What Harvey taught us about the supply chain
The Texas Gulf Coast was devastated by Hurricane Harvey less than two months ago. The region, and specifically Houston, was severely affected by the loss of life, destruction of private property and damage to city infrastructure. However, the disruption caused by Harvey has implications that reach far beyond our region.
If too much time is allowed to pass before critical data are captured, a prime opportunity to improve transnational trade and supply chain management will be lost.
The Port of Houston and neighboring ports play a vital role in the Texas economy. Operations at the ports of Houston, Galveston and Corpus Christi were severely hampered, while Port Arthur was completely underwater. The impact was not only felt on the coast: airports in the region were shut down; freight and road transportation ceased; major railroads stopped or reduced area operations; regional highway closures led delivery services to halt activities; and the trucking industry could neither enter or leave the affected areas. During the first week following Harvey, 10 percent of U.S. trucking was affected.
These impacted areas have implications at the national and international level. Globalized trade and supply chain networks within which the Texas logistics network is embedded were severely disrupted, potentially resulting in cascading consequences for neighboring states and supply chain stakeholders.
The Houston area is home to many of the nation’s oil drilling, refining and chemical manufacturing facilities. More than 45 percent of total U.S. petroleum refining capacity is located along the Gulf Coast, according to the U.S. Energy Information Administration, as is more than half of total U.S. natural gas processing plant capacity.
The chemical industry is a foundational block of the interconnected global supply chain, and as much as 60 percent of U.S. ethylene capacity was shuttered due to Harvey.
Ethylene is tightly linked with the production of plastics, antifreeze, house paint, vinyl products and rubber. The manufacturing sector should anticipate increased material prices and problems with supplier deliveries for the next three months.
The complete impact is not yet known, but the time is now to gain insights out of this tragedy by creating an initial framework to determine how Harvey affected the entire logistics network. There is a need to map the disruptions to key supply chain and intermodal logistics networks and to gain a comprehensive view of the damage to both the manufacturing and non-manufacturing sectors. The near-term and long-term impact on the supply chain must be captured, and the best practices of planning, response and resilience must be codified and shared.
How we do this is key. The process must be systematic and all encompassing.
The Borders, Trade, and Immigration Institute, through previous research and projects, has identified potential critical public and private stakeholders in the transnational supply chain. The next step will require identifying what worked and what did not during and after Harvey, determining best practices, lessons learned, mistakes and current gaps.
Then, after a thorough analysis of the relevant data, workshops to pass on those lessons must be developed for leaders of supply chain, logistics and trade organizations, with the goal of enhancing our nation’s supply chain resilience.
The region’s people and infrastructure are still recovering from Harvey, but the time is now, while critical organizational memory is fresh, to use this tragedy as an opportunity to improve our nation’s preparedness.
Kakadiaris is director of the Borders, Trade and Immigration Institute at the University of Houston. Iakovou is associate director of the Transnational Trade & Supply Chain Management at BTI. Kakadiaris and Iakovous are professors at the University of Houston and Texas A&M University, respectively.