Flooding rivers there mean higher prices here

With modern supply chain economics, Maryland consumers will be affected by problems along the Mississippi River

May 25, 2011|By Tobin Porterfield

Whether or not one agrees with the logic of dynamiting levees and opening spillways to sacrifice small towns in order to save downstream cities, the flooding of the Mississippi River area is a noteworthy economic phenomenon. The U.S. Army Corps of Engineers is strategically releasing water to relieve pressure on the levee system to divert the torrent of water resulting from heavy spring rains and snowmelt.

Old Man River is washing away thousands of homes, businesses and farms across 635 miles of river, from Illinois to the Gulf of Mexico. With water flowing at more than 1.6 million cubic feet per second, the Mississippi River would fill M&T Bank Stadium to its brim more than once every minute.

Opening long-closed spillways to spare downstream cities from catastrophic damage relieves the pressure in one area while driving up to 20 feet of water into another. But the ripple effects of this man-made movement of water can be felt everywhere — even here in Baltimore.

Today's businesses, made lean by years of trimming expenses, lack the extra inventory to survive disruptions to the supply of raw materials and finished goods. For consumers, disruptions to the supply chain result in higher prices or having to wait for some of their favorite products. For businesses, supply chain disruptions result in increased costs, component shortages and lost sales, none of which help them in these challenging economic times.

When the recent earthquake and tsunami hit Japan, General Motors rallied its personnel to quickly assess the exact impact the disaster would have on its complex supply chain. GM's leaders took steps to ensure the supply of parts to plants. Now the American car manufacturer is positioned to become the largest automobile manufacturer in the world, while Toyota struggles to keep its plants in operation.

Of course, opening floodgates devastates small towns across the bayou. The factories, farms, workers and transportation networks are not spared. These farms produce the milk, meat, corn, rice, wheat and cotton that are at the heart of American economic life. The relocation of workers as homes are flooded and factories are closed results in both short-term and long-term disruptions.

On the other hand, failure to open spillways would put Baton Rouge and New Orleans at risk. Nearly 20 percent of U.S. domestic oil refining capacity flows from those cities. Eleven refineries are located between Baton Rouge and New Orleans, with others as far north as Memphis already reducing their production in the wake of the flooding.

Whether floodgates are opened or remain closed, the recent flooding has crippled some transportation of products throughout the region. The Mississippi River has long been a major artery for commercial transportation. Six hundred barges move up and down the river daily, so even a brief shutdown can make the river look like the Baltimore Beltway at rush hour. For a short time last week, the river was closed to barge traffic, backing up barges onto the Ohio, Cumberland and Tennessee rivers. More recently, a barge struck a dock, sinking three additional grain barges and forcing the closure of a five-mile portion of the river.

Relying on alternate transportation may not necessarily be an option. It can take as many as 70 tractor trailers or 17 rail cars to haul the material contained in one barge. But flooding also has closed road and rail facilities in the region.

People all over the country — including Marylanders — eat Louisiana seafood. Lake Pontchartrain blue crabs certainly cannot compare with Chesapeake Bay blue crabs, but for those possessing less-discerning tastes, an interruption to their supply of Louisiana seafood could mean digging deeper into wallets when buying a bushel basket of crabs here.

But increased prices for consumer goods is a minor inconvenience compared to the scale of the problems faced by businesses without a plan in place to mitigate the effect of any supply-chain disruption, including flooding of the Mississippi.

Today's global supply networks require constant vigilance. If businesses choose to keep their heads in the silt, then they better hope that the competition is doing the same — or their rivals will be eating the business owners' lunch, and our Chesapeake blue crabs as well.

Tobin Porterfield is an assistant professor of supply chain and project management at Towson University. His email is supplychain@towson.edu.

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