability that these water heights will materialize, and made an informed choice.
Still can, because these manufacturers can assess the climate risks to which each of their critical suppliers is exposed, classify them, select them according to their level of resilience, engage in conversations to reduce risks, to adapt their supply chain to climate change. Porsche would then be able to set up monitoring systems, and contingency and business continuity plans in the event of a hazard occurring at a supplier.
📝 Because the DPC tells us that the Novelis site located in Sierre, route des laminoirs 15 in Switzerland is significantly exposed to the risks of undefended, defended, and rain-fed river flooding. The water height caused by a river flood in and around certain buildings on the site exceeds 2 meters of water, with an estimated probability of occurrence of 2% in the current year, 18% in the next 10 years, and 33% in the next 20 years! An extremely high risk. The same thing in the event of heavy rain: the site is exposed to significant water heights. The projections for 2050 are even more alarming. 2 meters of water in the plant, that is precisely what happened at the end of June[2].
🔎 Knowing the exposure to climate risks of production sites and its critical suppliers has never been easier with Tardigrade AI's DPC. For a few hundred euros per site, the DPC allows you to anticipate, adapt supply chains, select suppliers according to the risks incurred, engage the most critical partners in the supply chain in business continuity plans, or react quickly and communicate with analysts to avoid sudden corrections in the markets.
If you want to know the resilience of your supply chain, improve your resilience, and reassure your operational and financial partners about your ability to manage climate risks, contact Tardigrade-AI at contact@tardigrade-ai.com or find us on ww.tardigrade-ai.com