Hurricane Katrina Revisited

by Craig Babcock, Procter & Gamble Business Continuity Leader

It has been more than 11 years since the biggest natural disaster (in terms of dollar loss) in U.S. history, that of Hurricane Katrina. It is time to revisit the lessons learned from that disaster, as many are as applicable today as they were then. We will look at the effect of the hurricane on Folgers Coffee operations.

On the morning of August 29, 2005, the massive Hurricane Katrina made landfall slightly east of New Orleans. Winds flattened cell towers and power poles; tidal surge wiped out bridges and roads; and when the levees collapsed, there was widespread flooding in the city and surrounding communities. Most residents had evacuated, but many had not, and some had to be rescued by the National Guard, the Coast Guard, the military and good Samaritans.  The final death toll was 1,836, primarily from Louisiana (1,577) and Mississippi (238). Total property damage was estimated at $108 billion (2005 U.S. dollars).

Procter & Gamble had four coffee operations in the New Orleans area (now owned by Smuckers, Inc.)—one facility on Gentilly Highway, the largest coffee factory in the world, producing Folgers Coffee; a smaller coffee manufacturing facility that produced Millstone Specialty Coffee; a large coffee distribution center near the north shore of Lake Pontchartrain; and a green bean coffee facility for receiving raw material shipments from ocean freighters. 

The challenges on the ground were daunting. We had to find and verify the safety of our employees, most of whom evacuated to 15 different states in the Central and Eastern United States. Each facility was damaged; they were completely surrounded by water with no road access and martial law in force. There were no utilities (water, sewer, electricity) and greatly reduced services (police, fire department) for a long period of time. Because of the flooding and lack of utilities, many things were scarce—food, shelter, manufacturing and construction workers, materials, fuel, and communication.

We traditionally planned for a “most likely” rather than a “worst case” event, as do many Business Continuity Plans (BCPs). For example, the operations in New Orleans had had hurricane plans for decades, and they had followed the protocols faithfully in the past. A major difference in the Katrina disaster was the infrastructure damage that left 80 percent of the homes in the city uninhabitable and the utility services unavailable for weeks, not days. So a core learning from the Katrina experience is the need to create some high-level plans for a worst-case scenario and add them to the company’s BCP. Another key learning relates to streamlining decision-making during a crisis by empowering the people who have relevant knowledge and letting them make decisions without being second-guessed or going through the “normal” channels of approvals. 

The remainder of this article will be directed at specific actions that were taken to address the challenges experienced before and after Katrina.

Before the Hurricane Arrived

Procter & Gamble has always been proactive in risk management. Its hurricane plan had been in place for 40 years and included detailed checklists for thorough hurricane tracking, shutdown, and evacuation plans. The Gentilly plant and DC operations, near Lake Pontchartrain, were designed to be eight feet above sea level to avoid flooding. As soon as the hurricane entered the Gulf, the Purchasing group began renting generators from outside the region; business crisis teams were activated at the local and the business-unit levels; expecting telecom disruptions, a satellite phone was secured for the plant manager who, once the hurricane hit, stayed inside the area bounded by martial law.

As soon as the hurricane struck, employee contact became a top priority. The Human Resources Command Center in the Alexandria, LA, manufacturing plant, about 200 miles northwest of New Orleans, took on this role. Employee call-in lines were established. Local and regional broadcast media were used to reach out to employees. Coworkers, family members, and friends were contacted to find and help employees. Ultimately, it took 21 days to find everyone. Learning from this experience, Procter & Gamble has now established an automated notification system with which to contact employees.

Site Access

Initially, since all the coffee manufacturing facilities were surrounded by water, we rented a helicopter to provide access to the sites. The plant manager provided an initial assessment to the business crisis team in Cincinnati. A small group of experts (building structural, electrical power, utilities, construction) were flown into the sites for detailed assessments. Major roads were damaged (I-10 was half destroyed), and martial law was implemented with checkpoints on the roads, making travel extremely slow (employee commute time that had been 30 minutes turned into 2–3 hours). During the early weeks after the hurricane, we worked with the police to escort buses and caravans to help reduce the commute. We used the helicopter to provide traffic reports to find the best routes. Eventually we rented 100+ mobile trailers and created a “village” on site with employees working seven days on, seven days off, with 12-hour shifts, and provided four meal times each day. The “village” addressed the commute issue, enabled business resumption, and gave people the time they needed (a week off every other week) to restore their homes and lives and help others.

