02 December 2008 | Paul Snell
Supply chain managers and their businesses need to be more aware of how they use water in the future, according to a report by consultancy Arthur D Little (ADL).
As the demand for and scarcity of water increases, the report said, prices will increase and companies that do not deal with the problem will suffer higher costs and reduced growth.
It added companies often overlook the impact of water shortages on the supply chain, and it is essential to look at water use of vendors as well as their own firm.
A drought in the north western US caused higher costs for brewer Anheuser Busch as it affected supplies of barley from the region. It also slowed aluminium production, used in packaging, because of its dependence on hydroelectric power. Shareholders at Pepsico have also asked the firm to detail the risks it faces from water use in its own supply chain.
ADL said some firms were collaborating to understand their "water footprint". Plastics manufacturer Borealis announced this year it would work with supplier Uponor to examine how much water is used in making its products.
The report said buyers have to answer two questions - how vulnerable is supply and how much water does the firm use? Determining these answers will allow firms to balance the need for water in the business and identify potential efficiency savings by reducing consumption or through innovation.