Supply Excellence — Hurricane Ike’s Impact on Transportation & Logistics

Hurricane Ike’s Impact on Transportation & Logistics

September 18th, 2008 · by Rachel Rutkoski · No Comments · best practices, oil/energy, sourcing, supply management, supply risk

We’ve all seen the cable news coverage and painful pictures coming from Hurricane Ike’s impact zone on the Gulf Coast. And while the press focuses on the human element for obvious reasons, anyone concerned with transportation and logistics needs to be informed on the storm’s repercussions to those systems and markets.

I’m afraid the news is a mix of potentially bad and uncertain. The main areas of concern include….

Rail - Kansas City Southern railroad’s announced that some of their line embargoes will continue while flood waters recede and damage is repaired. Although they expect to have the system back up and running this week, those decisions are still pending further assessments.
Power outages - With millions of homes and business still without power, suppliers lack the capabilities and man-power they need to fulfill their shipments. If a link in the supply chain was in the path of the storm, there’s a good chance their production lines are sitting idle.
Oil - With many oil rigs damaged or toppled and refineries shut down, the impacts on production and processing (not to mention transportation) of oil and gas in the region could be felt for quite some time. Although everyone agrees that the damage could have been worse, the International Energy Agency is still uncertain as to how widespread the problems are and therefore can’t say when we’ll return to normal.

So, what are the important areas to watch closely in the coming days and weeks?

Fortunately the power outages and railroad problems are logistical delays. So assuming you had a Plan B for when there’s a transportation hub problem, you should be able to weather the proverbial storm without too much time or money lost.

The broader impact on the oil/energy markets is still playing itself out. So keep up with the IEA’s assessment (which is far more reliable than what you’ll see on cable news) to see what lasting impacts to production and capacity there will or won’t be. To be honest, there are so many moving parts to oil prices - currency fluctuations, politics, speculation, and crumbling banking and credit systems in the US just to name a few - the disruptions caused by Ike might be swept away. But it’s certainly something to keep an eye on. And if Katrina, Ike and the other disruptions haven’t caused you to look at strategies for coping with natural disasters and supply chain interruptions…I don’t know what will.

Rachel Rutkoski is a Category Manager for Transportation and Logistics in Ariba’s Global Services Organization. Rachel is recognized by the Institute for Supply Management as a Certified Professional in Supply Management (C.P.S.M.) and has several years experience as a supply chain and transportation analyst in Fortune 500 companies.

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