Impact of Hurricane Sandy on Logistics
The mid latitudes geographical position of the US is unique in that it is an expansive country situated halfway between the North Pole and the equator. It experiences dry and cold Arctic winds from Canada which provide the country with a contrasting climate in with regard to the moist warm winds emanating from the Mexican Gulf. There are no significant mountain ranges separating the east and west of the country allowing for frequent severe thunderstorms, tornadoes, draughts, blizzards and other climatic extremes. In the advent of adverse climate change outcomes on the country, Maurer, Dol, Chhetri, Venner and Kiel (2014) provide that the cost associated with extreme weather events on its transport infrastructure, freight and other diverse user costs are yet to be computed. This paper seeks to investigate the impact of Hurricane Sandy of logistics and logistics policy in the US.
The inevitable damage caused by hurricanes in the US is well known and as such disaster response organizations, government agencies, businesses and the general population are always kept abreast with the unfolding events. However, Hurricane Sandy impact on the US economy was unprecedented and to date is considered as the second most costly weather event in US history (PNG Logistics, 2012). It is estimated that the total cost of damage exceeded 70 billion dollars (PNG Logistics, 2012). Much of the resultant destruction heavily impacted on transportation and logistics in a negative way. The Department of Transportation at New Jersey provides that Hurricane Sandy caused more than 80 road washouts, more than 580 accidents in three days after the hurricane and major damage on transport and communication infrastructure in a number of surrounding states. Its impact on logistics on the East Coast as well as neighboring regions was considered as being on the extreme end.
Hurricane Sandy was so big that many states had already began to grapple with adverse effects of the weather event even before the storm actually hit them. The late season post tropical storm moved up from the Caribbean and affected the US’ East Coast resulting in nearly 150 dead, thousands of Americans homeless and many millions of US citizens without electricity (PNG Logistics, 2012). I began on October 19, 2012 as a tropical wave before growing into a tropical depression and eventually into a full blown tropical storm in under six hours. On the 24th of October, the US Meteorological Department upgraded it to a hurricane after its winds were sustained at a maximum 120 kilometers per hour (PNG Logistics, 2012). It first hit the US state of New Jersey on October 29 resulting in a statewide power blackout, severe flooding and massive debris. It affected the transportation system in the state severely as subway tunnels were flooded, over 15,000 air flights cancelled internationally and shut out gas stations from regular fuel supply.
As a result, most of the US states proactively began looking into their policies after Hurricane Sandy more so the states affected even by the smallest of margins as a result of the extreme weather event. According to Kaufman (2013), bout 24 states were affected. The coast from Florida al the way to Maine was affected. The Appalachian Mountain ranges, Wisconsin and Michigan were some of the inner regions off the US also affected by Sandy. The states of New York and Jersey however suffered the full blunt force of the extreme weather event. It is important to note that as much as the state and federal governments have been engaging in active conversations to this end, the media and public seem to be disengaged on the issue. Organizations on the other hand seem to have been cushioned from the adverse effects of the hurricane as a result of adhering to lean supply chain and logistics strategies (Kaufman, 2013). As such, it is estimated that organizations did not suffer major losses and as such rebounded quickly immediately after the storm.
Overview of the Impact of Hurricane Sandy on Logistics
From a logistics point of view, the hurricane affected airports, ocean ports, logistics companies, full truck load and low truck load operations (PNG Logistics, 2012). Major airports in the East Coast such as the JF Kennedy International Airport and the Newark Liberty International Airport had to be closed down and even after reopening had to contend offering its users limited services. LaGuardia Airport suffered extensive damage and remained closed for some time while the Philadelphia and Washington International Airports had to suffer delays due to disruptions that also affected its employees.
Ocean ports in New Jersey as well as New York such as the Per Maher Terminals suffered severe flooding due to sea storms during the hurricane and had to remain closed as damages were assessed and corrected (PNG Logistics, 2012). The port at Baltimore also had to be closed as well as container terminal in Philadelphia.
Logistics companies such as UPS kept operations running at a bear minimum as a result of the huge debris that was strewn all over highways and roads in a number of states on the East Coast. For instance, in West Virginia, heavy snow resulting from the hurricane had led to delays in the delivery of small packages DHL and FedEx also suffered significant challenges but were back in full operation soon after the hurricane subsided and disaster response teams had cleared up highways and roads (PNG Logistics, 2012). As for full truck load and low truck load businesses, operations in Delaware, Maryland, New York, Pennsylvania, Washington DC, Connecticut, Maine, New Jersey, Ohio, Virginia, and west Virginia suffered unavoidable delays. Areas most affected by Hurricane Sandy for these types of business included Long Island, the Metro Area and Northern New Jersey.
Impact on the Fuel Industry
Logistics is heavily dependent on the availability and price of fuel. According to the Association for Convenience and Fuel Retailing (NACS), the United States Energy Information Administration is well positioned to offer insights into how extreme weather events such as Hurricane Sandy affect the American fuel industry (2013). The supply chain for gasoline within the US is made up of five major parts. These include the importation or production of crude oil, importation of gasoline, crude oil refinement into gasoline, ethanol and gasoline blending done in distribution terminals and finally, the sale of processed gasoline in local retail stations. In the event of disruptions in this supply chain, retailers tend to loose control over fuel prices and product availability. Branded retailers tend to be cushioned from product unavailability and are able to transfer minimum price increases onto the consumers (NACS, 2013). On the other hand, branded retailers contend with competing for gasoline at a limited supply and as such suffer erratic wholesale price increases.
