‘Super’ El Niño: A Loss of Supply-Chain Focus
Supply-chain leaders remain critical, but eight in ten of them say their function is treated like a “cost center.”
Technically, there’s no such thing as a “Super El Niño.” The US government’s categories for the recurring weather phenomenon caused by the periodic warming of Pacific Ocean waters include only “weak,” “moderate,” “strong,” and “very strong.”
But whatever people are calling it, the latest version could be the biggest in decades and cause inflation and logistics headaches for farmers, microchip manufacturers, and practically everyone else. Prior El Niños have left behind an estimated $84 trillion in economic damage since 2000, and this year’s is already being blamed for strengthening Hurricane Lala and steering it to Hawaii, where it caused an estimated $3 to 5 billion in total damage and economic losses this month.
And yet, thanks to global economic turmoil elsewhere—the Middle East war curtailing energy and shipping; trade disputes upending long-standing supply routes—the potential impact of El Niño might not be top of mind for leaders. “Some firms aren’t even focused on the Super El Niño,” says Christian Goulding, a Korn Ferry principal specializing in supply chain, logistics, and operations. "All the other disruptions are taking center stage."
That could be costly to firms. An El Niño forms every few years (the last one was in 2023-2024) and typically peaks during winter. The U.S. government forecasts a 90% chance of a very strong El Niño this year, with a 69% chance that it’ll be the strongest since at least 1950, when official record-keeping began.
No two El Niños are alike, but generally they create more hurricanes in the Pacific and fewer in the Atlantic. This means that ships traveling from Asia to the Americas likely will have more storms to dodge. The trade winds that blow from east to west could also weaken, forcing ships to use more fuel.
But it’s not just changes at sea that organizations should be watching, supply-chain experts say. Indeed, the El Niño has historically affected harvests and the food-supply network as well. In 2015-16, during the last Super El Niño, drought conditions in Southeast Asia led to widespread forest fires that devastated the region's agricultural sector. This El Niño could cause agriculture production to drop by 10% or more. According to investment bank Goldman Sachs, the phenomenon also could cause a16% increase in global food commodity prices, with the full effect not being realized until the second half of 2028. Goulding says many companies that nurture and process chicken, beef, and fish—aka protein-related firms—are already developing contingency plans, securing food supplies for their animals from areas potentially less impacted by the drier weather.
It’s not just agriculture, either. A Super El Niño would threaten to dry up the water supplies of the semiconductor factories and AI data centers that have popped up over the last decade. Both depend on enormous volumes of water to operate.
Experts say the savviest firms have spent the last several years—particularly since the COVID-19 pandemic—stocking their supply-chain talent pool. They have hired agile leaders who have a mix of core functional technical skills, complemented by capabilities that can help them make quick tactical pivots and win over leaders in other parts of the firm. The pandemic, trade disputes, and wars have taught supply-chain leaders to not just focus on the costs of working in specific countries, but also on scenario planning around transportation routes and alternative sourcing options. A very strong El Niño will test those skills even further. Without the right people, supply-chain teams will invariably find themselves constantly “putting out fires,” says Korn Ferry senior client partner and supply-chain expert Gregor Fiabane.
Given the potential impact of El Niño, along with all the other disruptions, supply-chain experts wonder if boards might make supply-chain issues more appreciated within the organization. Many top supply-chain executives say they don’t have a seat in the C-suite, and only 25% of organizations have formal processes for discussing supply-chain issues at the board level. “Supply-chain people feel like pens to the executive leadership team. They get picked up only when they’re needed,” says Mehrab Deboo, a Korn Ferry senior client partner and member of the firm’s Global Supply Chain Center of Expertise.
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