Two weeks after Hurricane Katrina took most of the Gulf region—and the nation—practically by surprise, companies that have moved beyond shocked silence are arriving at “lessons learned” around how to do a better job of minimizing the impact of a disaster on the bottom line of a business.
Solid supply chain and logistical planning are essential, according to businesses that have weathered the hurricane.
But on the other hand, it is difficult—if not impossible—to map out business processes capable of handling every possible sort of contingency that might surround every conceivable type of potential disaster.
When disaster struck in the form of Katrina, some large businesses, including Chiquita Brands International, announced specific plans for moving warehousing and other operations within days of port closings in the Gulf.
But Chiquitas decision to shift port operations and warehousing from Gulfport, Miss. to Freeport, Texas and Port Everglades, Fla. didnt exactly happen overnight, a company spokesperson said.
Instead, the produce giant had already put together a contingency plan for all five ports used in the U.S. For each port, Chiquita assigns either one or two alternate sites for use in the event of emergency.
Chiquita uses some software tools as part of the contingency planning process, according to the spokesperson.
Meanwhile, many other companies—particularly SMBs—are still floundering to find alternative ways of filling customers orders now that customary modes of transportation, shipping and warehouse storage are either totally shut down or much more limited than before.
Unlike Chiquita, Almond Brothers Lumber Company didnt engage in formal contingency planning.
“But we did have [the port of] Houston [Texas] in mind as a back up. We thought that, between these ports, we had all our bases covered,” said William Almond, the companys secretary, treasurer and chief financial officer.
What Almond Brothers didnt figure on was that warehouse space in Houston would turn into such a sought after commodity.
But the lumber firm in northwest Louisiana soon found out that warehouses in Houston had been deluged with demand even before Katrina.
“Businesses had started leaving [the port of] New Orleans,” Almond said, citing rising crime in southeastern Louisiana as the reason why.
“Nobody wants to do business with a gun pointed at his head. Now, this story [about crime levels in New Orleans] is going to start coming out,” according to Almond.
Some companies victimized by Katrina pinned the blame on inadequate planning by government agencies.
“Planning was inadequate at all (government) levels—federal, state, or local,” said Randy Petry of Gambinos Bakery, a 50-year-old bakery firm based in the Greater New Orleans area.
Since Katrina careened through the region, Gambinos has stopped accepting customer orders placed over the Internet, due to problems surrounding the availability of overnight shipping services.
Dave Johnson, an analyst with Peppers and Rodgers Group, suggested that the government might have done a better job of “getting resources to those who really need them” by taking more advantage of available supply chain planning tools.
With optimization tools, for example, businesses can fine-tune their supply chain and logistical processes in ways suited to a variety of contingencies, according to Kevin OMarah, an analyst with AMR Research.
“These systems are event-driven—and if there was ever an event, Katrina was it,” OMarah said in an interview.
“But you cant just wait until [a disaster] happens to start doing supply chain optimization. You need to have everything in place before it hits,” according to the analyst.
Computer-based systems can be limited in some other ways, too, according to some who have tried to rely on them. 3Js Trucking Company, Inc., a trucking and warehousing firm based in central Louisiana, does not do formal contingency planning, either with or without software tools.
But 3Js did use information about road closings from the Louisiana State Police to devise a series of alternate routes, entering these new routes into its logistical scheduling software.
For several days after Katrina landed, however, the road information was tough to come by, according to Mike Pierce, 3Js general manager.
“The [state police] Web site was inaccessible at times. And when I tried to call the [road conditions] hot line, I kept getting a busy signal,” Pierce said in another interview.
Although high demand for this information may well have been a factor, Pierce also cited telecommunications and power outages throughout southern and central Louisiana.
The weekend after Katrina hit, Pierce went to northern Louisiana, further away from Katrinas devastation. When he returned to 3Js headquarters in LeCompte, La. last week, the landline phones and electricity were up and running again in the local area.
But unlike northern Louisiana, central Louisiana was still without cell phone coverage last week, Pierce said.
Despite all their merits, however, supply chain and logistics management systems require “up-to-date real-time data” to do their jobs most effectively, according to Dawn Salvucci-Favier, director of transportation and logistics management for supply chain vendor Manugistics Inc.
“So maybe that is [another] sort of lesson learned from this storm,” Salvucci-Favier said in an interview.