To shield fuel retailers from the adverse outcomes of extreme weather events like Hurricane Sandy, state laws tend to put price increase caps that wholesalers can pass onto the retailers (NACS, 2013). For instance, the state of New Jersey has laws to this effect such that it is impossible for wholesalers to increases prices by over 10% of gasoline prices before a natural disaster.
Hurricane Sandy affected the US refining capacity as about 7% of the country’s refineries were in its path (NACS, 2013). As such, refineries were not affected but the gasoline supply chain suffered much as a result of the hurricane. Distribution of fuel was affected by widespread electricity loss such that more than a fifth of gasoline outlets were severely affected. In some instances, gasoline rationing was employed as truck deliveries were grounded by the hurricane.
NACS provides that since the New York Harbor was significantly affected, refineries, pipelines and imports were disrupted (NACS, 2013). 28 terminals registered significant disruptions during the hurricane with more than 50% having to be shut down completely for days even after the storm resided. More so, damaged transportation infrastructure resulted in a situation where trucks could not get access to the operational terminals and reach affected retail stations. Power disruptions and a damaged transportation infrastructure led to some mitigating steps to be taken to address the fuel disruption problems in more than 24 states. These included fuel specification waivers, truckers were allowed to work for than the mandatory 14 hours, waiver on the Jones Act which allowed non US ships and crew to transport fuels to the East Coast and odd/ even fuel rationing (NACS, 2013). Gas retail store introduced innovative practices such as opening during the day even if there was no electric power, allowing customers to pay in cash as internet disruptions had curtailed debit/credit card systems. Other retailers with electric power or generators offered to allow customers charge their electronic devices such as laptops and phones during refueling.
Impact of Hurricane Sandy on the Supply Chain in Organizations
According to Myerson (2012), the impact on the retail supply chain along the US East coast as well as in affected states was not as adversely affected as expected. This has been attributed to organizational policies and strategies with regard to logistics where more agile and leaner supply chains have been developed. It is important to not that the hurricane did indeed pose significant challenges for organizations seeking to ship products. As organizations nowadays do not tend to overstock on merchandise, they did no suffer significant losses due to damaged stocks. It is however important to note that organizations with warehouses on the hurricane’s path did in fact suffer losses and as such disruptions on their supply chains (Myerson, 2012). Lean supply chains and contingency planning enabled organizations to reduce their exposure to risks associated with disasters such as Hurricane Sandy.
Large organizations such as Wal-Mart have instituted logistics policies and strategies that have enabled it to respond accurately and in line with consumer behaviors prior to natural disaster. For instance, Wal-Mart has a comprehensive disaster management and response center where operations are coordinated with seamless efficiency. As Wohlsen (2012) provides, contingency planning as well as lean supply chain strategies enabled organizations such as Sysco Corp cut its losses as a result of the hurricane significantly. The organization’s business operations revolve around food distributions to warehouses in the US. As such, its policies and strategies with regard to logistics ensured that its customers in New York City had all the good consumers normally purchase prior to a natural disaster. By the time the hurricane reached the state of New York, its warehouses were reportedly empty. As such, data driven decision making processes with regard to supply chains have enabled organizations to sidestep logistical hiccups.
Such strategies included ensuring that most of the shipments received at its warehouses were of a non perishable nature and are such are convenient with consumers looking to storm extreme weather conditions. Sysco Corp also made it a priority to ensure institutions like airports, hotels, hospitals, college campuses, jails and shelters foe communities living near areas envisioned to suffer much from the storm had their orders comprehensively catered for (Wohlsen, 2012). As such, establishments like restaurants were at the bottom of the priority list by reason of their mode of business operations. Real time tracking of inventories and subsequent analysis of collected data also played a significant role in enabling similar organizations to understand consumer behavior prior to and after disaster of a magnitude similar to Hurricane Sandy.
These organizations have indeed worked towards developing the most potent logistics policies and strategies which serve to ensure that transparency, leverage and scale of operations are clearly defined(Wohlsen, 2012). For instance, with large organizations, it is possible for scale of operations to be adequately controlled to and from warehouses on the path of an identified natural disaster. This allows the organization to have the ability to reroute its inventory from warehouses in the path of a natural disaster to those which are comparatively safer. Transparency of inventory operations in these organizations also ensured that it is possible to pin point with great accuracy where a particular batch of items is located in real time. This enabled organizations to ensure that the products desired by consumers before and after the hurricane were located and supplied to the desired retail points. The leverage aspect enabled retailers to affect suppliers such that it had a higher likelihood of being supplied with the goods it required before other retailers were supplied with the same.
