Mitigating Risk from Hurricanes and Other Natural Disasters

Some of the highest-profile damage by Hurricane Milton was inflicted on Tropicana Field in St. Petersburg, Florida. The home of the Tampa Bay Rays of Major League Baseball suffered significant water damage after winds tore fiberglass panels off the stadium’s roof. (U.S. Department of Homeland Security/Jocelyn Augustino)

Hurricanes Helene and Milton have caused flooding, deaths, infrastructure damage, displacement of homeowners and renters, and other destruction. Disruption to supply chain production, supply availability and delivery has been rampant.

An IV-fluid manufacturing plant in North Carolina was flooded due to Hurricane Helene, causing it to close. Nine Florida ports and one Georgia port closed due to Milton; they escaped major damage during Helene, although operations at some were suspended at the time. Imports and exports were impacted; shipments were delayed.

An AccuWeather report estimates the total damage and economic loss from both hurricanes to be as much as US$430 billion, with Milton accounting for between $160 billion to $180 billion of that total. “Milton will go down as one of the most damaging and impactful storms in Florida history, along with Hurricane Helene’s estimated total damage and economic loss of $225 billion to $250 billion just two weeks ago, which resulted in significant damage from the Gulf Coast of Florida to the southern Appalachians, where a catastrophic flooding disaster occurred,” the report states.

Among measures taken to mitigate supply chain impacts, the Biden administration last week took action to ensure access to medical supplies following the hurricanes, including working to restore access to the North Carolina facility and moving IV fluids to safe facilities.

Also, according to a U.S. Department of Health and Human Services press release, “(A)s of October 9, FDA (the U.S. Food and Drug Administration) announced the temporary importation of 19 different IV solution and dialysis products from five different international manufacturing plans to bolster domestic supply. FDA continues to evaluate additional options around the world.”

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How can organizations prepare their supply chains for risk from weather disasters like hurricanes? A recent Inside Supply Management^® Weekly article, “Back-to-Back Hurricanes Wreak Havoc on Supply Chains,” offered strategies from two supply management experts.

Question: What steps can organizations take to ensure the flow of goods? Now and into the future?

Sara Saberi, Ph.D., associate professor of operations and industrial engineering at Worcester Polytechnic Institute in Worcester, Massachusetts: Companies should diversify their supplier base and source from multiple regions to avoid reliance on a single area that could be vulnerable to natural disasters. Establishing backup suppliers in different geographical locations ensures business continuity in the event of regional disruptions.

Overall, investing in risk management and supply chain visibility tools will allow organizations to better monitor the flow of goods and identify weak points in real-time. Using technologies like artificial intelligence (AI) and blockchain for tracking will improve decision-making and enable faster responses to disruptions.

Robert Handfield, Ph.D., Bank of America Distinguished university professor of supply chain management and executive director of the Poole College of Management Supply Chain Resource Cooperative at North Carolina State University in Raleigh, North Carolina: Mapping out supply chains and understanding the impacts is essential.

These supply chains issues remind us that we live in a globally connected economy. What happens in our region can have lasting impacts on those outside and vice versa. Even a seemingly small disruption, a small pebble, can have wider and wider ripple effects.

Supply chains balance being efficient with being flexible. Efficient supply chains try to reduce cost and eliminate waste. Flexible supply chains bend or adapt quickly to changes and uncertainty. There’s an inherent tradeoff between the two.

For 30 years, many organizations and entire industries focused more on efficiency in their supply chains by reducing inventory and using global outsourcing to reduce costs. Since the disruptions of the coronavirus pandemic, organizations have realized the importance of greater flexibility and resilience and are moving towards efforts like nearshoring, higher inventory buffers, and greater supplier redundancy.

By focusing on efficiency for many years, supply chains lowered costs and made products more affordable for consumers. This works best when things are smooth and predictable — especially when consumers demand ultra-fast delivery. However, with fewer buffers and redundancies, supply chains built for efficiency see greater ripple effects when disruptions do happen because they are less flexible and resilient.

Supply chains may be moving toward greater flexibility and resilience to adapt to risks such as COVID-19 and Helene, but this transition will take many years and will likely come with higher costs and thereby higher prices for consumers.