Earlier this year, NOAA announced a 70% chance of above-normal activity for the 2019 central and eastern Pacific hurricane season. If you’re doing business in Hawaii, Guam or any other Pacific destinations, it’s possible that you might experience impacts either on your own company’s shipments or within your supply chain.
Even when a storm doesn’t hit your area of business directly, hurricane damage can create ripple effects due to closed ports, canceled flights and damaged infrastructure, to name a few. Your shipping routes might not be directly impacted by a storm, for example, but one of your suppliers might be unable to meet a crucial delivery deadline, which, in turn, can affect your operations.
Your best bet? Prepare for Pacific hurricane season in order to minimize its potential impact on your business.
In this article, we’ll walk you through seven things you can do to protect your business from the potential impacts of the Pacific hurricane season.
Curious About the Difference Between Hurricanes, Cyclones, and Typhoons?
According to NOAA, these three words all describe the same weather phenomenon:
- In the North Atlantic, central North Pacific, and the eastern North Pacific, the term hurricane is used.
- In the Northwest Pacific, this weather pattern is called a typhoon.
- In the South Pacific and the Indian Ocean, the term tropical cyclone is used, no matter the strength of the wind.
First, though, we’ll explore the significant impact that recent storms have had on businesses across the globe.
The Far-Reaching Impact of Natural Disasters
Hurricane Harvey slammed into Texas as a Category 4 hurricane in 2017, and it’s currently tied with Hurricane Katrina as the costliest tropical cyclone on record. Floodwaters significantly impacted operations in and around Houston, shutting down ports, roads, rail lines, and airports. Logistics activities ground to a halt.
Even once airports, seaports, and railways were back up and running, operations remained bogged down by backlogs as carriers worked to catch up. Additionally, a significant amount of capacity was dedicated to delivering aid supplies, slowing down commercial shipments.
Hurricane Irma had similar impacts on the Florida coast, where it made landfall as a Category 4 hurricane. During that time, six major ports closed as a result of the storm. These closures had a huge impact, owing to the fact that they handled one out of every six containers coming in and out of North America. Additionally, these key ports played a key role in transporting diesel and jet fuel. Irma even impacted Amazon.com deliveries, with their usual two-day deliveries taking as many as thirteen.
In addition to directly damaging your own assets, a hurricane can severely disrupt supply chains. Even if you’re not in the area directly impacted by the storm, flooding and damage can impact warehouses, suspend rail service, close ports, wash out roads and halt ocean freight traffic, all of which can result in a ripple effect.
Given that the weather isn’t something over which we have day-to-day control, your best bet is to put in place a series of procedures and stop-gaps that will help mitigate the impact to your business, if and when a hurricane strikes. We’ll walk you through seven areas to get you started.
1. Evaluate Your Risks Throughout Your Entire Supply Chain
This might sound simple, but you’d be surprised how many businesses don’t take the time to think through all of their potential risks.
Some are obvious: If you have a warehouse in Oahu, you could easily be impacted by any storms that hit the Hawaiian Islands.
Others are less obvious: If Oahu gets hit by a hurricane, closing its ports, that could result in supply issues to Kauai for any shipments that pass through Oahu first. Or, if ocean traffic is delayed or diverted to avoid a potential storm, even ocean freight shipments from China could be vulnerable. If you rely on regular shipments from a key supplier in the Pacific, a significant storm could impact your business.
So as you evaluate your risks from hurricanes and other potentially catastrophic storms, make sure you think through all the links of your supply chain to evaluate the full extent of your risk.
2. Put a Business Continuity Plan in Place (or Update Yours!)
Whether or not your business lies directly in the likely path of a hurricane, it’s always a good idea to have a business continuity plan in place in case of any kind of disaster, such as a fire, flood, earthquake or other events.
Here’s why a business continuity plan is so critical: Following a disaster, FEMA estimates that 90% of small businesses fail within a year unless they can resume operations within five days. Your business contingency plan will help you create and test a plan to help you restart operations quickly, even in a worst-case scenario.
That way, you’re not scrambling to get your business back together in the middle of a crisis. Instead, you’re following a carefully created plan that’s been vetted and tested.
