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Natural Disasters

Note from the editor

Whether it's a hurricane, earthquake, blizzard or wildfire, each natural disaster is unique and brings about its own challenges for supply chain managers.

It's next to impossible to prepare fully for these catastrophic events, but careful forecasting and contingency planning can help businesses weather the storm — and equally important, be resilient in its aftermath.

In the trendline below, we explore natural disasters and their effects on risk management in the supply chain. 

Shefali Kapadia Editor

Not if, but when: How supply chains prepare for hurricane season

Harvey, Irma, Maria and Nate. Four 2017 hurricanes that were so destructive that the U.N. World Meteorological Organization (WMO) has retired their names. The four storms devastated portions of Texas (Harvey), Florida (Irma), Puerto Rico (Maria) and the Caribbean (Nate), leaving massive power outages, severe flooding and death in their wake.

According to the Washington Post, final costs may not be known for years, but estimates suggest the tab will far exceed $200 billion

Now Hector has grown to a Category 3 hurricane as it moves close to Hawaii in the Pacific Ocean.

Planning for the 'not if, but when' scenarios

The number and intensity of the storms can vary, but their occurrence should never be a surprise, Rod Daugherty, VP Product Strategy at Atlanta-based Blue Ridge, told Supply Chain Dive.

"We know there are going to be hurricanes in the fall," he said. "It’s not if, but when. My whole summer is [spent] doing logistics to move products from the Gulf Coast and out of harm’s way. In the manufacturing sector, for example, you have to move your supply chain so you don’t lose inventory."

Physical sites such as factories, warehouses and chemical plants can’t be moved, but transportation companies have assets that can be relocated. As soon as they know where the storm will hit landfall, equipment must be moved.

"It really comes down to better planning," Daugherty said, "so that they don’t lose tractors and trailers and have them ready to go when [the storm] passes."

Sometimes, though, emergency response measures lead to another supply chain delay, Daugherty said. When Houston got hit so severely during Harvey, all the loads that could be trucked in or out, were. But in a ripple effect, a driver shortage resulted elsewhere. It had nothing to do with the hurricane geographically, but receiving was off course because of all the drivers hauling to and from Houston after the storm.

How Home Depot used its supply chain for island relief

Daugherty’s colleague, Blue Ridge Chief Data Scientist Rajesh Veliyanallore, pointed out that the major players will always have a strategy. "Walmart has a group that just does this. They can predict and pre-position some inventory at stores, move some to a safe zone, then rush it to the stores after the hurricane passes by." 

Home Depot, for example, will make sure that such emergency items as batteries, flashlights and plywood for boarding up windows is plentiful at stores in the hurricane’s path.

Since October of this year, Home Depot has sent 6,900 containers to Puerto Rico and the U.S. Virgin Islands, including emergency relief supplies and rebuilding materials.

Initial Home Depot shipments to the Caribbean contained critical necessities like batteries, flashlights, tarps, chainsaws and inflatable beds. Power generators and bottled water are still high in demand. Because Puerto Rico’s infrastructure took such a beating, fuel also is a necessity to keep trucks and generators running.

"What we’ve learned is that the Islands are a different animal," a Home Depot spokesperson told Supply Chain Dive. “We need to do more forecasting and more stockpiling of goods. We’ve also increased the number of distribution centers (DCs) serving the Islands from three to five." To meet demand Home Depot increased staffing at the DCs and the on-island stores.

Another key point, the spokesperson added, is communication with carriers and online providers. "We leveraged all those relationships to get emergency relief and goods to the Islands. We’re in constant communication with them and when we spot a storm, we’ll be ready to jump on it."

In crisis mode, communication must be a 'two-way street'

Clear and immediate communications is vital, Jon Slangerup, Chairman and CEO at American Global Logistics, told Supply Chain Dive, calling it "a two-way street" between customer and 3PLs or other business partners. "They share their experience with their providers. How do they deal with backup power? How do they deal with the labor impact when families are homeless and require assistance?"

Slangerup said that those in harm’s way usually have a diversion strategy in place, however, “there also are some with very little knowledge of their supply chain. We work at different levels. As a 4PL, we manage [clients’] 3PL networks. We map and plan their supply chain, giving us visibility into it," including transportation networks, warehouse optimization, cargo diversion or delays, keeping containers at ports until the situation is normalized.

