Hurricanes disrupt supply chain, impact shipping capacity for months

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Hurricanes Harvey and Irma caused major disruptions in the supply chain, and will impact the trucking/transportation industry for weeks and even months to come, said John Kent, director of the Supply Chain Management Research Center at the University of Arkansas.

If one were to compare which hurricane had the most impact on the supply chain, it would appear Hurricane Harvey has had the greatest impact nationally and globally, Kent said. Imports and exports were not only impacted at the Port of Houston, but also oil refineries and chemical plants were shut down because of the storm and flooding along the Texas Gulf Coast.

Major ports on the east coast of Florida including those in Miami and Fort Lauderdale weren’t impacted by Hurricane Irma as much as expected because the eye of the storm traveled along the west coast instead of the east coast.

Kent said the price increase of gasoline after Hurricane Harvey is one of the most noticeable examples of its impact in the United States. Over the past month, the average retail price of a regular gallon of gasoline has risen 28 cents to $2.62, according to the AAA. In Arkansas, the average price has risen 27 cents to $2.38 a gallon.

Ports in Florida and Texas closed before the hurricanes made landfall but have since reopened, allowing for shipments of containers and oil to resume. Impacts on the supply chain were immediate at ports as they closed, but the long-term impacts on the supply chain will remain as relief items are distributed, supplies are replenished and the rebuilding endures.

“It’s going to go on for weeks and months,” Kent said.

‘SUBSTANTIAL’ TRUCKING INDUSTRY IMPACT
Capacity in the trucking industry has already been tight, and with more capacity being distributed to Florida and Texas, it’s only going to be tighter, especially for other areas of the country.

“The impact has been substantial and beyond the actual capacity impact is the anticipation and actions in response to that anticipation that exaggerates the real capacity impact,” said Jim Craig, executive vice president, chief commercial officer for USA Truck and president for USAT Logistics. “Thousands of trucks are needed to move relief and rebuilding supplies in to the storm affected areas, and with the market equilibrium being fairly balanced right before the storms hit, even a few percentage points of demand can dramatically impact the market dynamics.”

Freight demand for the Van Buren-based carrier has risen since the hurricanes “because the relief supplies are additive to normal demand and then the volume of freight needed to restock lost inventory and the rebuilding supplies needed for the next couple of years will ensure continued demand levels that are higher than the norm,” Craig said. Also, demand is expected to surge as a result of increased shipments for the upcoming the holiday shopping season.

In the immediate aftermath of the storms, USA Truck implemented “temporary service restrictions to keep our people and our assets out of harm’s way,” Craig said. “We had to address the certain impact on equipment efficiency and the transit times and equipment utilization are negatively impacted by the infrastructure disruptions. We need to account for those greater inefficiencies on how we price our service and how freely we allow our assets to move in to those affected areas.”

“One obvious challenge is the fact that the outbound demand for trucks out of south Texas and now Florida is nowhere near the massive inbound surge of volume in to those areas,” he said. “So we need to plan on moving that truck hundreds of miles once it’s unloaded to find that next revenue opportunity. These non-revenue miles need to be accounted for in our pricing and routing decisions.”

USA Truck’s brokerage division, USAT Logistics, has seen its average cost per truck rise nearly 20% in the past 30 days, a cost paid by the cargo owner. The company “has committed to their customers that despite the opportunity to take advantage of conditions historically very favorable to third-party providers, that we will not unfairly profiteer and instead will maintain our normal margin percentage or management fee levels on loads moving in to the storm zones,” Craig said.


Read more: http://talkbusiness.net/2017/09/hurricanes-disrupt-supply-chain-impact-shipping-capacity-for-months/

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