Interstate 45 and rail lines stand surrounded by floodwaters from Hurricane Harvey in an aerial photograph taken above Texas City, Texas, on Aug. 30, 2017. Photo credit: BLOOMBERG
As bad as Hurricane Harvey’s destruction was to property and lives in the Texas coastal area, it will likely continue spinning out trouble for auto industry logistics in the weeks ahead.
Automotive companies aren’t concentrated in the Texas Gulf Coast area. But chemical and oil-related companies are, and many of them produce basic ingredients used downstream by diverse auto suppliers.
Oils, resins, paints, compounds and other building blocks of plastics and coatings come out of petrochemical operations along the Gulf Coast, notes Bindiya Vakil, CEO of Resilinc, a global supply chain monitoring firm tracking Harvey-related troubles.
Vakil: Months-long waits possible
“These are the materials that are necessary to make steering wheels, seats, coatings and a wide range of auto parts,” Vakil said.
“The auto industry can manage a hurricane’s disruption to port traffic,” she said. “That will all be clear in a few days. But flooding is a serious problem. If the flood damages the equipment needed to produce parts or materials, that means repairs or new tooling and simply ordering a new piece of machinery can mean a three-month wait.”
Resilinc is a disaster-alert intelligence system based in Milpitas, Calif., that monitors thousands of production sites around the world to warn companies of potential supply-chain interruptions. Resilinc is monitoring 300 sites in the Houston area, although only 15 of them are direct parts suppliers to the auto industry.
Other companies in the affected area include producers or distributors of commodity items needed across auto supply chains but are not specific to automotive, such as makers of electrical connectors, wiring and switches.
“It doesn’t matter how far down the supply chain you are, if you are out of commission, the whole chain is disrupted,” Vakil said. “You can’t build a car that’s missing one part.”
Vakil has been urging supply chain managers to become familiar with their extended supply chains to know where every chokepoint is. She said U.S. seaports are recurring problems for the industry, with hurricanes, tropical storms, labor interruptions and other problems.
But it is pointless to consider developing North American logistics maps that do not involve the ports, she said.
“Disasters are always happening,” she said, noting that at the same time Harvey crippled Houston, Typhoon Hato was thrashing Hong Kong, Macau and the coast of Southern China.
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