FM Global, a two-century old commercial and industrial property insurer surveyed 101 senior financial executives at Fortune 1000 organizations just after hurricane season. Sixty-four percent of the respondents said the hurricane season had an adverse impact on their business, and among those impacted, 62% they were not completely prepared to deal with the effects.

"Those who cannot remember the past are condemned to repeat it," philosopher George Santayana famously said. And since hurricane season is a regularity, each year can be a learning experience, Slangerup said.

"I think that the more experience you have with these kinds of events, the better you are with planning. Until it hits you, you never understand. When you’re in harm’s way, think it through as much as you can and look at all of your resources to get through," he said.

Article top image credit: Getty

Timeline: How Hurricane Florence is agitating supply chains

In an otherwise quiet hurricane season, a storm by the name of Florence began speeding toward the U.S., threatening homes, lives and businesses in the East Coast in mid-September.

The news sent the East Coast whirring with fears of life-threatening flooding and storm surges. Authorities reacted by mandating evacuations, and companies — from ports and logistics providers to grocers and manufacturers — quickly activated their resilience plans. In the timeline below, we overview the supply chain effects of the storm.

If you are watching from afar, we urge you to visit the American Logistics Aid Network's website, which details ways to help in the resilience and recovery efforts that will be pivotal throughout the storm.

Hurricane Florence and the supply chain: A timeline

Article top image credit: NOAA Satellites via Flickr

Hurricane Florence, one month later

Lingering effects on supply chains have mostly faded, but billions of dollars in damage remain.

One month after Hurricane Florence made landfall, and the Southern U.S. is still mucking out (and that was before Hurricane Michael hit last week).

The slow-moving Florence caused $38 billion in damage, according to Moody’s Analytics. It turned roads into rivers in North and South Carolina, throwing the supply chain — much needed for recovery — into chaos. North Carolina Ports in Wilmington and Morehead City closed for 11 days, and delivery issues jumped 50% as Florence hit.

"Anytime that roads are closed and things are delayed because you’re taking an alternate route that takes you an extra hour or two hours, then the whole system starts to get backed up," Kathy Fulton, executive director of the American Logistics Aid Network (ALAN), told Supply Chain Dive in an interview. "Those things start to escalate quickly."

Florence: An atypical storm

Hurricane Florence was not a typical hurricane — not like, to use a most recent example, Hurricane Michael. While an extremely powerful storm, Hurricane Michael made landfall and moved on, and most of the damage was from wind. With storms like Hurricane Michael, "the zone is relatively small in geographic area, focused on the core of the storm," Stephen Bennett, COO of Riskpulse, told Supply Chain Dive in an interview.

Instead, Hurricane Florence was more like 2017’s Hurricane Harvey, which made landfall and then stayed. "[Florence] basically moved inland, stalled out and stopped moving," Bennett said. In both cases, the storms dumped water on the region, with some areas in North Carolina receiving more than 30 inches of rain from Florence. The catastrophe zone was much larger because of widespread flooding.

That lead to the biggest challenge of recovering from this hurricane: infrastructure damaged and destroyed by flooding. "Businesses could not deliver via their normal routes," said Fulton.


"It’s still an experience based on each storm, but the technology is also learning storm to storm."

Stephen Bennett

COO Riskpulse


In some cases, stores or manufacturing plants were ready and open, but no one could get there – including employees and truck drivers.

The truck driver shortage already present on "blue sky" business days became an issue with Florence recovery too, Doug Baker, vice president of private brands for the Food Marketing Institute, told Supply Chain Dive in an interview. Not only were delivery routes lengthened because trucks had to find alternative routes when major corridors were closed, but also in the aftermath of a disaster, FEMA needs truck drivers too.

Agriculture suffers a $1.1B blow

The North Carolina Department of Agriculture and Consumer Services estimates that Florence caused $1.1 billion in damage specifically to the agriculture industry. Bennett said the most severe impacts were to farms raising hogs and poultry — about 5,500 swine were lost across the state.