If you already have a business continuity plan in place, it might be time to update yours. Make sure you’re reviewing it regularly, as well as sharing it with your team. That way, you have ample time to make changes in calm times that you can easily implement in a crisis.
3. Talk to Your Insurance Providers to Ensure That You Have Adequate Coverage
It’s a good idea to review your business insurance coverage at least once a year. This is especially important as your business grows or changes. Talking with your agent, broker or carrier annually will ensure that you have:
- The right types of coverage in place – For example, flood coverage may not be included in a standard commercial policy.
- Adequate limits to cover any potential losses – If your business has grown or acquired new assets, you may need to raise your limits to cover them all in case of potential loss.
Reviewing your coverage annually also might also present the opportunity for savings by renegotiating your rates or changing carriers.
Either way, the worst time to discover that you have inadequate coverage is when you’re making a claim in the wake of a natural disaster. In order to give your business the complete coverage it deserves, make a standing yearly appointment with your insurance agent, broker or carrier.
4. Talk to Your Partners and Suppliers
Once you have plans in place with regard to your own business, you’ll also want to look outward to your suppliers and partners. Ask them what kind of plans they have in place. Do they have a business continuity plan? Have they ever dealt with a natural disaster? What actions did they take?
By having these conversations now, you’ll have a better sense of how these partners and suppliers will work with you in case of a major storm. If you’re uncomfortable with the answers you receive, you may want to replace some of these vendors with others who are more cognizant of potential risks, ones with contingency plans in place.
And while we’re on the topic of alternative vendors . . .
5. Consider Establishing Yourself with Backup Vendors and Suppliers
If a vendor or partner is forced to shut down operations after a hurricane, you may see your own supply chain grind to a halt. That’s why you should consider getting yourself set up with a few backup vendors, suppliers and partners now—before disaster strikes.
The middle of a crisis is no time to establish a new account. Additionally, you may see additional benefits from diversifying your supply chain, such as keeping costs competitive and making your operations more responsive to any hiccups in your vendors’ supply chains
Take a look at the vendors who are critical to your operation. Set up some redundancies to make sure you have extra resources in case one supplier is forced to shut down. Then, in the worst-case scenario, you have a fallback position that can keep your business moving forward
6. Partner with an Experienced 3PL or Freight Forwarder
When a natural disaster strikes, having an experienced 3PL freight forwarder in your corner with a deep network of contacts they can call upon is critical. This kind of collaborator will work with you to find ways to keep your operations moving forward, perhaps by diverting your shipment to a different mode of transportation that may still be operational.
Additionally, if you’re also leveraging your 3PL or forwarder’s capacity to manage your supply chain, they may also be able to help you anticipate hurricane-related issues and make provisions to mitigate the impact.
Just as we suggest with the rest of your vendors and suppliers, talk to your freight forwarder about their plans for responding to hurricanes—and how they might be able to help you minimize the effect on your business. If you’re not satisfied with their answers, you may want to establish a relationship with an additional provider so you have a backup for this crucial element of your operations.
7. Budget for Potential Impact
Just as natural disasters can have a ripple effect on your supply chain, they can also significantly impact shipping costs. An analysis of trucking in the aftermath of Hurricane Harvey revealed that the average cost per load after the storm rose by 11%.
Talk with your 3PL, forwarder or carrier to make sure you’ve adequately budgeted for potential costs. You might consider adding an extra cushion in your budget so that you have adequate funds available for any additional costs you might incur. By budgeting in advance, you’ll set yourself up to be able to respond nimbly to the 2019 hurricane season, no matter what happens.
Planning Ahead for Hurricane Season
From mid-May through the end of November, individuals and businesses alike in the Pacific will watch and wait to see what hurricane season will bring. Knowing you’ve made the necessary preparations will reduce significant stress and worry on your part—and ensure that you’re positioned to respond nimbly to any storm impacts you might see this hurricane season.
Want to strategize with one of our logistics experts? With nearly 30 years of experience in Pacific shipping routes, we’ve had extensive experience in responding to storms. We’ve helped our customers plan proactively for hurricane season and we’ve also helped them develop alternative plans in case of storm impacts. Just get in touch with us for a free consultation.