Katrina and Spend Management

It's been hard for me to get past the pictures of devastation that Hurricane Katrina has left in my mind. But after getting past the shock, disbelief, and anger (anger at how the international press, including the BBC, has made the story a number 2 or number 3 lead, not number 1, at least until now), I spent a few minutes this morning reflecting on the Spend Management implications of the disaster.

There's already been a few good articles written about the topic already, so instead of restating what's been said, I'll provide commentary and links to perspectives that I've found informative. And I'll continue posting insights I come across throughout the week.

To begin, I found Gartner’s recent brief "Hurricane Katrina Will Impact Energy Costs, Increases Likely" insightful. It struck me that for companies focused on Spend Management, "Optimizing the efficiency of transportation will become a critical competency for manufacturers wishing to hold the line on costs, and could be as important as optimizing labor and material costs." Procurement organizations thinking about tackling transportation Spend Management initiatives should consider best of breed vendors including i2 and Combinenet to get the most from their efforts. Other providers to consider include Ariba and Verticalnet, who have also developed expertise in the transportation sourcing arena.

From a global sourcing perspective, New Orleans is an underappreciated port. While it's not Long Beach or Oakland, it is still a strategic entry point to the US. According to the Los Angeles Times, "The city's port is a key entryway for bulk commodities ... and an outlet for grain exports from the nation's heartland ... The Port of New Orleans connects with many different forms of transport, including all six major U.S. railroads and barges operating on the Mississippi River. It is the largest source for seaborne imports of coffee, natural rubber and steel, according to port statistics." In addition, "Steel imported at New Orleans moves up the Mississippi River at roughly $10 a ton ... That steel will probably head to Houston now, where inland transport could cost four times as much."

Clearly, Katrina's impact will be felt across the economy. To manage costs and risk in the wake of this disaster, companies will need to take a Spend Management approach to stay on top of their supply chain and global infrastructure.

Jason Busch

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