Florence by the numbers

Damages

  • $38 billion: Total damage from Florence
  • $1.1 billion: Damage to North Carolina's agricultural industry
  • $23.1 million: Damage to North Carolina's livestock, poultry and aquaculture

Livestock losses

  • 4.1 million: Poultry losses
  • 5,500: Hog losses

"These losses were caused by a combination of wind damage, power outage and floodwaters and were distributed across an area larger than the state of Massachusetts," Bennett said. "Farmers moved more than 20,000 pigs to higher ground before the storm, and this coordinated effort across the industry unquestionably reduced animal mortality in our industry."

That, of course, affects the supply chain. "Those items are inputs at the beginning of the supply chain, so [they] have potential ripple effects," Fulton said.

Sophisticated supply chains help recovery

Previous experience helped those along the supply chain know what worked and what didn’t in previous storms and could be applied to Florence, Baker said.

"The more as an industry that we can work with FEMA and explain to FEMA that we have all our ducks in a row and we have a plan in place, the less they have to do," he said. That includes communicating with FEMA about what grocery stores are open and stocked so that they don’t waste resources on a community where residents already have access to food.

He added that a grocery store being up and running can help a community feel like things are getting back to normal, and recover.

Fulton said North Carolina has a "really robust process for integration with the private sector, so they’re focused on getting business and industry restarted," which helped with recovery too, adding that the same is true for the state of Florida as it begins recovery from Hurricane Michael.


"Anytime that roads are closed and things are delayed ... then the whole system starts to get backed up."

Kathy Fulton

Executive Director, American Logistics Aid Network (ALAN)


"The supply chain as a whole is becoming much more sophisticated," said Bennett. "It’s still an experience based on each storm, but the technology is also learning storm to storm" like identifying store, plant and road closures and the amount of time to anticipate things being closed, effects on shippers, etc.

"Florence is just an evolution," Bennett added. "We are able to point back to Harvey and say, 'remember during Harvey, we used these sorts of metrics?' Then use the same type of metrics that you were used to seeing last year and apply it to your network to see how things might need to flow."

Fulton said that North Carolina has seen some "compounded impacts" due to Hurricane Michael, like power outages and flooding "but we are not seeing any significant lingering effects." Bennett said that their customers "are not observing any large-scale lingering impacts across their supply chains. Impacts are mostly localized at this point."

Baker said there’s always learning to be done from each storm, to do things better, faster and quicker. "I do believe that the area is responding, and communities are doing what they need to do to support each other, and retailers are getting back to business," he said. "I'm hopeful that Michael doesn’t go and take them 10 steps back from all the recovery they were able to accomplish over the last month."

Article top image credit: ESA/NASA

3 ways volcanoes in Hawaii and Guatemala will disrupt supply chains

Lava and volcanic ash from Kilauea and Fuego are wreaking havoc on local farms and infrastructure, but the economic effects are just beginning.

As emergency responders continue to fight the destructive path of volcanoes in Hawaii and Guatemala — which are still erupting, weeks after they began — a long-term battle on the economy has already begun.

The volcanoes' short-term effects are undeniable: The eruption of Kilauea on Hawaii's Big Island has destroyed 600-700 homes since May 3, and Fuego, which is more explosive than Kilauea's slow lava roll, has killed more than 100 people in Guatemala. Both have displaced thousands.

Volcanoes disrupt the supply chain, end-to-end

In the long-term, the volcanoes will hurt more than the people in the evacuation zones and local economies. Wreaking havoc on farms, roads and infrastructure, the volcanoes' destruction will ripple down the supply chain in three ways, reaching companies and consumers.

1. Agriculture

Both volcanoes have severely damaged agriculture in the areas they've reached, which could ultimately have repercussions in the form of higher prices and a shortage of goods.

In Hawaii, Kilauea could destroy as much as 70-80% of the state's papaya production, said Kelvin Sewake, associate dean for extension at the University of Hawaii at Manoa's College of Tropical Agriculture and Human Resources, in an interview with Supply Chain Dive. Twenty feet of lava rock are covering some farm areas near the volcano.

Kilauea's lava is rolling over large orchid farms located nearby too, which Sewake said will lead to "significant drops" in the state's orchid production. It's also affecting livestock: 1,500 head of cattle were moved north to other ranches on the Big Island. Plant nurseries and other fruit and nut crops have also been overtaken by lava, though not to such a great extent. And lava isn't the only threat: Sulfur dioxide from the volcano kills crops miles downwind, Sewake said.

