Supply Risky Lesson From Hurricane Ike

Over on Supply Chains Matter, Bob Ferrari recently penned a post on a subject that gets far less attention than it deserves -- supply chain risk. His topic on this particular blog entry was the risks posed by Hurricane Ike (which after the fact, we know shut down the city of Houston for over a week, not to mention much of the oil and natural gas facilities in the region). Bob gets more specific in his analysis: "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."

Perhaps the intensity of the storm could have led to more widespread damage than it actually did. One could argue that we were, in fact, spared the worst. But the disruptions that Ike did cause -- as well as the spikes and fluctuations in oil prices (which had huge variations on a regional basis after the storm) -- should be lessons to all of us that we're woefully underprepared to monitor and plan for supply chain disruptions. While many of us have started to consider how best to tackle supply risk as it pertains to supplier financial viability and supplier performance, we should expand our definition to include geographic and weather related supply risk as well. Consider, as a final aside, the types of geographic supply risk that Apple exposed itself to with its iPod supply chain.

- Jason Busch

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