Damage control

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The catastrophic events in the Gulf states at the end of August will leave an indelible impression on the American psyche for generations to come.
Lives and livelihoods were among the many casualties as Hurricane Katrina wreaked its path of destruction on 29 August. And the cost is high. The death toll at the time of writing was 770 and rising, and the financial total $125 billion and rising, with White House officials saying it could climb to $200 billion. President Bush prefers not to put a figure on it, saying "it’s going to cost whatever it costs," but he has ruled out any tax rises to help foot the bill.
Businesses in the area are still assessing the full impact of Hurricane Katrina, although things are becoming gradually clearer by the day. In the immediate aftermath, however, it was difficult to comprehend the sheer blind confusion. Even as long as two weeks after the storm, the situation on the ground remained blurred, with companies still frantically trying to account for staff dispersed in states from Texas to Florida.
Stark
Georgia-Pacific, for example, employs nearly 9,000 people in the affected states of Mississippi, Alabama and Louisiana, and is still assessing the full extent of the damage weeks after the storm hit, although it adds that it "believes" all these employees to be safe.
There is not a firm in the area that has not been affected, and some of the tales they have to tell are truly sobering. A stark picture of the situation on the ground in the early days following the storm is well illustrated by SP Richards (SPR), which has a distribution centre in Jefferson Parish just outside the city of New Orleans. Jefferson Parish was one of the worst hit areas.
Says EVP of operations Bob Fornal, who is overseeing SPR’s recovery efforts: "Immediately following the hurricane and the subsequent flood in New Orleans, we were only able to confirm the safety and whereabouts of seven of our employees who worked in or out of our New Orleans DC.
"Now we have been able to contact and confirm the safety of all but five of our people. We continue our efforts to locate these five missing people and remain hopeful that we will find each and every one. Most of our New Orleans employees have lost their homes and all their possessions. Their stories of survival and loss are heart-wrenching."
Indeed, most of SPR’s employees in the area are now scattered across several states – Texas, North Carolina, Mississippi, Alabama, Georgia and Florida.
Fornal adds: "The outpouring of support from our employees from all SPR locations across the US and Canada has been inspiring. Some have opened their homes to affected employees.
"When one SPR New Orleans employee arrived at SPR Tampa, with his wife and two-year-old daughter, he was given a job and then the employees contributed to pay for accommodation for the dislocated family for a month."
SPR also moved quickly to offer its support to affected dealers. "We immediately rerouted delivery and support to operating dealers primarily from SPR Houston, Dallas and Birmingham," explains Fornal. "We are offering support in a number of ways to affected dealers in an effort to help them personally and also to help them rebuild their business.
"We know we will not be able to operate from our New Orleans facility for the foreseeable future," he adds, "so we wanted to get everything in place to service our customers from our other facilities before trying to gain access to our New Orleans location. It is our hope and intention to reopen in New Orleans at the earliest possible time, but more importantly to maintain timely service from our other facilities until we are back up and running in New Orleans."
In the meantime, in common with so many companies in the area, SPR together with parent company Genuine Parts (GPC), has set up a GPC Employee Relief Fund, with 100 per cent of contributions going directly to helping affected employees.
Disjointed
United Stationers has also felt the impact at close quarters, with its LagasseSweet subsidiary having its headquarters and DC in Metairie and Harahan, adjacent to New Orleans, employing 163 people. In addition, the United Stationers Supply (USSCO) division also has a DC and furniture annex in the city, employing a further 40 associates.
Information comes in in a disjointed way, but at the time of writing, some two weeks after the hurricane struck, 153 of the 163 Lagasse staff had been contacted, and 30 of the 40 USSCO associates. And mercifully to date, neither had received news of any fatalities.
The crisis highlights the importance of companies having an effective disaster recovery plan (DRP) in place. LagasseSweet president Steve Schultz reports that the company has been well rehearsed in this aspect.
He comments: "The plan accounts for alternative approaches to every area of our business. We’ve actually implemented the plan several times before with the threat of previous storms."
Demand
And this has stood the wholesaler in good stead. He adds: "Our Lagasse computer system is now working from our United Stationers headquarters in Des Plaines, and our main call centre moved all operations to our Philadelphia location. So we’re doing business at a high level of capability.
"Of course, there are many customers in the area that are still shut down or operating in only a limited way, but there continues to be a high level of regional demand for the products we carry."
CEO Dick Gochnauer echoes: "For both USSCO and Lagasse, we’ve been able to shift demand to other facilities in the region. Customer demand is impacted short-term, but the long-term impact is just not clear. However, events such as 9/11 and other natural disasters have taught all of us that every business needs to have a strong disaster recovery plan in place.
"As always, the human element is paramount, and we’re very thankful that we seem to be coming out okay in terms of the safety of our associates."
It has very much been a case of working through the crisis as best as they can for everyone affected. United Stationers gives mention to one of its dealers with multiple locations in the area that has set up business in Houston. Others are operating as best they can out of hotel rooms.
Meanwhile, the OP industry has been rallying around with various aid-generating schemes – be it donating money to the American Red Cross or Feed the Children charities, or essential supplies on the ground, and this is likely to continue for months to come.
It is still too early to gauge what the impact on the bottom line will be, but at least it would be appear that the worst industry fears regarding rising oil prices in the wake of Katrina appear to have receded – for the time being at least.
The Gulf Coast oil platforms are crucial to the US energy infrastructure, and in the immediate wake of the storm oil prices tipped $70 a barrel for the first time ever. But they tumbled back below $66 after industrialised nations agreed to release 60 million barrels of crude from strategic stockpiles.
And economists have insisted that the hurricane, despite hitting just as the US economy was beginning to slow, will not be enough to trigger a recession. "Katrina won’t be a tipping point," says AmSouth Bank chief economist Robert Allsbrook.
He adds: "I felt before Katrina that we didn’t have a significant recession risk until late next year – that would be the earliest I would see one – and I don’t see a change in that."