Two

Supply Chain Matters features its second update regarding the industry and supply chain management impacts relative to Hurricane Harvey that struck the Texas Gulf Coast.

It has been almost ten days since the devastating storm first came ashore between Corpus Christi and Houston, with the five-day event dropping upwards of 50 inches of rain in certain areas.  The devastating flooding that now stretches from Corpus Christi to parts of Southern Louisiana will no doubt result in human and commerce impacts for many weeks and months to come. Already many are of the view that Harvey will likely be recorded as one of the more severe natural disaster flood events ever to occur in the United States to-date.  The municipal water system servicing the city of Beaumont Texas failed two days ago, forcing additional evacuations of residents because of a lack of supply of essential water.

The impacted region is a hub of global energy and petrochemical production and as-such, materials that form the basis of quite many multi-industry products. One of the largest oil refineries in the United States, the Saudi-Aramco owned Motiva Port Arthur refinery remains shutdown, with estimates indicating as much as two weeks before being able to resume production. Other refineries in the region are just beginning to re-initiate gradual start-up of operations. At one point three days ago, upwards of 30 percent of U.S. petroleum refining capacity, representing more than 3 million barrels per day, had been shutdown. Actual shortages of fuel supplies are being experienced in certain areas of Texas including Dallas, with long lines of vehicles queued among filling stations hoping to fill-up. Supply shortages have forced major pipelines, including the Colonial Pipeline that provides major fuel supplies to the U.S. northeast region to temporarily halt pumping. Gasoline prices across the United States have spiked to as much as 30 cents more per gallon, and we are in the middle of the three-day Labor Day Holiday weekend where many motorists travel.

A chemical facility that was severely flooded in Crosby Texas has encountered two major explosions, with others expected. The Arkema SA facility produces organic peroxides used in acrylic paint, pharmaceuticals, and construction materials. The material itself becomes unstable if not refrigerated and chemicals stored in trailers that lost refrigeration are the ones exploding.

Beyond ongoing rescue and recovery of flood victims. one of the key priorities at this point is to re-establishing transportation to and from the impacted areas. Multiple truckloads and airlift of needed relief materials are inbounding to the region from federal, state, and international relief agencies and naturally have priority. Major retailers Home Depot, Lowes Home Improvement and Wal-Mart has dispatched upwards of 700 trailers each to area distribution centers and stores that have now opened. Across the United States, people are donating goods for disaster relief but unfortunately, there may not be adequate resources facilities in-place yet to accept and distribute such goods.  Coordination is essential.

Shipments of fuel and other needed materials from the region are the next priority. As we pen this posting, Port Houston and Corpus Christi have opened for very limited smaller activity. Authorities warn that it could be weeks before large oil tankers and container ships can safely navigate the Houston Ship Channel. The latest advisory from Port Corpus Christi indicates Corpus Christi Ship Channel restrictions in-effect for only one-way vessel movements and daylight-only transits, with draft restrictions limited to 43 feet.

Houston’s Busch International Airport is open for limited flight activity. The BNSF Railway has begun some limited service while trucking firms remain impacted by terminal operations still effected by the effects of flooding. Obviously, it will take several more days and lots of federal and state governmental assistance for area transportation and logistics to be able to resume some semblance of needed services.

Needless to state, Harvey represents a major industry supply chain disruption. Once again, various business continuity and supply chain risk mitigation plans will be put to the test. Supply Chain risk management platform provider Resilinc has produced the below Table indicating a forecast for weeks of potential disruption, primarily because the impacted region serves as a foundational block for many manufactured materials and interconnected global supply chains.

Source: Resilinc, Inc.

Supply Chain Matters re-iterates important learnings gained from observations from previous natural disasters of this significant magnitude:

  • Often, the specific impacts of such events extend way beyond the actual event. Initial assessments may tend to indicate all is fine, lacking a full assessment, and discovering more meaningful impacts after days of more thorough assessment.
  • Continued to offer any impacted employees and their families in the impacted regions required assistance in temporary housing and essentials of food and water. Schooling and day-care of children will likely become a major concern as-well.
  • It is critically important to assess all tiers of product supply chains, beyond key Tier One suppliers and services providers. As noted, the Texas Gulf Region is a hub of energy and petrochemical related products that touch so many product supply chains.
  • Offer assistance to impacted suppliers and service providers. That includes offers of augmented resources, equipment, tooling, key personnel, or other needs. Accelerated account payable payments are another consideration.
  • Offer assistance to state, federal and relief agencies because are working to restore some sense of normalcy. One agency to consider is the American Logistics Aid Network (ALAN) connects logistics resources with organizations involved in disaster recovery efforts. This agency helps to serve as a resource for volunteer transportation and logistics needs which can be viewed at this web link.
  • Initiate contingency plans for key supply needs where required, and do so before others consume available capacity from alternative suppliers. At the same time, we caution teams not to game the system with false orders since in the end, that benefits no one.

Supply Chain Matters will continue to provide weekly updates regarding the effects of Harvey.

 

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