Shippers learn tough lessons from Hurricane Katrina

By Michael A. Levans -- Logistics Management, 10/1/2005

WALTHAM, Mass.—With Gulf Coast ports and the surrounding transportation infrastructure slowly coming back online following Hurricane Katrina, U.S. shippers are beginning to assess the resilience of their logistics operations and are taking steps to prepare their supply chains for future natural disasters.

According to the results of an exclusive Logistics Management online poll, shippers have their work cut out for them. Seventy-nine percent of the 231 respondents reported that their supply chain and logistics operations were disrupted in some manner by Hurricane Katrina, and 61 percent said that they failed to make deliveries because of the storm.

As the hurricane was battering the Gulf Coast, 35 percent of those respondents were busy moving inventory so they could make deliveries from alternative warehouses, while close to 50 percent were shifting transportation modes to take advantage of any capacity they could find.

Respondents said that such tactics have become an absolute necessity as the Federal Emergency Management Agency (FEMA) continues to buy up as much capacity as it can find in and out of the region.

"Truck supply became very tight as equipment was diverted to transporting relief supplies and the price of diesel fuel spiked," reported one shipper. "This 'tightness' has begun to subside somewhat, but I expect this situation, as well as some spot shortages, to continue through the end of the year."

Frank Miller, corporate manager of transportation and logistics for Alexandria, La.-based Roy O. Martin Lumber Company, said he's still shifting modes and ports as he manages through the intense capacity crunch.

"Katrina has not only affected back hauls and head hauls, it's simply turned the market upside down," said Miller, who mainly ships bulk lumber. "To compensate, we're doing more domestic intermodal, more van, and moving freight to rail where possible. However, with the mode shifting going on here, I'm finding as many capacity issues with rail as I did with trucks," he said.

With shippers in and around the region facing an unstable environment for the foreseeable future, some 40 percent of respondents told us that their experience with Hurricane Katrina has led them to rethink their long-term supply chain strategies.

That was the case for Gary Anderson, transportation manager for Dri-Eaz Products, a manufacturer of restoration equipment used after flooding and hurricanes, who said Katrina has forced him to recalibrate his distribution network.

"We've learned that we may need to look at placing product in strategic locations to set up a better disaster-recovery plan," said Anderson. "We can work with a 3PL to set strategic catastrophe supply in parts of the country that are more prone to these types of situations and have product available to those regions in 12 hours."

Survey respondent Wayne Vossen, transportation manager for Minneapolis, Minn.-based Novartis Medical Nutrition, said he's learned that there's no single golden rule that applies to every shipper when it comes to preparing for such disasters. "All you can do is have your transportation connections in place and be as flexible as possible and respond to the customers when you can," he said. "And when they do find a truck and get an order in, make sure it's enough to cover a couple weeks of your product."

For many shippers, the worst is behind them. But this is no time to be complacent, said Roy O. Martin Lumber's Miller, whose company was directly in the path of the storm. "We're pretty stable at this point," he said. "But we're really going to see a shift as construction kicks in and insurance money comes in…Then we're really going to see the challenges [of trying to get enough] equipment."