Hurricane Katrina Showed Importance of Logistics, Supply Chain Management

Communication and clear decision delegation among personnel are important components of logistics and supply chain management, especially during disasters.

U. of Arkansas researcher explains how federal agencies, nongovernmental relief organizations can learn from the best practices of successful businesses

Fayetteville, AK — October 10, 2005 — A University of Arkansas researcher believes state and federal emergency management agencies and nongovernmental relief organizations could improve disaster response by learning from successful businesses that have mastered transportation logistics and management of goods and supplies.

"Most skills and competencies needed to excel in logistics and supply chain management are the same skills and competencies needed to excel at disaster relief operations," said Matt Waller, associate professor of marketing and logistics at the University of Arkansas.

Waller was not surprised that Wal-Mart, the world's largest corporation, beat the Federal Emergency Management Agency and the Red Cross to areas devastated by Hurricane Katrina. He said the company delivered supplies quickly and efficiently because, simply put, that's what it does every day. Wal-Mart has mastered logistics and supply chain management, and the company's expertise in these areas worked well during a natural disaster.

For the past four years, Waller has studied the importance of logistics and supply chain management during and immediately following disasters such as Hurricane Katrina. The terrorist attacks of September 11, 2001, and subsequent military action in Afghanistan motivated Waller, who was already an expert in industrial logistics, to investigate how organizations can meet human needs in times of disaster. He found that although natural and man-made disasters shift the purpose for delivering products to a destination, the process of transportation and management of supplies are similar. And organizations such as Wal-Mart and Federal Express, which excel at these skills, will have the most success at disaster response.

Logistics is more than delivery of products to a destination, said Waller. It involves managing the transportation and storage of all product inventories while minimizing total costs and serving as many customers as possible. Supply chain management integrates business processes within and between companies to maximize the effectiveness of logistics and business overall.

Several specific factors led to Wal-Mart's success in shipping supplies to Katrina's victims, Waller said. The company used point-of-purchase data from other hurricanes to know what consumers would need before and after the hurricane. As the hurricane gained strength over the Gulf of Mexico, the company's logistics leaders closely monitored weather reports and made decisions accordingly days before the hurricane reached the Gulf Coast. For example, early weather reports predicted the storm would hit Florida, so the company shipped goods there. When forecasts changed, trucks were routed to the Mississippi/Louisiana coastal area.

Waller said communication and clear decision delegation among personnel are important components of logistics and supply chain management, especially during disasters. Decentralization of authority allows local operations to respond quickly. This was especially true for Wal-Mart stores during the storm, Waller said, as local store managers made important decisions that helped get food and water to victims. As the most extreme example of decentralized authority, at least one local store manager decided to allow people to take necessary supplies without paying.

Waller said disaster-relief logistics require effective management of:
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  • the needs and requests for help from victims.

  • available supplies and donations.

  • inventories that deteriorate.

  • the location of supplies.

  • storage and transportation.

  • the coordination of relief and government organizations.

  • costs versus available resources.
  • Other principles of logistics, such as using fewer suppliers and serving a given market from fewer warehouses, may need to be modified during disasters because organizations will need to augment supply chains or have extra stock and more holding locations.

    Waller said disaster response should be an integral part of logistics and supply chain management because more disasters will occur and corporations have a civic responsibility to work with government and nongovernmental agencies to provide relief. He cited a recent Massachusetts Institute of Technology study stating that the annual frequency of disasters has tripled since 1970 and wind speeds and durations of hurricanes have increased in recent years.

    "Probability is high that a natural disaster or man-made disaster will happen again," Waller said, "so companies and relief organizations are interested in improving logistics and supply chain management."

    Supply chain executives are discovering new ways to apply technology and innovative processes to the challenge of managing uncertainty. Read more in Rethinking Risk, cover story in the August/September 2005 issue of Supply & Demand Chain Executive.