How Businesses Can Respond to Disasters by Repositioning Inventory

Make no mistake, disasters can, and frequently do, wreak havoc on communities and businesses. Directly after a natural disaster that outstrips a community’s ability to respond, various third-party organizations and companies must mobilize to supply products and services that meet the needs of those affected.

In the case of a disaster, organizations’ responses are supported by pre-positioned inventory that has been prepared for just such scenarios. These organizations need to work quickly to move water, food, health supplies, shelter supplies, and other necessities, and many use a number of tailored inventory strategies to achieve this.

It’s common knowledge that natural disasters are becoming more and more frequent in the face of climate change. Now, even major university departments are brewing up inventory management methods to assist companies and organizations in the face of devastating phenomena.

Researching Emergency Inventory Organization

Research headed up by assistant professor of supply chain and information systems at the Penn State Smeal College of Business, Jason Acimovic, has identified ways of helping organizations to better locate and coordinate their product stockpiles while concurrently saving a significant percentage of their original costs.

The convoluted system currently in use involves many NGOs and government organizations, which manage thousands of different items in warehouses across the globe to respond to international events. This system has its advantages, but it doesn’t provide a means of ensuring real-time, system-wide stockpiling capacity. Even though organizations’ combined efforts determine how community needs are met after disasters have occurred.

According to Acimovic, his team’s goal during their research was to assess this complex system, and to develop and mold individual decisions towards its improvement. They created a set of new metrics based on data-inspired optimization protocols, which assess the quality of allocation inventories among warehouses using objectives that are priorities to stakeholders. The metrics include time and cost-to-respond. While based on advanced models, they are simple to interpret, and can appropriately aid decision-making processes.

The metrics assist organizations like NGOs, governments, and donors to understand how their inventory decisions can affect the entire system’s responses during disasters. This allows companies to assess internal objectives like warehousing costs and supply chains, while contributing to improved system capacities.

Acimovic et. co. demonstrated that current inventory allocation can be remarkably improved by repositioning inventory that has already been deployed. Doing so enables systems to respond to disasters with significantly lower costs—up to 20% lower in the researchers’ sample. These savings could in turn allow businesses to buy more supplies with their same donor budgets.

The Importance of Being Prepared

The size and intensity of storms and other disasters can vary, but companies should never be surprised at their occurrence. It pays to be prepared at all times by assessing risk factors and doing logistics to reposition products out of the line of fire. This is particularly important for businesses in the manufacturing sector, who need to move their entire supply chains to avoid losing inventory.

Physical locations like warehouses and factories cannot be moved, but most companies have assets that can be relocated if necessary. Large businesses such as grocery giant Walmart can predict and pre-position their inventory at certain stores, move some products to safer zones, and then move them back to the stores after a disaster has passed.

Other companies—take hardware and home depot chains, for example—can ensure that emergency items such as flashlights, batteries, rain gear, and plywood for boarding up windows are available in abundance if a storm will be passing through.

By acting proactively, they can predict which necessities will be in high demand, and ensure that they are in steady supply in the right places during times of crisis. These details can be outlined using a business plan template, or companies may draw up documentation that relates specifically to how their processes and procedures will be updated when disaster hits.

Pandemics vs Geographical Disasters

Another category of natural disaster to take into account when repositioning inventory is a pandemic. The effects of certain disasters like hurricanes and tsunamis may, in many cases, be similar to those of pandemics. However, there’s a key difference. A pandemic can start in a specific area, quickly spreading across the country, or even the world, while a natural disaster tends to be limited to a certain geographical locale.

This difference has implications for the inventory repositioning process. Instead of being concerned about damage or loss of goods, companies need to be prepared to position and mobilize their stock at the right locations to meet soaring demand for medical supplies, sanitizers, and other basic goods that may be in short supply.

At the onset of COVID-19, countless businesses rushed to get in-demand products such as sanitizer, toilet paper, and surgical masks to store shelves as a wave of panic buying ensued. The companies that were successful in repositioning their inventory at the right outlets and storage facilities were best able to capitalize on that demand, and secure their supply contracts with major retailers. This rapid repositioning of stock also allowed such companies to keep their employees safe thanks to guaranteed, regular access to PPE and essential sanitary wares.

Planning Disaster Relief

Businesses who are planning disaster relief protocols need to coordinate with their closest non-affected warehouses to store relief supplies safely. If a situation arises where relief supply is stored in potentially dangerous locations because of prior repositioning decisions, extra repositioning costs may be avoided if a company’s existing inventory can cover a highest demand surge situation.

For a business to respond to natural disasters effectively with community aid, it will first need to identify the amount of relief supply necessary to meet the needs of an affected group. These figures must be based on response time threshold levels.

Once achieved, a business can develop a coordination plan to reposition inventory to best protect its assets and products, and provide valuable support for those at risk.

About the Author

Kristie Wright, freelance writer

Kristie Wright is an experienced freelance writer who covers topics on logistics, finance and management, mostly catering to small businesses and sole proprietors. When she’s not typing away at her keyboard, Kristie enjoys roasting her own coffee and is an avid tabletop gamer.