What Can Learn from Harvey and Irma?

Peggy Dorf | DAT Solutions

On Aug. 30, 2017, less than 10 days after Hurricane Harvey made final landfall near Cameron, LA, trucks were moving freight out of southeast Texas with almost the same volume as before the storm.

It was an incredible recovery and a testament to the hardworking people who helped restore commercial transportation in one of the nation’s largest markets for van, refrigerated, and flatbed freight. Houston’s van freight volume rebounded to 88 percent of pre-storm levels during that Labor Day week.

And then came Irma.

Hurricane Irma arrived in the Florida Keys on Sept. 1. Like Harvey, its toll on human life was brutal, and it upended freight transportation systems in the Southeast and other parts of the country.

But each storm was unique. With the 2018 Atlantic hurricane season now under way, Harvey and Irma offer a number of distinct lessons for anyone who needs to move freight during disruptive, unpredictable events.

Big Weather Event or Something More?

The hurricanes’ impact on freight appeared to follow patterns that are typical of a “big weather event” like Super Storm Sandy in 2012 and Hurricane Katrina in 2005. These tend to affect freight movements in three stages:

1. Before the storm: Unlike an earthquake or other unpredictable events, a storm can be forecast well in advance, giving shippers time to plan and react. Outbound rates may increase sharply, but goods can be rerouted, stockpiled, and potentially saved from spoilage. The Federal Emergency Management Agency (FEMA) and other organizations may stage emergency relief supplies on the outskirts of the storm zone, so they are ready to act as soon as roads are clear.
2. During the storm: Nothing moves in or out of the area until conditions are safe. Restoring service and schedules depends on the availability of commercial power and the condition of roads, rails, ports, and other infrastructure.
3. After the storm: In terms of freight, emergency supplies tend to be brought in first, followed by van and reefer freight. Flatbed demand picks up when it’s time to bring in construction equipment and materials for cleanup and rebuilding.

Accepting loads into a storm-affected area can be a difficult choice for a carrier. On one hand, an inbound load can represent an opportunity for additional revenue – inbound rates tend to shoot up after a big weather event.

However, a truck might have to wait an extended period of time to get unloaded, which raises questions about the availability of fuel and essential services for the driver, and the lack of outbound freight means the trucker may need to deadhead out of the region.

Market Size and Scope

One thing that distinguished Hurricane Harvey from Irma is the significance of Houston to the national economy.

Houston is home to a number of industries, including energy exploration and refineries. It’s a major hub for rail and marine freight. In trucking, it’s consistently the No. 1 source of flatbed loads and one of the top five or six markets for van and refrigerated freight.

Distribution centers near Houston serve at least six states. After Harvey, some shippers began to supply markets ordinarily served by Houston from regional hubs in the Southeast, including Atlanta, Charlotte, and Memphis. Warehouses in the Midwest were called on to supply the Northeast in order to compensate for freight that otherwise would have come from Atlanta. Many of those warehouses had to supply Colorado and other out-of-the-way markets served by Houston.

It’s telling that on Aug. 30, 2017, the worst truck shortage was in Grand Rapids, MI. Trucks were being diverted to deliver emergency relief to staging areas in markets like San Antonio and Dallas, leaving shippers in the Midwest scrambling to move seasonal freight, including apples and potatoes, as well as the usual consumer goods. Harvey’s impact on the supply chain was felt well beyond south Texas.

Severe weather and natural disasters test the resiliency of supply chains but also show what a resourceful group of professionals we have in the industry. During last year’s hurricane season, many offered equipment, warehousing, and other resources to organizations like the American Logistics Aid Network. At DAT Solutions we established an area on our website to offer tools to help brokers, carriers, and shippers move FEMA loads and other emergency freight, and to provide data about how those disruptions affect rates, truckload capacity, and demand on a market-to-market basis. Many 3PLs and carriers provided similar resources.

You never know when the next big event is coming – you just know it’s coming. Now is the time to put contingency plans in place so you can help your customers when they need it.

Peggy Dorf is a market analyst with DAT Solutions, located in Portland, OR. She was instrumental in developing DAT Trendlines and writes frequently about economic trends in transportation and logistics. Peggy is a TIA Certified Transportation Broker and holds an MBA from the Wharton School. She may be reached at [email protected] For information, visit www.dat.com.