Preparedness Lessons from Walmart, FedEx and Procter & Gamble
SMITH BRAIN TRUST – Among the lasting effects of a catastrophic natural disaster like Hurricane Harvey is one that is undeniably positive: Knowledge. It's an understanding of what is needed in the wake of a disaster, which efforts worked and which failed, and how to be better prepared.
Sandor Boyson, research professor of logistics, business and public policy at the University of Maryland's Robert H. Smith School of Business, has long studied how Walmart, FedEx and other big companies have adapted their preparedness through the decades. Each disaster brings its own challenges, and with each one new lessons are learned, says Boyson, who is also the co-director of the Supply Chain Management Center.
Harvey made landfall late Friday in Texas as a Category 4 hurricane and was later downgraded to a tropical storm. It has caused large-scale damage in several regions and catastrophic flooding in Houston, the country's fourth-largest city. But the extent of Harvey's damage is not yet known.
As he monitors news coverage surrounding Hurricane Harvey, Boyson takes note of the relief efforts that appear to have been arranged in advance. Refugee centers dot the city, with bottled water, diapers, cots and other essentials. Some 3,000 boats were said to be out on Houston's streets, moving people to safety. Offshore oil and gas platforms were preventatively shut down and evacuated.
"There is a portfolio of planning, pre-positioning and crisis management activities that go into adaptive responses to mega-disasters," Boyson says. "That doesn't mean you can control them, but you can buffer or mitigate against the worst effects."
Boyson teaches a case study in class about Hurricane Katrina, the Category 5 hurricane that struck the Gulf Coast in 2005, killing 1,800 people and leaving much of New Orleans underwater. He recalls that in the aftermath of Katrina, Walmart was on the ground with bottled water and convoys of supplies for disaster victims even before the Federal Emergency Management Agency.
"How did that happen? How did Walmart overnight become a lifeline for an imperiled city? That's one of the more compelling outcomes of corporate preparation and response," Boyson says. "Their networks are on the ground. They are helping people."
The company wasn't alone in its preparedness, Boyson says. He calls Walmart, Procter & Gamble and FedEx the vanguard in dealing with mega-disasters.
Walmart, ahead of Hurricane Katrina, analyzed prior disasters to determine the likely consumption and demand for key goods – water, diapers, batteries, flashlights, blankets and, interestingly, strawberry Pop-Tarts.
"The company was able to define that basket of goods that they knew would be needed after a disaster, and pre-positioned those because there would be a run of demand for them," Boyson says.
FedEx, studying past disasters, came to understand ahead of Katrina that it would likely be forced to shut down one air terminal and move operations to an air terminal outside of the disaster zone. So the company put "very large kits" of essential operations materials in alternative air terminals, Boyson says.
Both Walmart and FedEx had meteorologists on staff who gave company officials early warnings that Katrina was turning into "a monster," says Boyson. "That early warning told these companies they had to activate their emergency response plan. Pre-planning and pre-positioning, and knowing earlier about the event are all very important."
Procter & Gamble did extensive site analysis prior to Hurricane Katrina, looking to build manufacturing plants in New Orleans that would be elevated from the flood regions. It proved to be an essential preparatory move. Roughly half of the coffee that the company produces in the United States is made in New Orleans.
"Procter & Gamble was able to be the first manufacturing company to be back at work after the floods, because they had located their plant in an area that had slight elevation – just enough to help them get back quicker," Boyson says.
The company built prefab housing that workers could move into in the event of a disaster, a detailed communications plan that involved local police, fire and transportation officials, and established orderly shutdown procedures for the factory, enabling workers to start the plant back up more quickly and with less complication.
That kind of rapid re-boot is what the offshore oil and gas operators affected by Harvey will be hoping for, Boyson says.
For Walmart, one of the key lessons in responding to disasters has been the value of empowering local store officials to make critical decisions without input from corporate executives, says Boyson, who spent time at Walmart's corporate headquarters in Bentonville, Ark., with company officials discussing supply chain risk management.
"During Katrina, local store managers in New Orleans were told: Do what you need to do. You are the front lines, you know what actions are required in real time. Go ahead and get things done," Boyson says. "That executive support is powerful."
From a government standpoint, whether it's city, state or region, similar principles apply.
In Houston this week, authorities were calling on local residents to get actively involved with boat rescue, using their own watercraft, where possible. "This tells me that whatever was pre-positioned in terms of boats, it wasn't enough," Boyson says.
Much of Houston and its roadways were washed out or underwater this week, with Harvey dropping more than 40 inches of rain on the city in just four days. On Tuesday, much of the city was without basic utilities. Tens of thousands of residents had been forced from their homes, and for many it was unclear when they might be able to return.
"Of course, after a while, it doesn't matter how much you pre-position," Boyson says. "This is a disaster. There is only so much you can do. When the infrastructure washes away, how do you get to people? And when everyone is so spread out in a city as large as Houston, how do you get people to your shelters, what planners in Houston are calling 'lily pads' or dry spots in the lake?"
That speaks to one of the critical problems posed by Harvey. It's one thing when a hurricane strikes a smaller city. But how do you evacuate a metropolitan area of more than five million people?
"That's a difficult thing to do, even if you make all of the roads outward-bound," Boyson says. He wonders if, more practically, planners might have targeted extremely vulnerable areas for priority evacuations.
In the wake of Harvey, those questions are likely to be among the ones closely analyzed.
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About the University of Maryland's Robert H. Smith School of Business
The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and flex MBA, executive MBA, online MBA, business master’s, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.