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Hurricane Harvey - Effects, Forecasts, and Operational Best Practices

Posted by Tal Porat | August 29, 2017

As a center of petro-chemical industry and a conduit of trucking and rail out of Mexico, the key supply chain hub is currently devastated by Hurricane Harvey. With a growing death toll, many more injured, and a cumulative 50 inches of expected rain, the hurricane is unprecedented in the region in terms of rainfall and flooding. The response to the hurricane — both in terms of rescue efforts and reorganizing the operations of effected businesses — will be Herculean. 

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Harvey is not the first lethal and damaging flood to hit Houston: Tropical Storm Allison in 2001 killed 41 and caused $9 billion in damage, as well as flooding in 2016 that shut down the city for days. Houston’s expansive sprawl lacks drainage systems and has ample bodies of water that are easily exacerbated by heavy rains. Hurricane Harvey might be a turning point in rebuilding the low-lying, vulnerable infrastructure.  

Catch up on the effects and forecasts of Tropical Storm Harvey below:

EFFECTS

  • 10 refineries close as Harvey drenches Texas energy hub.
  • Several ports and businesses, including ExxonMobil, INEOS, INVISTA, and Occidental Chemical, suspended their operations on Thursday August 24th, as Tropical Storm Harvey approached. Authorities forecast the winds brought by the storm to reach 185 kph or higher. According to reports, warnings have been in place for the effected ports and there is a possible call for mandatory evacuations as a caution against the expected heavy rainfall and flooding.
  • Rail freight networks operated by Kansas City Southern and Union Pacific in Texas, USA were heavily disrupted due to Hurricane Harvey, according to reports on Friday, August 25th. Kansas City Southern suspended train operations between Kendleton and Laredo, while Union Pacific reduced the movement of trains along the areas to be hit by the storm. Delays in the automotive industry are also expected due to these disruptions. Hurricane Harvey, now a Category 4 storm, is expected to bring heavy rainfall to the area until Wednesday, August 30th.
  • Rising flood waters in southeastern Texas caused by Hurricane Harvey have shuttered numerous airports in and around Houston, including George W. Bush International Airport and William P. Hobby Airport. The damage forced airlines to cancel thousands of flights, shutting off one means of evacuating one of the nation's most densely populated areas.
  • At the Port of Houston, all facilities are closed, focusing on rescue efforts before moving to recovery efforts, said Roger Guenther, the port’s executive director, in an interview with CNBC.
  • Benchmark European gasoline refining margins spiked nearly 9% on Tuesday to their highest since April after more than 2 million barrels per day (bpd) of U.S. refining capacity was knocked offline by Hurricane Harvey.
  • At least 14 people are reportedly dead in the Houston area; more than 3,500 people have been rescued, and about 30,000 are thought to have been displaced, including 9,000 or so currently taking shelter at Houston’s convention center.
  • More than a quarter of a million were without power in Texas.
  • BNSF Railway reported that widespread flooding is causing major disruptions of service and operations in the Houston region. All traffic destined to or originating from Houston has been suspended, according to a BNSF customer alert. Kansas City Southern announced yesterday that its force majeure declared for Kansas City Southern Railway and Kansas City Southern de Mexico and an embargo for impacted areas on the KCSR network remain in effect.

FORECASTS

  • According to analysis by freight research firm FTR Transportation Intelligence, Hurricane Harvey will strongly effect over 7% of U.S. trucking over the next two weeks, with some portion of that number being out of operation entirely.
  • As Harvey continues to dump rain on Houston, the estimates of economic damage to the nation’s fourth-largest city continue to escalate. Morgan Stanley says if media reports about the damage ranging between $30 billion and $40 billion are correct, Harvey would rank as fourth worst storm, when adjusted for inflation.
  • Just as Hurricane Harvey unleashed devastation and human tragedy across Texas' Gulf Coast, the epic storm's economic impact is expected to cause a deluge of ripples in the state and U.S. economies. Battered Houston, the nation's fourth largest city, plays a crucial role in the energy, chemical and shipping industries that reaches well beyond its metropolitan area. Texas' Gulf Coast is an economic powerhouse, accounting for roughly $600 billion in annual economic activity. This link lists how that impact will be felt in coming weeks and months:
  • The floods could destroy as much as $20 billion in insured property, making the storm one of the costliest in history for US insurers, according to Wall Street analysts.  
  • As devastating as the flooding has been for oil refiners in the U.S. Gulf Coast, surplus fuel inventories may help the industry withstand the worst storm to hit the country in more than a decade.
  • As rain continued to fall on Houston and rescue personnel scrambled to answer remaining emergency calls from trapped residents, the city and region faced what will likely be a years-long road to recovery from Hurricane Harvey and its aftermath, city planning and disaster response experts said.

RELIEF EFFORTS


OPERATIONAL BEST PRACTICES

  • Master the information quickly: letting chaos reign will inevitably lead to missed opportunities. Getting your carriers to move shipments and jumping at buying on the spot market will help you seize limited resources first.
  • Rally your troops: get everyone that is relevant on board as soon as possible through a centralized communication system so you can harvest your brainpower and jump to action. Your supply chain IQ is high — so enable their communication to move proactively and quickly.
  • Be transparent: don’t try to resolve the problem in siloes or through personal heroics. The more connected your supply chain is across functions, the faster you will move toward resolution.  
  • Assess wins and losses: go back and analyze where things went right and where things went wrong; then build these lessons back into your process for future events.