 

Public Utilities Outages

All forms of public utilities were unavailable for several weeks, and in the case of telephone to the Millstone  facility, for several months. We were able to rent generators outside the region, but most of the generators initially were expropriated by the government for higher-priority uses (hospitals, nursing homes, emergency services). The main generating equipment was used during cleanup and pre-startup, as public electricity became available about three weeks  before startup. Water and sewer facilities took longer. We initially trucked in water from Baton Rouge to fill fire water tanks and process water. Eventually, we drilled our own well for water. We brought in portable restrooms for people. We worked with the state to get a special permit to process water discharge into the storm runoff, as there was no sewer capability. We installed satellite dishes on our facilities for data transmission and phone service via voice over IP.

 

Police and Fire Department

Local police and fire services were vastly reduced and had other, higher priorities during our resumption phase.  Therefore, we created our own fire department, using people who were qualified in structural fire-fighting from P&G facilities throughout North America. We rented a used fire truck and brought in seven-person crews to work a week at a time. We did this for several months until the public fire department had recovered enough to resume normal service. As goodwill, we also offered free meals to state and local police, which also created a nearly full-time police presence on site while we maintained the “village.”

 

Site Repair

The coffee business crisis team was at our corporate headquarters in Cincinnati. Its primary work was to (1) interact with the trade to help everyone understand when customers would have products, and (2) support the facilities restoration and resumption of work. A Restoration Command Center was set up in Baton Rouge at our third-party construction partner to plan the restoration. An Operations Command Center was set up at the Alexandria, LA, plant site to (1) find all the employees who had evacuated and (2) plan for the cleanup and resumption of operations. Initially, engineers and craftsmen were flown in via helicopter for assessment and preliminary restoration. When roads were passable, materials were brought in from the Midwest and Northeastern United States. It took 21 days to find all our employees (they had evacuated to many states in the Midwest and the Southern and Eastern United States). Many company retirees returned to help, and many resources across P&G were involved in the restoration.

 

Product Availability

We increased output at our other, smaller P&G coffee sites. Our Purchasing group secured about half of the total third-party roasting capacity in North America (a competitor secured the other half). We approached another competitor who agreed to work with us to roast and package Folgers. Our Marketing group launched a “Save New Orleans” campaign and featured a Statue of Liberty on the coffee can to encourage people to buy Folgers. Our Sales group worked with the trade to protect our shelf space based on the timing we committed to be producing again. Our Management group kept Wall Street reassured by communicating our efforts and timing. We also brought the Food and Drug Administration on site to work with us to make sure that there were no quality issues at the time of our startup. 

 

 

Employee and Community Help

We wanted to make sure that our people were taken care of, so we established continuity of pay throughout the hurricane, evacuation, and return. We also offered fast cash loans so that employees could start their personal restoration as soon as possible. The seven day on / seven day off schedule was a very popular with our employees because it gave them time to rebuild their homes and lives. As a company, we partnered with Red Cross and America’s Second Harvest and donated over $10 million in cash and product shipments (180+ truckloads). The company coordinated another $1 million+ in an Employee/Community Relief Fund ($700,000 directly to affected employees). Also, nearly $50,000 in Iams Friends for Life Fund plus $300,000 in Iams product and animal housing were donated.

 

With the combination of planning; a competent and able work force and many who stepped up to meet great challenges; being extremely creative and flexible; being focused with the end in mind; and having the support of the company, various government entities, suppliers, and customers, the coffee employees of Proctor & Gamble made a miraculous recovery, starting the first production line at the Gentilly facility within three weeks after the hurricane. Another three weeks after that, all production lines were running. The Governor and the President of the United States made visits to the plant site to recognize the company as the first major business back in operation. In addition to that, with the help of our Marketing and Process Development colleagues, we were able to turn around an almost 20 point market share drop (due to loss of manufacturing capacity) into a market share higher than pre-Katrina levels.