This commentary is an initial preliminary update after our initial alert regarding the supply chain impacts of Hurricane Sandy as it continues to impact the Northeast portions of the U.S.

The storm itself was massive and met initial reports of being unprecedented in terms of scope and impact.  Sandy made landfall off the coast of New Jersey at about 8pm eastern with storm related effects extending up to 1000 miles from the center of the storm.  As expected, after traveling parallel to the U.S. east coast, it suddenly turn westward and accelerated speed, packing sustained winds of 90 miles-per-hour with higher gusts. The coastal regions of New Jersey and New York suffered the greatest impacts, with reports of up to 12 inches of rain impacting the immediate coastal areas when the storm came ashore.

At midnight, a storm surge estimated to be 9-12 feet inundated lower Manhattan, flooding streets, businesses, and the underground subway system. Six tunnels that provide access to the city have been flooded and need to be pumped out, while suspension bridges need to be inspected.  Government officials indicate that it will take at least a week, if not more, for the city to fully recover.  The New York Stock Exchange remains closed for a second day, something that has not happened since the late 1800’s.

The governor of New Jersey described his state as in “total devastation”, with rescue and recovery efforts underway.  As of this morning, millions of customers across the Northeast remain without power including 2.4 million customers in the state of New Jersey alone.  According to this morning’s Wall Street Journal, some 20 percent of the U.S. population is expected to be affected in some way from the storm, with economic damages ranging from $10 to $20 billion.  The storm itself continues on its inland path, bringing continued heavy rains and some blizzard conditions in high elevation areas of Pennsylvania and West Virginia.

As is usually the case, specific supply chain related implications will not be known until after various teams assess the full extent of their facilities and operations. As we noted in our initial alert, there are 5 east coast oil refineries directly in the forecasted strike zone along with petrochemical and pharmaceutical production facilities.  The Mid-Atlantic and Northeast regions are also the epicenter for the seafood, poultry and other food related production supply chains, and also have a high concentration of product distribution facilities.

Transportation remains severely curtailed with airlines, rail lines, ports and other carriers suspending services until after the storm. Carriers are expected to suffer losses in the millions. UPS is reported to be re-directing incoming international airfreight destined for Philadelphia and Newark to its Louisville Ky. Hub. Major airports in the New York and New Jersey area, along with other east coast airports are still struggling to restore any sense of normal operations. Seaports from Virginia to Boston had suspended operations and the timing was not ideal, coming at the height of the current peak period for unloading inbound shipments of goods destined to retailers for the upcoming 2012 holiday buying season. CSX, the east coast’s largest rail freight operator closed tracks from Richmond Va. North to Albany NY informing customers to expect a minimum three day delay.

At 9am this morning, Supply Chain Matters surveyed major retailer we sites for indicators of disruption. Wal-Mart’s web site provided the most prominent and helpful information with Storm Alert information prominently displayed on its main page. The retailer indicated that 800 facilities along the eastern seaboard were in the path of the storm. As of 10:30pm Eastern time, last night, 267 stores remain closed with the Wal-Mart Disaster Response Center was in full alert. The WSJ quoted a spokesperson as noting that 282 truckloads of merchandise were dispatched to the impacted area with replenishment shipments that included generators, cleaning supplies, blankets and ready-to-eat foods. Wal-Mart has consistently responded in this manner, including the tragedy of Hurricane Katrina in 2005.  In our view, Wal-Mart remains a benchmark for responsive response to supply chain disruption.

Target provided very little web site information and we had to dig to ascertain by our count, a listing of 111 retail outlets that remained closed because of the storm.

The web-site of home improvement retailer Home Depot provided limited information as to status, which is unusual since the Depot has demonstrated previous excellent response capabilities. We had to dig deep into Lowes’s web site to ascertain that 143 stores remained closed but there was no information available regarding any response plan.

Supply Chain Matters will continue to monitor this ongoing situation in terms of supply chain implications. We strongly suspect the real effects will unfold in the coming days and weeks.

Bob Ferrari