September 13, 2017

Will two disasters in three weeks move the cloud investment needle?

Cleanup after Irma continues apace as companies take stock of their resiliency efforts and IT investments.

By Mark B. Solomon

No one has to give Peter Edlund religion in the value of cloud-based supply chain management systems. Edlund is a founder and senior vice president of global product marketing of DiCentral Corp., a global business-to-business IT integration provider that serves as the backbone for the various systems that connect supply chains. He and his company are also based in Houston, which will likely always be remembered as the city nearly drowned by a hurricane.

Because Harvey did not disrupt DiCentral's operations, it was able to meet its service commitments to customers nationwide that still needed to get goods to market. Still, it didn't stop Edlund from surveying the major damage inflicted on his hometown, and wondering how many firms using on-premises software platforms were flooded out and couldn't recover as fast as they would have liked. By contrast, firms that already had data in the cloud—and hadn't lost electricity--could quickly reconfigure their networks, re-direct purchase order flows, notify their carriers of changes in routing, and re-distribute their inventory as quickly as possible, Edlund said.

The back-to-back monsters of hurricanes Harvey and Irma—which have been conjoined into the apropos moniker "Harma"—will provide much fodder into the fall and winter in the discussion of the increasing need for resiliency and redundancy. It may also provide fresh impetus to the conversations about cloud computing, which refers to the sharing of resources, software, and information via the Internet, where data is stored on physical servers maintained and controlled by a provider. While the storms may not trigger a wholesale migration to the cloud, internal champions of a cloud-based strategy will "have more ammunition to push it further," Edlund said in a phone interview yesterday.

A cloud network, which eliminates the need for the user to install software on premises, can result in considerable cost savings because of reduced staffing, maintenance, and power consumption, among other factors. However, it is not a panacea. Businesses have poured considerable investments into on-premises networks, and are loath to dismantle them for a technology that isn't as well-proven. In addition, power outages can shut down access to key data; in Florida, where Irma's fierce winds and storm surges toppled power lines statewide, taking the Internet with it, on-premises systems would have allowed a user to remain operational, providing the physical structure wasn't flattened.

Ian Hobkirk, managing director of Commonwealth Supply Chain Advisors, a supply chain consultancy that works closely in the warehouse management systems (WMS) segment, said his firm hasn't heard of many instances where a natural disaster will trigger a migration to a cloud-based WMS. In fact, it might result in the opposite behavior, he said. Following Superstorm Sandy's assault on the New York metro area in October 2012, a Commonwealth client engaged in a WMS selection project deliberately steered clear of a cloud-based solution because its on-premises network had kept it operating through the storm, while its cloud-based rivals all went offline, Hobkirk said.

Back to Work

On the physical front, the recovery from Irma continues as fast as can be expected. The Florida seaports, as well as the Ports of Savannah and Charleston, are back in operation. Georgia's Port of Brunswick, which handles roll-on, roll-off traffic and bulk and breakbulk cargoes, is still shut due to a lack of power, according to the Georgia Ports Authority (GPA), which runs both ports. Airport operations in Florida are resuming at a limited clip.

UPS Inc. said today it continues to report service disruptions in the Florida Keys as well as along the corridor linking Brunswick, Ga., to Jacksonville, Fla., due to flooded roads. The Atlanta-based transport and logistics giant is also dealing with localized flooding in cities like Charleston, where all ZIP codes are being served, but not every address within that ZIP code is sufficiently passable for drivers to make deliveries.

The two main eastern railroads, Norfolk, Va.-based Norfolk Southern Corp. and Jacksonville-based CSX Corp., have notified customers to expect traffic delays in the affected areas. Norfolk Southern said in a service update last night that it projects freight delays of two to three days through areas disrupted by power outages. CSX said it expects to resume service to Tampa tonight. Its service operations teams are working to restore its facility in Tampa, Fla. and expect to resume service tonight, Sept. 13. Its Jacksonville-Orlando corridor is still out of service pending repairs, CSX said. No time frame has been determined for resumption of service on the lane.

All of CSX's intermodal traffic destined for Florida East Coast Railway locations at Fort Lauderdale, Fort Pierce, Miami, and Port Miami has resumed, CSX said. Florida East Coast operates a 351-mile line between Jacksonville and Miami with multiple intermediate points.

In Irma's wake, truckload spot, or non-contract, rates have risen even in markets as far north as Philadelphia and Buffalo, a common occurrence when freight flows migrate southward, according to DAT Solutions, a consultancy that closely tracks spot market trends. Spot rates into Florida have spiked as shipments of emergency supplies, often at premium rates, are trucked into staging areas near affected regions.

Being mainly a consumption market, Florida has little in the way of manufacturing. Most inbound dry van shipments will be consumer goads and while flatbed hauls will be mostly comprised of wallboard for housing repair, according to consultancy FTR.

Noel Perry, chief economist for consultancy Truckstop.com and a principal at FTR, said the back-to-back storms are expected to shave about one-half of 1 percent from U.S. GDP in the third quarter. Florida and Texas combined represent about 15 percent of the U.S. economy, and about 7 percent of U.S. trucking activity on a typical day, Perry said.

Perry said at an FTR conference earlier this week that trucking volumes in the Southeast will drop by 25 percent this week. Rates on Florida inbound hauls could spike 10 to 30 percent this week, and level off next week as volumes return to normal, Perry predicted.

As with Harvey, there should be strong trucker demand for so-called "FEMA Freight," high-margin shipments of emergency supplies. However, drivers are being cautioned that it may take a couple of days to offload the goods at staging areas, and that there may not be abundant pickings of outbound hauls once the inbound freight is offloaded.

Over the medium to long term, two major storms in three weeks will strain supply chain networks and resources, especially when it comes to allocating human capital to respond and rebuild, according to Chloe Demrovsky, president and CEO of Disaster Recovery Institute International, a non-profit group that helps organizations prepare for and recover from disasters. "With the ever-present pressure for efficiency, many business continuity, risk management, and supply chain management programs have been merged, restructured, or scaled back," Demrovsky said in an e-mail. "That leaves fewer hands on deck when it comes to dealing with a disaster."

About the Author

Mark B. Solomon
Executive Editor - News
Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.

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