Katrina Applies Supply Chain Stranglehold

Early indications of Hurricane Katrina's impact are cropping up in areas just outside New Orleans, starting with central and northern Louisiana.

More than a week after Hurricane Katrina whipped through the Gulf region, many roads, production plants and warehouses in New Orleans and surrounding areas remain shut, forcing businesses to reroute product shipments elsewhere, either with or without support from high-tech tools.

As of this Tuesday afternoon, all roads into New Orleans were still closed, according to information posted on a Web site run by the Louisiana State Police.

But even beyond the human suffering and financial losses felt in the city itself, companies and consumers in neighboring communities in Louisiana, Alabama and Mississippi are already experiencing the impact of major supply chain disruptions.

Central Louisiana, for example, may have escaped hurricane flooding, but gas and diesel fuel are in extremely short supply there, and some food items are completely unobtainable, said Mike Pierce, general manager of 3-Js Trucking Company Inc., a Lecompte, La.-based regional trucking and warehousing firm.

Meanwhile, 3-Js customers, which include international product distributors such as Cargill and Sysco, are avoiding both New Orleans and the many outlying areas hit by electrical power failures, shipping goods through less affected areas instead.

Over the weekend, Cargill started processing grain in Shreveport, La., which was originally slated for processing in the more coastal areas of Arcola, La., and Lumberton Miss., Pierce said in an interview.

"[The whole supply chain] is out of whack. In the grocery stores [of Lecompte], you cant get anything thatd normally come in from New Orleans. If a bakery is in New Orleans, for example, bread from that company just isnt on the shelf," according to the general manager.

Also absent from supermarket shelves are meat and poultry items of any description—fresh, frozen, and canned, according to Pierce.

Pierce said he wasnt sure of the reasons behind the dearth of meat, but that the problem probably revolves around a combination of local power outages and hording by food-panicked consumers, as opposed to road closings nearer to New Orleans.

At the same time, many towns some distance away from the Big Easy now have more mouths to feed, he said. New Orleans residents who heeded pre-storm evacuation warnings are still living in hotel rooms and apartments theyve rented in central and northern Louisiana and farther away.

The road closings in and near New Orleans, though, are causing big changes in both transport and warehousing operations.

"Calls started coming in early last week from truckers who thought they might be stranded. They were trying to find places where they could temporarily drop their truck loads," said Pierce.

All the while, 3-Js has been re-routing its truckers, too. At this point, the company has adopted routes that circumvent Baton Rouge, La.

Although the roads to Baton Rouge are not closed off, the area is fraught with traffic bottlenecks, since Baton Rouge has become a big staging area for emergency vehicles.

3-Js is using PC-based logistics scheduling software to log its routing changes. The regional trucker has not yet adopted more elaborate software in the "routing optimization" category, but Pierce said that some larger truckers have made this move.

/zimages/1/28571.gifFuel hikes pose challenges for logistics systems. Click here to read more.

Routing optimization software is designed to let shippers and transport firms find the most efficient transport routes, according to Kevin OMarah, an analyst with AMR Research.

"It can deal with changes in variables," OMarah said in an interview. If roads are closed, for example, the software might "go grab the rail information."

Red Prairie Corp., for example, includes routing optimization as part of its Transportation Management Suite, said Erv Bluemner, vice president of product marketing for Red Prairies Transportation Solutions arm.

Red Prairies software accommodates "a number of different constraints, (including) least cost to most expensive [shipping] carrier," Bluemner said in another interview.

Companies trying to ship products through the Gulf Region also face major fuel shortages, along with the possibility of higher gasoline and diesel prices than those charged in other parts of the country.

Reached by telephone late last week Chris Lessner, president of Baltimore, Md.-based Atlantic Nationwide Trucking Inc., said hed heard rumors from other truckers that gas pricing in Louisiana and Alabama might shoot to $5, $6, or even $7 per gallon.

"Right now, there are certain areas were trying to stay out of," according to Lessner, who added that his company isnt making any deliveries south of the Carolinas.

But fears of $7 per gallon fuel charges hadnt come close to reaching full fruition by Tuesday. "I just filled up my gas tank this morning for $2.90 a gallon," said Pierce of 3-Js.

Gas shortages, though, have already reached epic proportions in central Louisiana. "Im talking about standing in line at the gas station for half a day," according to Pierce.

Pierce blamed the fuel shortages partly on the need to use fuel for two purposes—filling up gas tanks, and powering up the small generators that homes and businesses are buying to help them deal with electrical power outages.

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