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In Harvey’s Wake…What’s the Impact on Your Supply Chain?

Posted by on 09.01.17

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All of us at Sedlak are saddened by the catastrophic flooding caused by Harvey, and our thoughts and prayers go out to everyone caught in its path. 

As Hurricane Harvey continues to pummel major area of Texas and Louisiana, we are rapidly seeing the impacts on supply chains all over the country brought on by port closures, carriers' inability to navigate affected areas, and the destruction of critical infrastructure. Whether or not your business or customers are located in the region, you will feel the effects in your supply chain for weeks or months to come:

  • Port closures in Houston and Corpus Christi, which together handle 14% of U.S. shipping, will need significant time to resume normal operations    
  • Reduced capacity at oil refineries in the region will impact fuel prices in the short term
  • Carrier capacity will be reduced (it's been estimated by as much as 10%), as FEMA and other agencies will need them to move critical medical, food and heavy equipment into affected areas
  • Damage to roads, rail, and warehousing will create backlogs all over the country
  • Customer demand may shift significantly - while those in storm-stricken areas may cancel orders to deal with clean up, the will eventually need to replace lost inventory 

In light of all this, here are a few things you should do right now:

Contact your trading partners. Contact your suppliers, carriers, 3PLs, temporary labor sources, and others in your supply chain to understand any impacts you will face and to formulate alternate plans. You may need to reroute inbound product in the short-term, or seek alternate modes of transportation to support service levels.  If distribution space is in short supply in the region, a short-term alternative such as pop-up DCs near your customers may be a viable option.

Communicate with your customers. Let them know about any delays and what you are doing to fulfill their orders. As the saying goes, “people are down on what they're not up on.” If you're not talking with your customers, they are likely to fill in the gaps with negative perceptions about you.

Talk to your employees and colleagues in the industry. Your people with “boots on the ground” in your distribution operation and even those in your business network may have great ideas or connections to be able to alleviate some of the impacts. 

Update your budgets. The transportation industry estimates that costs will rise as much as 20% in the short-term. If you anticipate a lull and then an influx of orders, you need to adjust your inventory planning accordingly. If you need to reroute fulfillment due to store closures or disruptions at a distribution center, there will be costs involved.

Over the longer term, consider developing a disruption mitigation plan for the next disaster (because you know it will come eventually). A decision matrix (“If this happens, then we do that”) should not only consider how to respond if part of your distribution network goes down, but also when in the sales cycle that disruption occurs and its expected duration. A disruption during your peak season looks a lot different than elsewhere in the year. And while a shutdown of a few hours or days might require minimal damage control, an extended period of weeks or months needs a more comprehensive plan. 

Some actions that might make sense for your business:

  • A capacity assessment of your current distribution network can help you identify where you have additional capacity that could be brought online on short notice. 
  • A review of your transportation profile can help you plan alternative means and modes of shipping.
  • An analysis of your inventory deployment across your network may help leverage your existing assets to provide needed redundancy in case disaster strikes.

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