Hurricane Maria Highlights Need for SCRM Planning & Mitigation before a Disaster

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Puerto Rico has a substantial role in the apparel manufacturing supply chain for the US military. The concentration of apparel suppliers in Puerto Rico is the result of forces which have affected the global textile supply chain for decades. Textile manufacturing has been moving overseas for years in order to reduce costs in a competitive, low-margin business, but defense suppliers must remain Berry Amendment-compliant (which requires the Department of Defense (DOD) to give preference in procurement to domestically produced, manufactured, or home-grown products, most notably food, clothing, fabrics, and specialty metals). Puerto Rico offered military apparel manufacturers a way to reduce labor costs, take advantage of tax-incentives, and comply with the Berry Amendment. Nine of the Defense Logistics Agency’s (DLA) 15 combat utility uniform prime contractors are based in Puerto Rico[1]. According to usaspending.gov, 16% of the DoD’s apparel (product code: Clothing/Individual Eqpt, Insignia-84) sourcing came from Puerto Rico in 2017 (13% in 2016).

In September, Hurricane Maria wreaked havoc on Puerto Rico, which, in addition to causing a severe humanitarian crisis, from which they are still recovering, created disruptions in the defense apparel supply chain. Manufacturers were affected by problems such as loss of power, building damage, flooding, infrastructure damage, and negative impact on the well-being of their workforce. For example, Bluewater Defense is a manufacturer of U.S. military uniforms that made up 23% of the defense contract dollars to Puerto Rico in 2017. Bluewater has five buildings, three of which were badly damaged by Maria. About a month after the initial damage, Bluewater was able to run at two-thirds normal production capacity using backup generators for power[2]. The firm was able to recover from Maria, but the supply chain was disrupted for one month.

Although the humanitarian crisis no doubt outweighs other concerns, Hurricane Maria serves as a real-world example of the inherent risks that arise when regulatory factors and the global business climate combine to create geographical concentrations and bottlenecks. As these factors are typically beyond the control of supply chain planners, the lesson of Maria is that when a bottleneck cannot be prevented, supply chain transparency, risk assessment, and robust mitigation planning (i.e., having adequate backup generators) is required to minimize disruption.

[1] FY 2017 Annual Industrial Capability Risk Assessment Report, DLA Industrial Capability and Warstopper Program

[2] Parija Kavilanz (October 3, 2017). 330 workers show up to restart Puerto Rico clothing factory. CNN Money. Retrieved from http://money.cnn.com/2017/10/03/news/economy/puerto-rico-bluewater-defense-factory/index.html

Blog Authors:  Rob Callaghan is a manager with Bättra, LLC specializing in supply chain issues with the Defense industrial base. Thomas Fry is a supply chain consultant working for Bättra, LLC with an emphasis in logistics data analysis.