Hurricane Harvey became the first major hurricane to make landfall in the United States since 2005. In just a four-day period, regions in Texas received more than 40 inches of rain, causing catastrophic flooding that inundated hundreds of thousands of homes and displaced more than 30,000 people. Only a few weeks later, Hurricane Irma created a path of destruction across the state of Florida, shutting down nearly all of Florida’s 15 seaports, which are vital centers of international trade.
While the immediate, short-term effects are starting to fade, we are now left with major long-term disruptions to two of the most important business centers in the United States. Odds are you are experiencing the impact in your supply chain.
The shipping industry is scrambling to reroute ships around Houston – a major supply chain setback. Houston’s ports play a critical role in importing vehicles and electronics made in Mexico and, according to The Wall Street Journal, stores as far away as Denver rely on foreign-made goods entering the country through Houston. Miami, Orlando and Fort Lauderdale, home to the 12th, 13th, 21st largest airports in the U.S., had to temporarily shut down completely. Furthermore, diesel fuel prices shot up by almost $0.18 per gallon, ultimately increasing freight costs by 1.5 percent to 2.5 percent. On top of that, The Union Pacific and BNSF rail lines have announced that it could be months before they are fully operational again. Florida East Coast Railway (FECR) also had to suspend rail operations.
Manufacturers also have been affected due to the impact of Hurricane Harvey on chemical plants. Texas is responsible for 70 percent of the nation’s ethylene, one of the most important chemicals used to make plastics. It has been reported that 37 percent of U.S. ethylene production has been disrupted due to the hurricanes, threatening to create supply shortages and raise prices for U.S. manufacturers.
If there is one takeaway from these natural disasters, it is the importance of being proactive and not taking a wait-and-see approach. Companies should pay close attention to the forecast at all times and always expect the worst case scenario. Contingency plans are vital when it comes to risk management. These plans should be thoroughly explained and printed out in case of a power failure. And, they should designate who will be doing what and how supply shortages will be allocated across customers. Most important, companies should routinely practice these types of scenarios in order to minimize disruptions when the real event occurs.
Always look for the positive during a not-so-good situation. Some companies have found ways to profit from these kinds of events since massive storms tend to cause consumers to stock up on essentials. If possible, your supply chain should work to get the goods that will be in great demand into the stores prior to a natural disaster.
Consider doing an end-to-end mapping of your supply chain, too. It should identify hard-to-source components that are manufactured in regions likely to be affected by natural disasters. If a component is in demand across the industry, place a rush order with other manufacturers of these parts in other regions so your supply chain will take less of a hit.
We cannot always predict when a disaster will occur. However, with proper advance planning, supply chains should be able to function and allow business to remain competitive in the marketplace.
Tag: Hurricane Harvey; Hurricane Irma
