Severe weather events have hit supply chains hard in recent years, so as the Atlantic hurricane season looms just two weeks away, many companies are applying some hard-earned lessons to their logistics operations in an effort to avoid disruption and plan for a quick recovery from the next storm.
Traditionally spanning from June 1 to November 30, the six-month span has lately included painful and expensive hits to U.S. roads, rails, and warehouses by hurricanes Florence and Michael in 2018, and by hurricanes Harvey, Irma, and Maria in 2017.
To help businesses take steps to minimize that damage, transportation and logistics provider DHL provides a supply chain risk management platform called "Resilience360" that the company says can help users to predict, assess and mitigate the risk of disruptions. The company on March 25 released its first "Annual Risk Report," listing the top 10 supply chain risk predictions for 2019. Number four declares: "climate change impact heats up," saying that forecasters predict this year could be the warmest year on record, pitting companies against an increasing number of weather-related disruptions.
A forecast from Colorado State University's Department of Atmospheric Science backs that up, saying those disruptions are on track in 2019 to include 13 named storms, including five hurricanes.
While such massive storms are mighty forces of nature, DHL says companies can use technology to mitigate hurricane risk, since storms are usually detectable three to five days in advance through data supplied by weather radar, satellite imagery, and airplanes carrying sensors. "Companies can map their supply chains, see which supplies are where, and what routes they're using," Tobias Larsson, CEO of Resilience360, said in a May 15 webcast. "Then they can see the predicted path of the storm, whether it will impact their suppliers, and note whether those are critical suppliers, who provide high-volume or high-margin products."
Armed with that model, companies can build buffers of backup capacity so they can continue operating even if inventory flow comes to a halt because of flooding, power outages, and other impacts. "Many just-in-time supply chains have very low inventory levels because they are optimized," so they may have to contact alternative suppliers or load some goods into trucks and put their stock on wheels, Larsson said. "You can't mitigate 100 percent of the risk, but you can do better than your competition."
DHL applied many of those lessons to its own practices after Hurricane Maria swamped Puerto Rico in 2017, and the company was scrambling to get its 10 warehouses on the island back up and running, Ewar Rivera, the director of operations for DHL Supply Chain in Puerto Rico, said on the webcast. As a provider of third-party transportation and warehousing services, DHL helped its customers build up inventories, so they had enough "safety stock" to stay in business, even though the movement of goods through the region came to a standstill as Puerto Rico was lacking clean water, electricity, food, and fuel, he said.
Each DHL warehouse has a business continuity plan (BCP) that is drafted with input from customers and from providers of crucial services like internet, fuel, and water. Many BCPs also include pre-agreed standing orders, so a diesel vendor will continue to make deliveries even when communications are down. "We also used catering services to our facilities, so employees could get food while working and even take some home after work," Rivera said. "We were up and running faster than other companies in the area."
The New York-based insurance company Travelers offered similar advice for companies preparing for the upcoming hurricane season, pointing out that just because a manufacturer is located in the Midwest doesn't mean that the upcoming hurricane season won't impact them.
Far-flung supply chains mean that essential suppliers, customers, transportation routes, or other dependencies could be located in high-risk areas, spelling danger for their clients thousands of miles away from a storm's path, Travelers said. The insurer provided three points of advice for businesses planning for the upcoming hurricane season:
Setting priorities before the storm hits is a crucial step in hurricane preparation, according to the American Logistics Aid Network (ALAN), a charitable group that coordinates donations of logistics goods and services to supplement non-profit organizations' response efforts following natural disasters.
In a May 14 blog post comparing storm preparation to the safety pamphlets founds in airline seatback pockets, ALAN executive director Kathy Fulton advised people to "put on your own oxygen mask before helping others," saying that one of the most practical things you can do to help the cause of disaster relief is to be prepared to take care of yourselves and your loved ones.