Supply chain managers respond to risk, ripple effect of hurricanes

In an op-ed published by the Houston Business Journal, Panos Kouvelis writes about the crucial role supply chain managers play in recovery from natural disasters like the recent Hurricanes Harvey and Irma. Kouvelis is Director of The Boeing Center for Supply Chain Innovation and Emerson Distinguished Professor of Operations and Manufacturing Management.

Hurricanes Harvey and Irma provide another stunning reminder of how far such disasters can reach. It is no exaggeration to say that, in the weeks and months to come, the whole world will feel their after-effects.

For supply chain managers confronting a disruption, the first-level reaction is to consider which customers, products, facilities, employees and suppliers are at the greatest risk. What is the overall revenue exposure, and how long it will take to recover?

As any supply chain manager understands all too well, it is not necessarily the original event, but the ripple effects that cause major disruptions. The Japanese earthquake triggered a meltdown at the Fukushima Daiichi Nuclear Power Plant. Hurricane Harvey caused a series of small explosions at the Arkema chemical plant in Crosby, Texas.

And when supply chains are tight, any hiccup can drive supply-demand imbalances. Harvey shuttered 60 percent of U.S. ethylene capacity. Ethylene and its derivatives are used to produce plastics, antifreeze, house paint, vinyl products and rubber. Shortages will ripple across these markets for months.