In 2016 we saw several events hit the logistics services industry causing delays and upheaval in the supply chain. What these events have taught us once again is the necessity to have a robust emergency management plan in place to help assist companies in delivering client goods on schedule. While some events are sudden others are seasonal (hurricanes) and can be anticipated and better managed. Knowing how to react in the face of Mother Nature or other event will help save logistic service providers both time and money during an emergency. Let’s take a look at some of the events that unfolded in the past six months.
Southern California Fire
In August 2016, the Blue Cut fire in the San Bernardino Mountains in Southern California burned structures, devoured 30,000 acres, caused 83,000 people to evacuate and disrupted rail and truck passage between Los Angeles and Las Vegas. The fire slowed down deliveries, disrupted schedules and set off headaches for truckers, retailers, shippers and crews staffing Southern California’s ports. More than 5,000 cargo trucks use the route daily, carrying everything from fresh produce for supermarket shelves to construction tools en route to Las Vegas and back. It was estimated at that time the trucking industry could incur $1 million per day in additional costs, as they were forced to find alternate routes to make their deliveries. “These are major, major corridors,” said Joe Rajkovacz, a longtime trucker and current spokesman for the Western States Trucking Association, in an article in The Sun. “You are looking at something like a 200-mile diversion for truckers.” In addition, for nearly two days, the north-south railroad lines for Union Pacific Railroad and BNSF Railway through the Cajon Pass were shut down, delaying the distribution of millions of dollars’ worth of goods. At the ports of Los Angeles and Long Beach, stacks of cargo containers grew.
California wildfires are nothing out of the ordinary but reports on climate change suggest that we could be experiencing longer drought periods in the Golden State as well as throughout the U.S. Southwest as weather patterns. All those in the supply chain are looking at mitigating the effects that this type of disruption can have in moving goods and on the industry, including finding alternate routes to service their clients that are cost-efficient.
Hanjin Shipping Bankruptcy
In late August of last year, the collapse of Korean Company Hanjin Shipping, the world’s largest shipping company, was by far the largest container shipping bankruptcy in history. The consequences reverberated throughout international supply chains and the transportation sector, sending the industry scrambling to protect their cargo. There were stranded containers and spot freight rates rose. Indeed the collapse of this giant in the industry served as a wake-up call, including for shippers. Shippers should evaluate their exposure to doing business with one carrier and consider the value and viability of signing contracts with multiple carriers to avoid being left on the docks when one of their service providers abruptly drops out of the trade. Spreading the business around allows for multiple options and emergency preparedness.
East Coast Storm
In October, Hurricane Matthew hit the East Coast hard resulting in economic damages of $10.2 billion in the U.S., according to Munich Re. In anticipation of the storm, which initially hit the Bahamas and Haiti, supply chain companies throughout the East Coast repositioned equipment and cargo away from the hurricane’s path. Shipments were moved inland to secured rail yards, and traffic in route was held at various yards to alleviate congestion in the affected regions. Ports from Miami, Florida to Norfolk, Virginia closed as the storm approached. The lesson here is to have a plan ready to implement ahead of such potential catastrophes in order to keep supply chains flowing. This could include calling the port to see if you can move goods out early when an initial storm warning is made (typically there you have a few days’ notice), having back-up suppliers and having alternate flood-resilient transportation routes when possible. It’s also critical that an emergency plan includes supply chain partners working together to create a plan for any potential risk that may negatively impact the supply chain.
About Roanoke Trade
Emergency planning is a key component of a strong risk management plan along with having the proper insurance solutions in place. Roanoke Trade specializes in insuring transportation and logistics service providers (LSPs) and customs brokers. For a review of your insurance program and for more information about our solutions, please contact one of our professionals at 1-800-ROANOKE (800-762-6653).