Last week, Gulf Coast residents and businesses have courageously endured through the unprecedented wind and rain brought by Hurricane Harvey. Carriers all over the world have also begun to feel its impact. With over 50 inches of rain in Houston, refineries are flooded, pipelines are shut off, ports have closed, and trucking has come to a halt. The sun has finally come out, but many areas remain flooded. Even where the water has receded, significant flood damage has rendered infrastructure unusable.
We analyzed our exceptions data since Harvey reached land in order to help shippers better understand how Hurricane Harvey will affect them. We found not only a large effect in Texas, but significant impacts many states away.
As carriers are coping with ripple effects throughout their systems, shippers can stay one step ahead of storm-related delays by proactively identifying and communicating changes in delivery expectations to their customers.
Hurricane Harvey’s Impact on Exception Rates and Carrier Operations
According to our data, Hurricane Harvey played a major role on exceptions, causing a 512% spike this week over the prior week. Not surprisingly, it caused heavy delays in Texas, as shipments were not able to reach their destination or leave the area, and carriers stopped service in affected areas of Texas and Louisiana.
Further up the supply chain, ships are unable to dock at gulf coast ports, and airports remain closed or are operating on a skeleton crew. This is causing rerouted wholesale shipments to alternate distribution centers hundreds of miles away. Many carriers have also damaged and/or lost shipments due to rising floodwaters in the area. Expect resultant stocking issues to cause further delays in getting goods to customers.
Carriers such as FedEx and UPS, in addition to a long list of freight carriers such as Estes, Old Dominion, and Saia, have halted delivery altogether in the greater Houston area and along the Gulf. UPS and Fedex are still seeing disruption in Texas and Louisiana, with UPS still unable to deliver to 560 zip codes. FedEx has a similar list of zip codes that it cannot service, and the carrier is offering an extensive list of zip codes that have suspended or partial delivery for customers to reference. XPO is also offering extensive weather alerts as well as an interactive service level map, and YRC is also offering a hotline for expedited and on-demand services for customers affected by the storm.
While we expect delays to gradually decrease as flooding goes down and infrastructure is repaired, we do not expect a return to normal for a number of months. Until then, businesses can expect to see alerts as vague as “Due to special operating conditions, your package may be delayed” or as specific as “Due to the impact of the hurricane, deliveries are delayed at this time” and “Due to Hurricane Harvey, your package has been delayed.”
With cryptic carrier alerts and a tough operating environment, visibility and customer communication is more important than ever to ensuring a positive delivery experience. It is necessary to stay up to date with the Service Alerts from each carrier. Since many shipments were lost and/or damaged in the flood, it is imperative to locate as many as possible so that customers can be notified and shipments can be replaced.
In order to locate these packages, we recommend searching through shipments using identified disrupted zip codes, tracking packages whose last scan was in one of the affected zip codes, and tracking packages whose destination was one of the identified zip codes.
Our Mid and Long-Term Outlook
In an analysis of major shipping lanes this week, it is no surprise that all shipping routes to and from Texas have been heavily affected. We found that lanes with destinations in Texas have the largest amounts of delays, followed by lanes originating in Texas — meaning that shipments heading to the Lone Star State were more susceptible to exceptions. Although shipping lanes in other states are seeing some gridlock and delays, we expect these to decrease over time as carriers find ways to re-route Houston-transiting shipping lanes around the city.
In addition to delays, shippers should also expect an increase in pricing. Based on damages incurred by Hurricane Katrina in 2005, Economist Noël Perry from Truckstop.com estimates that shipping costs could rise 5% to 22% over the mid-term, especially since Harvey impacted 10% of the nation’s trucking capacity.
As flood waters recede, some of the biggest costs to look out for in the next few months will likely be high fuel prices. Refineries in Houston such as Motiva, Exxon, Valero, and Shell are shut down as are pipelines such as Explorer and Colonial that transport refined fuel to the East Coast. With fuel shortages already beginning to occur in major Texas cities, and with the potential to occur throughout the eastern seaboard, they represent another risk to freight and last-mile fuel surcharge costs and delivery delays.
Maintaining the Bigger Picture
In the coming weeks, as businesses and carriers get a better understanding of the damage done by Hurricane Harvey, it is more important than ever to get visibility into how carriers are responding to delays and what new costs will look like, and it is imperative to relay that information to customers. Retailers should also take note of their own pricing strategies over the next few months, as their freight and parcel costs are likely to increase. For best practices on how to respond to different types of exceptions, including those related to weather events like Hurricane Harvey and possibly even Hurricane Irma later this week, download our exceptions action guide.
As a Texas-based company, we here at Convey extend our sympathy and strength to Houstonians who are going through this difficult time. If you would like to contribute to the rebuilding of Houston, you may find several ways to do so here.