Recovery will probably take years, Sewake said, because farmers have lost seeds, not just crops and land.

In Guatemala, the volcano has devastated crops —not just with lava and gas near the eruption, but with volcanic ash that has covered nearly half the country. The country's minister of agriculture said the most affected productive sectors have been coffee, basic grains and vegetables, according to Fresh Plaza.

According to one coffee company that sources from Guatemala, Sustainable Harvest, "Beyond the impact of burning lava, rocks, and gas, the ash from the eruption can cause major detriment to coffee plants if it remains stuck to leaves, as it blocks the sun and prevents photosynthesis from occurring." The company noted that its producers have not been affected, but it knows that others have been.

2. Transportation and infrastructure

"There is no doubt that transportation will be affected," said Jonathan Procter, program manager for Volcanic Risk Solutions at Massey University, in an email to Supply Chain Dive."The hazards produced are destructive, destroy roads, bridges etc. Ash fall (associated with Volcan de Fuego) is likely to also affect a much larger area that can disrupt transport routes (air, road, rail etc) that can be difficult to manage or clean."

Kilauea, which is only affecting the southeast corner of the Big Island, has not blocked major highways, though it certainly has shut down roads in the area, said PJ Rogers, assistant professor of supply chain and operations at Brigham Young University Hawaii, in an interview with Supply Chain Dive.

In Guatemala, Fuego has blocked roads and forced the closure of a major highway and the Guatemala City airport.

Volcanologists often neglect the "secondary effects" volcanoes have on businesses through infrastructure destruction — not only halting business by ruining buildings but by contaminating water, cutting off power and disrupting fuel pipelines, Procter pointed out.

"There's also simple things such as ash and gases affecting human health and the inability of people to be able to work or even get to [their] places of work that can have a dramatic effect on business," Procter said.

3. Shifting jobs and resources

Volcanoes affect supply chains in a less obvious way by redirecting jobs and resources, Rogers pointed out. Rescuers and disaster relief officials draw resources — such as sanitation trucks, water and construction workers — to disaster areas.

Hawaii Governor David Ige appropriated $12 million in disaster relief for short-term supplies and repairs in the wake of the Kilauea volcano. Contractors had to bulldoze an alternate escape route after lava blocked highways, USA Today reported

Lessons learned from Iceland in 2010

This isn't the first time volcanoes have had major repercussions for supply chains. 

In 2010, the Eyjafjallajokull volcano in Iceland "sent economic shock waves throughout global supply chains when much of Europe's airspace was closed for six days, canceling 100,000 flights and causing sporadic disruptions that lasted for weeks. The daily flow of $41 billion worth of products moving through the global economy was interrupted," notes IBM in an analysis of volcanic risks on supply chains

The report details the destructive ripple effect: With transportation blocked, seafood companies lost tens of thousands on products that couldn't get to wholesalers in time; Bangladeshi clothing, dependent on air freight in Europe, piled up in airports; and diamonds needed by Indian processors got stuck in Belgium.

Preparing for the future

For many actors in the supply chain, cognitive-analytics platforms and blockchain may be useful tools for mitigating the effects of disasters in the future, the IBM report notes. Digital solutions can keep everyone along the supply chain up-to-date, helping them soften economic impact and make informed decisions as quickly as possible.

Infrastructure development projects can also take mitigation strategies into account.

"Many mitigation strategies that require additional engineering works can be costly and ultimately prohibitive," Procter said, meaning it's essential to understand the hazards at hand to implement cost-effective solutions. "It is also easier to develop more cost effective mitigation at the initiation of any development or investment in infrastructure development."

For farmers in Hawaii, a volcanic island, there's always risk, Sewake noted. But farmers will probably relocate farther away from the affected area, which will shift the logistics of how their crops travel from the farm. 

Humanitarian organizations are on the ground in Guatemala, aware that economic problems won't be stamped out with the volcano and that rehabilitating agriculture is essential to recovery. And on the Big Island, on Friday, Sewake will be speaking at an event with politicians, government agencies, the college, and displaced farmers to discuss ways they can help. 

"We don't want to see any farmer stop farming," Sewake said.

Article top image credit: Alain l [CC BY-SA 2.0 fr (https://creativecommons.org/licenses/by-sa/2.0/fr/deed.en)], from Wikimedia Commons