Alabama Power Response to Katrina: Managing a Severe Service Supply Chain Disruption

CASE DESCRIPTION This case is designed to provide students with a business case based practical example of how an unexpected event can impact a business operation. This is a multi-part case designed to provide business students with a unique perspective on the many issues that a company must confront and address when an unexpected event disrupts the normal operations of a business. The case is designed to appeal primarily to a broad range of undergraduate students, and to a lesser degree graduate level business students. The case is challenging because it encompasses a wide range of issues, but the focus of the case is designed to entice meaningful and insightful discussion about how to effectively manage a business when confronted by a specific type of disruption. As a result, the case is not complex from the standpoint of developing a "correct" or "incorrect" answer. CASE SYNOPSIS Part A of the case is designed to provide students with a multi-faceted situation with the focus being on requiring students to identify, analyze, and prioritize the key issues, their relative importance, and how to address each issue to minimize the impact of the disruption on business continuity and performance levels. Part B complements Part A by providing the student with an in-depth discussion of how the company featured in the case identified, analyzed, and prioritized the key issues they faced during and immediately after hurricane Katrina. PART A: INTRODUCTION The risks of, and impacts from, environmental disruptions on businesses are tremendous. As we continue to progress towards an increasingly global marketplace, the risk of a potential business disruption tends to escalate. The ability to manage these disruptions and develop effective continuity response plans in the event of a disruption involves resources, a dedication to planning, and early involvement of key participants (Zsidisin, Melnyk, & Ragatz, 2005). Risk management has placed many professionals in an unfamiliar and relatively new territory, forcing the application of new techniques (Elkins, Handfield, Blackhurst, & Craighead, 2005) and highlighting the need for improved visibility and communication (Christopher & Lee, 2004). Given the large potential impact on business from a disruption, interest in, and application of risk management tools is expanding. One of the many challenges for businesses today is to plan, control, and monitor the potential risk associated with uncommon or undesirable business interruptions. Ultimately, to be highly effective in a constantly changing marketplace, a business must have a contingency plan that incorporates the identification and valuation of various risk events, the probability of occurrence, and the firms' contingencies for alternative actions. Clearly one size does not fit all in the management of potential risk. With a better understanding of the causes, identification, assessment, and management of risk has come the realization that there is no single method of controlling the risk of a disruption. Recent natural disasters such as Hurricane Katrina and the typhoon in the Indian Ocean have highlighted the need for better disaster preparedness planning (Alff, 2006; Hale & Moberg, 2005). Therefore, the remainder of this case focuses on how Alabama Power successfully utilized a contingency planning process in disaster recovery efforts to achieve dramatic and positive results immediately subsequent to Hurricane Katrina. BACKGROUND Hurricane Katrina struck the Gulf Coast as an extremely large Category 3 storm on the morning of August 29, 2005. The storm surge from Katrina caused catastrophic damage along the coastlines of Louisiana, Mississippi, and Alabama. In Louisiana, the surge breached several levees separating Lake Pontchartrain from New Orleans, ultimately flooding about 80% of the city. With damages estimated at $75 billion, Katrina was the costliest hurricane in United States history. …