According to Wohlsen (2012), Wal-Mart stood out as an organization whose logistics policies and strategies were on point to respond to the needs of its consumers before and after Hurricane Sandy. This author provides that logistics operation and the multinational retailer on a day to day basis do not differ much with critical situations one would expect during a natural disaster. Its operations are fluid and seamless in comparison to the response operations spearheaded by FEMA, related government agencies and non governmental institutions.
It is important to note that the effects of the disaster caused by Hurricane Sandy were also felt on an international level(Wohlsen, 2012). The New York Stock Exchange as a major financial hub suffered the effects of the hurricane and as such, financial markets all over the world exhibited diminished gains as a result. As a supplier of financial information to the global economy, the NYSE suffered losses as its customers received the compromised state of the US economy.
As much as the critics of the US government’s handling of Hurricane Sally decry its ineffectiveness, it is important to also note that the US faired very well in comparison to government responses in other countries. As Wohlsen (2012) provides, the immense flooding that affected Thailand in 2011 resulted in a fall in the supply of hard disks in the global market. This is because the country is home to the largest hard drive production industry in the world. The fall in supply translated to a huge increase in the price of this commodity in the international market.
It is evident that the US government, its citizens as well as business are well aware of the disasters its geographical position on the world map presents it. It has one of the most effective and efficient transport infrastructure and systems which have evolved over the years towards spurring continued economic growth (O’Reilly, 2014). However, the impact of Hurricane Sandy on the US economy was quite significant such that other major economies on the world stage felt its impact. Its fuel supply chain was one of the most affected mainly due to the fact that the US East Coast had not suffered such a devastating weather event in the past. The country’s administrative organs as well as organizations in its private sector can formulate stronger logistics and policies if they are able to adhere to the following recommendations.
It is expected that as much as strong policies and strategies are in place, in the event of a natural disaster some situations that arise cannot be envisioned before hand. This calls for the need for government agencies and businesses to allow for a high degree of logistical flexibility (Comes, 2014). This will allow for greater physical, financial and analytical mitigation efforts against the adverse impacts of natural disasters. These are integral components of a strong logistical policy or strategy. The impact that the hurricane had on the US fuel logistics basically led to the American people and businesses experiencing longer recovery times from the disaster. The US government should therefore try to implement policies which are similar in efficiency and effectiveness to the logistical strategies employed by such organizations as Wal-Mart and Sysco Corp (Kahn, 2013). Policies should be formulated to incorporate the US of pipelines in the fuel supply chain so as to limit the reliance on the vulnerable transportation infrastructure and systems. It is also important for the policies formulated and implemented to take heed of early warning systems such as information sourced from meteorological departments. This failure compounded the problems resulting from the hurricane which would not have been the case if it was followed.
From a macroeconomic perspective, the US should seek to conform to policies that integrate the climate change mitigation protocols as prescribed in the Kyoto protocol (Kahn, 2013). This not only includes cutting down on greenhouse emission but also controlling infrastructure development also natural disaster prone US East Coast.
The American businesses showed a great deal of innovation in the wake of the destruction caused by Hurricane Sandy. As much as the government’s response efforts did not match up to those of its organizations, it fared better than other countries. Logistics policies hold the key to optimized disaster response systems. The impact that the hurricane had on logistics should serve as a basis for the US government as well as business operating in the US to work towards better disaster response and mitigation policies and strategies.
Association for Convenience and Fuel Retailing. (2013). How Hurricane Sandy Affected the Fuels Industry. Retrieved from http://www.nacsonline.com/YourBusiness/FuelsReports/GasPrices_2013/Pages/How-Hurricane-Sandy-Affected-the-Fuels-Industry.aspx
Comes, T. (2014). Near Real-Time Decision Support for Disaster Management: Hurricane Sandy. In Decision Support Systems III-Impact of Decision Support Systems for Global Environments (pp. 22-33). Springer International Publishing.
Kahn, B. (2013). Despite Policy Changes, Hurricane Sandy Hasn’t Shifted Climate Change Narrative. The Huffington Post. Retrieved from http://www.huffingtonpost.com/2013/10/29/hurricane-sandy-climate-narrative_n_4174921.html
Kaufman, N. (2013). Picking up after Sandy: Resilience in the eye of the storm. Retrieved from http://www.pwc.com/gx/en/governance-risk-compliance-consulting-services/resilience/publications/in-the-eye-of-the-storm.jhtml
Maurer, H., Doll, C., Chhetri, P., Venner, M. & Kiel, J. (2014). Logistics systems, weather extremes and policy response–a comparison between Europe, the US and Australia. Transport Research Arena. Retrieved from http://tra2014.traconference.eu/papers/pdfs/TRA2014_Fpaper_18851.pdf
Myerson, P. (2012). Hurricane Sandy and its Effect on the Retail Supply Chain. Retrieved from http://www.industryweek.com/blog/hurricane-sandy-and-its-effect-retail-supply-chain
O’Reilly, J. (2014). Risk Mitigation: Supply Chain Safety Net. Retrieved from http://www.inboundlogistics.com/cms/article/risk-mitigation-supply-chain-safety-net/
PNG Logistics. (2012). Hurricane Sandy’s Effect on Logistics. Retrieved from http://pnglc.com/hurricane-sandy%E2%80%99s-effect-on-logistics/