Supply Chain Risk Management: Could You Face a Category 4 Supply Chain Disaster?

JoeCannata

Supply chain risk managementWith Hurricane Matthew, the most powerful storm to threaten the Atlantic Coast in over 10 years that has already brought severe damage to Haiti, the Bahamas and several Southeastern U.S. states, obvious disruptions to supply chains and supply chain risk management were a given. Many of the states affected contained key ports and supply destinations, as well as transportation and logistics hubs. These ports accounted for 18.3% of U.S. container import shipments and 49.8% of east coast and Gulf of Mexico imports in September, according to an article from the Business Information Industry Association.

  • Starting with Miami, this port primarily handles containerized cargo with small amounts of breakbulk, vehicles and industrial equipment. It is the largest container port in the state of Florida and ninth in the United States.
  • Going up the coast in Jacksonville, FL, there is a huge port that receives the second-most automobiles in the US along with all types of cargo.
  • Heading further north along the coast is Savannah, GA, home to the largest single container terminal in the United States. In 2015, the Port of Savannah moved 8.2% of total U.S. containerized loaded cargo volume and more than 18% of the East Coast container trade.
  • A little more northward up the coast is the port of Charleston, SC. In 2016, this port handled 1.1 million containers, moved 1.2 million tons of non-containerized cargo and had the most productive crane moves in the U.S.

The theme here? The southeast contains a bunch of key ports and supply chain links that were in peril as Matthew approached and eventually passed through them. As if the situation wasn’t bad enough, Hanjin, the huge shipping company, was already in bankruptcy as of early September and putting a delay in the arrival of goods well before the hurricane. Hanjin typically handled delivery of goods to the west coast, but their containers can be found all across the US, so suppliers, wholesalers and retailers were already feeling the effects of the Hanjin situation. Several container ships adjusted schedules to arrive before the storm, which put a strain on the dockworker supply as well. They would be handling maybe twice as many ships in a typical set of days. The human links of the supply chain were stressed. Then, with the southeast ports eventually closed for weather issues, even more intelligent decision making was needed to mobilize and survive the situation that pre-planning did not account for in time.

As is typical with an impending hurricane, many East Coast retailers ordered extra supplies ahead of the major rush on key items and necessities. Trucking companies already warned customers trying to get shipments into the region that they should expect at least a two-day delay. Long before the red flags with black squares in the center were raised, the grocery stores were the first to stock up on goods. However, each store only has so much shelf and storage space, so they could only sell a fixed amount.

Next up were the big box home improvement stores, like Lowe’s and Home Depot, which activated their emergency supply chain plans. Home Depot devoted a whole distribution center in Florida to hurricane relief supplies such as tools, generators, tarps, flashlights, batteries and chainsaws, to support more efficient distribution across the southeast. Lowe’s also had distribution centers in Florida, Georgia and North Carolina with extra supplies ready and waiting. This involved in some cases, diverting some inventory bound for other regions. The key was to get everything in place well before the arrival of the hurricane.

The major pharmacy chains, CVS and Walgreens, took steps to protect their perishable pharmaceuticals, as well as ensure adequate supply was on hand once they reopened. They encouraged their customers to refill prescriptions in advance, in case the store had to be closed for an extended period either due to flooding, or lack of electricity.

Speaking from personal experience, it is important to get a jump on the situation well before it happens, to avoid being stuck in lines, scrambling for supplies, or even gasoline to go get supplies and necessities. Do not forget that during a storm, fuel trucks will not be out and about, nor can they deliver to stations that do not have electricity. The state of Florida “requires motor fuel (1) service stations near interstate highways or evacuation routes, (2) terminals and (3) wholesalers to have transfer switches and appropriate wiring to transfer the electrical load from a utility to an alternate generated power sources in the event of a power failure. It requires corporations or entities with at least 10 service stations in a county to have access to at least one portable generator.” (information is courtesy of this site: https://www.cga.ct.gov/2011/rpt/2011-R-0389.htm). The fuel supply chain could be one of many chains affected by a hurricane, especially if the hurricane threatens the Gulf of Mexico hampering the oil fields like Katrina did in 2005. While cleared roads are a necessity, also finding available staff to drive trucks becomes an issue. A supply plan is needed for the human element, as well.

For retailers, it is huge to keep the supply chain running smoothly, regardless of the weather, while balancing the needs of staffing, customers, safety and common sense. While there is never a guarantee a retailer won’t experience losses in a major weather event, there are some ways that can help them hunker down when the storm arrives. This is where RapidResponse can help, by making use of:

  • Automating the fulfillment optimization
    • Selecting the distribution center best equipped to fulfill orders
    • Finding alternative suppliers
  • Up to date inventory status
    • Knowing what you have and what you can deliver
    • Global, regional or local asset tracking
    • Update e-commerce websites to sell only available items
  • Use analytics
    • Thorough data reviews before and after the storm
    • Determining the buying patterns
    • Determining which products sold in higher quantities

After Hurricane Matthew hit, were companies prepared for supply chain disruption recovery? Based on what I read about Hurricane Matthew, the answers ranged from not at all to minimal planning. That is where the what-if scenarios in RapidResponse can help. This powerful feature lets a supplier or manufacturer see what would happen if the ports all closed, or the delivery mechanisms could not embark.

Whether it’s a storm, a fire or an earthquake, or a man-made disaster, preparedness is key to surviving any kind of major catastrophe. Having the best tools and systems at your disposal is key to weathering the storm (bad pun intended). Don’t let your supply chain get blown away by any category of winds.

JoeCannata

Joe joined Kinaxis in July of 2015 as our Certification Director, coming to us with 15 years of experience in architecting and running formal certification programs. Joe holds a Masters of Applied Science in Computing from the State University of New York at Stony Brook. He currently resides in the north Atlanta suburbs.

More blog posts by Joe Cannata

Discussions

  1. Another consideration beyond the supply chain/logistics is how will your facility respond and recover operations to a business disruption? Have you identified your critical processes? Have you developed a plan for communication and coordination (off site)? Have you developed a plan to address the impact to operations of employees personal lives are impacted?

  2. Good point Fred. This is all part of a disaster/recovery plan and the human element often gets overlooked.

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