As I write this post on Saturday morning, September 13, 2008, Hurricane Ike continues with its direct hit to the Galveston and Houston Texas area, battering the entire Southeast Texas and Louisiana coastal regions with torrential rains and devastating winds.  Ike is the first major hurricane to hit a U.S. metropolitan area since Katrina devastated New Orleans three years ago.  At the time this massive storm came ashore, winds were measured at 110 miles-per-hour, with 35 foot sea waves and 20 plus feet of storm surge.  The storm also has a massive scale, stretching more than 600 miles in width. Our thoughts and prayers are that human loss and injury will be minimal, but the coming hours and days will tell the true story.

Hurricane Ike may also provide yet another entry in our logging of major supply chain disruption.  With the nation’s biggest complex of refineries and petrochemical plants located directly within the path of this storm, many chemical and petrochemical related supply chains will experience some form of disruption or supply/demand impact for many weeks to come.  Four of the top 10 oil refineries, representing major output capacity are located in this region.  The ports of Galveston and Houston are major ports of entries and exits of bulk tanker shipments, and let’s not forget all of those off-shore drilling platforms that also feed their crude to this port complex. These same refineries also supply some of the nation’s largest petrochemical plants that are located within this same region.

While it is far too early for me to pen speculation, I do believe that supply chain procurement, planning and logistics professionals should anticipate a period of difficult challenges over the coming weeks, starting this weekend. When Hurricane Katrina struck New Orleans, the port of New Orleans was not opened to general shipping traffic for six weeks, since the harbor and linking major shipping lanes had to be completely cleared of debris and hazards to shipping.  It will take days or perhaps weeks to assess the damage among the various refineries, bulk storage facilities and petrochemical plants and repair the damage.  Normal re-starts of these facilities generally take two to three days under normal conditions, let alone abnormal. 

Feedstock and bulk input materials in these industries generally average three to four weeks of bulk supply, and if disruption or unusable feedstock exceeds this time period, than supply chain professionals will be presented with more challenging supply and demand imbalances to overcome or compensate for.  Impacts to end-item pricing are yet to play out, but already gasoline prices in the U.S. have begun to spike.

For today, let’s all focus on the tens of hundreds of people and families that have to deal with the effects of this devastating storm.

If any readers who read this post want to contribute further information or commentary as to the immediate and longer-term impacts of this storm, I certainly encourage you to do so in the comments area below.

 Bob Ferrari