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When Hurricanes Disrupt the Supply Chain

How supply chains are impacted when not one, but two, catastrophic hurricanes hit the U.S. within two weeks of one another.

In most cases, a single natural disaster or catastrophic weather event can be enough to disrupt even the most resilient supply chain. But when two major hurricanes impact the United States within two weeks of one another, the effects can be downright debilitating, as many organizations are now realizing in the aftermath of Harvey and Irma.

Hurricane Harvey made landfall in Texas on August 25, wreaking havoc on major metropolitan areas like Houston. About two weeks later, Hurricane Irma left her initial footprint in Naples, Fla., and then made her way up the center of the state, leaving a path of destruction in her wake.

As companies in the impacted states assess the damage and dig into the cleanup process, it’s clear that each storm will create its own set of supply chain challenges. In ISM Analyzes The Future Supply Chain Impacts From Hurricane Harvey, ARC Advisory Group’s Steve Banker noted that 67% of supply chain managers expect input materials pricing to be negatively impacted over the next three months, and that 27% percent expect prices to be “negatively” or “very negatively” impacted.

“Fifty-six percent believe supplier deliveries will be at least somewhat negatively impacted over the next three months,” writes Banker, citing a recent Institute for Supply Management survey, “and another 19 percent expecting deliveries to be negatively or very negatively impacted.” Even six months out, Banker says 56% expect at least some negative impact on prices will continue.

According to the ISM survey, the key commodities most often mentioned as those that could potentially be in short supply over the next three months were fuel, plastic resins, chemicals, electronic components, feedstocks, chemicals (raw), gasoline, and polypropylene, among others.  

But Wait, There’s More…
Hurricane Irma could further complicate the situation for procurement professionals who are forced to find alternative sources of supply, pay higher prices, or wait out extended delivery times. As the storm approached the U.S. coastline, Freight Waves was already foreshadowing potential supply chain disruptions in Impacts already rippling through supply chain as Irma approaches.

“…Irma has already disrupted oil tanker movements with transshipment hubs in the Caribbean shut down,” Brian Straight writes. “Shipping lines Maersk Line and Mediterranean Shipping Co. said at least 10 vessels have cancelled or delayed calls to ports.”

On the trucking and supply chain side, Straight discussed the probability that Irma would stretch already-thin resources. “Atlanta has been filling in gaps for Houston area shipments that are only starting to return to normal,” he writes. “A significant disruption to shipping out of the Atlanta area early next week could drive rates up even more.”

In Hurricane Irma Causing Chaos for Transportation Industry in Florida, Go By Truck News points out that Florida isn’t home to major distribution centers, nor is it a major supplier of goods to the rest of the U.S. (with the exception of produce, whose shipping season isn’t until the spring).

The Houston MSA, on the other hand, is a crucial hub for global trade. Texas accounts for about half of petroleum and gas exports, along with about a fifth of chemical exports, according to More Than Shipping. “The Lone Star state is where 30% of U.S. oil refining capacity originates, and during Harvey, half, if not most, of the refineries shut their operations due to the storm,” writes Feray Yuksekbas Kavas in Hurricane Harvey’s Impact on the Logistics Industry.

“Almost half of the products exported from Houston are resins, plastics, chemicals, and minerals, showcasing the nation’s focus in petrochemical business and industry on the Gulf Coast,” Yuksekbas points out. “Major imports flowing through the port include food, construction materials, machinery, and retail consumer goods. The Port of Houston is a major logistics center for the country’s south and central regions.”

As business starts to return to “normal” in the impacted states, buyers will likely continue to feel the negative supply chain impacts for months to come. “Procurement professionals have their work cut out for them…” Spend Matters’ Nick Heinzmann notes in Assessing the Near- and Long-Term Supply Chain Effects from Hurricane Harvey. “While the personal and human costs of the disaster are only beginning to be tallied, supply chain and logistics pictures appear even murkier.”

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