Hurricanes on Supply Chain Brains

Southern states are reeling from widespread damage in the wake of two major back-to-back hurricanes. Hurricane Harvey struck as a Category 4 on Friday, August 25, displacing thousands of Houston residents, over 20 deaths, and record-breaking flooding.  Harvey’s 51.2 inches of water broke the 48-inch record, set by Tropical Storm Amelia in 1978, for rainfall from a single storm in U.S. mainland history.

Just over a week later, Hurricane Irma made landfall in Key West, Florida as a Category 4 storm with winds reaching 130 mph.  While Irma was downgraded to a Category 1 and then to a Tropical Storm as it ripped through Florida, Georgia, and South Carolina, the largest impacts came from the 75 mph winds leaving millions of residents and commercial businesses without power.

As extensive damage to crucial supply chain infrastructure is evaluated, shippers should anticipate a complex peak season heading into the holidays.  Natural disasters, such as hurricanes, have consequences ripple throughout the economic landscape.

ECONOMY

  • Irma threatens $1.2 billion worth of U.S. agricultural production of tomatoes, oranges, green beans, cucumbers, squash, citrus and sugar cane.
  • Chemical refineries have been temporarily closed, reducing production and increasing prices for crucial plastics such as PVC piped and building materials.
  • Cost of lumber will continue to increase due to wildfires in the western U.S. states.
  • Household spending on reconstruction/building materials, furniture, appliances, and vehicles will increase, to the detriment of retail, as discretionary income is re-allocated towards getting lives and communities back in order.
  • Florida makes up 5% of the U.S. economy; Houston’s metro area accounts for 3.2%.

INFRASTRUCTURE

  • Rebuilding and restoration work for commercial, residential, and public infrastructure will be extensive over the next several months.
  • More than 7 million people lost power in Florida and Georgia, leaving crucial pieces of supply chain distribution networks in limbo until electricity is restored.
  • Miami’s ports and airports reportedly handle much more than half of all foreign-caught fresh salmon, tilapia and Mahi fillets coming into the U.S.
  • In Houston, flooding also impacted major shrimp and oyster fishing operations.
  • Perishable goods that rely on refrigerated services could face crucial losses.

FUEL

  • Nearly one-fifth of the nation’s oil refining capacity has been shut down because of Harvey, and fuel production has significantly dropped.
  • Gas prices have jumped about 30 cents a gallon nationwide, on average.
  • Tampa and Port Everglades also happen to be major distribution hubs for both gasoline and aviation fuels.
  • Customs and Border Protection (CBP) issued a week-long Jones Act waiver allowing tankers that are not Jones Act qualified to make intra-US shipments of petroleum products in order to distribute fuel to states and territories to hurricane-affected areas.

CAPACITY

  • Domestic trucking will see increased spot rates and decreased commercial capacity as domestic trucking stepped up to aide impacted areas.
  • Shifted capacity can be expected for weeks to come as infrastructure, humanitarian aid, and backlogged international freight demand steals from commercial services impacted regions.
  • Fuel cost will play heavily into domestic rates and supply chain decisions as importers configure alternative routings to ensure products get on the shelves.

Importers and exporters utilizing a freight forwarder in their carrier mix should pat themselves on the back for incorporating flexibility into their supply chains.  Freight forwarders can provide alternative routings with multiple distribution option in cases of force majeure.

Green Worldwide’s Houston office and Miami warehouse were temporarily closed to ensure safety of all staff and cargo.  We are happy to report that neither location sustained any damage and both offices are open and fully operational as of this notice.

If your business is in need of flexible, alternative routings, contact Green Worldwide Shipping.

Green Worldwide Shipping believes in supporting the communities in which we live and do business.  We challenge the freight industry to support donations to all those impacted by these storms.

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