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Mitigating the Effect of Natural Disasters on Your Supply Chain

We’ve already begun to see the significant effect Hurricane Harvey has had on global supply chains and on the procurement professionals who manage them. Costs associated with business interruptions — particularly due to flooding — are taking a toll on businesses in several counties in Louisiana and Texas, as well as Arkansas, Kentucky and Tennessee, and supply chain effects will be felt far beyond those borders.

Harvey’s unprecedented impact will bear heavily on the economy of Texas and the US and those abroad will feel some of it — at least in the medium term  through factors such as gas price fluctuation because of oil refineries and petrochemical facilities going offline, as well as disruption in energy exports and other supply chain activities as ports in the state remain closed to vessel traffic until floodwater damage has been assessed.

Dun & Bradstreet estimates that Hurricane Harvey has impacted close to 542,000 active businesses in the 29 counties in Texas that have been officially declared by the Federal Emergency Management Agency (FEMA) as disaster areas bearing Harvey’s impact. This analysis is based on Dun & Bradstreet's vast database of US businesses.

In our detailed look at the profile of businesses affected, the majority were micro (90.88%) and small (8.25%) businesses with less than 10 and less than 100 employees, respectively. These types of companies are more likely to be credit- and cash-constrained, and the interruptions cause by Harvey will make it especially difficult for these businesses to open their doors even as conditions start to improve.

Dun & Bradstreet’s economic impact analysis dashboard graphically displays the potential business, jobs, and sales impacts of Hurricane Harvey. It shows the counties designated by FEMA for disaster assistance. Counties under a state of disaster were also included to reflect the potential scale of Hurricane Harvey’s impact.

The affected counties are a major hub of the US’s petroleum refining and chemical production industries. Houston accommodates major airports with flights to more than 70 international destinations, and major ports in the Houston and Corpus Christi areas remained closed in the wake of Harvey. Rail transportation was affected as well. That will result in severe supply chain disruptions through other parts of the US and among international business platforms, and supply chain interruptions will not be limited to energy and chemicals; these interruptions will extend to other commodities such as agricultural products, we found.

With the clear impact and devastation caused by Hurricane Harvey, and with Hurricane Irma bearing down on Florida, another group of regions could likely see significant storm impact. From Dun & Bradstreet’s data, and based on the National Hurricane Center forecast, counties likely impacted will be:

  • Miami-Dade
  • Monroe
  • Collier
  • Broward
  • Palm Beach
  • Martin
  • St Lucie
  • Brevard
  • Okeechobee
  • Hendry
  • Lee
  • Pinellas
  • Flager
  • Manatee
  • Sarasota

Dun & Bradstreet will have an updated list once the hurricane has passed next week. Given the number of counties potentially affected, our estimate of total businesses potentially affected by Hurricane Irma is one million-plus.

The immediate priority regarding Hurricane Irma will of course be the health and safety of all those in its path. Many in Florida have thankfully heeded the evacuation announcements. However, we’ll continue to monitor the situation overall to provide customers and the business community with useful resources where possible.

With the size and frequency of powerful storms already this season, organizations are advised to prepare for all natural disasters now and in the future — both for those events such as hurricanes that can be somewhat anticipated, as well as those that can’t — to minimize the disruption and toll these events have on businesses.

What I recommend to our customers to mitigate those effects on the supply chain includes the following:

  • Create a specific committee or team within your organization that will be able to respond before, during and after such events to assess the level of supply chain disruption anticipated or experienced and assure the best path to supply chain continuity
  • Perform an audit of current supply chain sources and weigh risk analysis based on various factors, including geography. This requires in-depth visibility into all sourced material and those companies’ relationships your business depends on
  • Build in policies and contingency plans for your supply chain. That includes identifying geographically diverse suppliers and distributors and may include onboarding them well in advance of future events

Dun & Bradstreet also provides additional resources to businesses that are updated regularly, include an impact report, a customer identification guide, credit customer notices, a Business Impact Search Tool, and our complete downloadable list of business entities located in the impacted areas, and pertinent links.

The Business Impact Search Tool provides access to a searchable list of companies to find businesses located in the areas affected by Hurricane Harvey, and we will have a similar tool after Hurricane Irma. Companies can search using the Dun & Bradstreet D-U-N-S® Number, business phone number, or by entering the business name, city, and selecting the province/state from the dropdown menu.

Ultimately, risk management in your supply chain is the imperative, whether your supplier universe involves tens or thousands of companies. Reliable data and the use of advanced analytics will help companies build and maintain strong, strategic relationships within US borders and beyond, and a plan to respond in a timely fashion to mitigate the effects of natural disasters is part of that equation.

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