Summary

The goods and services that we all rely on—food at the grocery store, clean water from the tap, gasoline at the pump, power and Internet for homes and businesses, medicines at the pharmacy—are readily available only because of the innumerable processes, systems, and dedicated professionals that keep supply chains flowing. Such systems can be disrupted for a variety of reasons, with extreme weather such as hurricanes being one of the most disruptive threats. The three hurricanes that hit in 2017—Harvey, Irma, and Maria—were each unique and record-setting in their own ways. The fact that these storms occurred in quick succession tremendously stretched the capacity of the Federal Emergency Management Agency (FEMA) and other organizations to respond, and strained the functioning of some supply chains that facilitate the flow of critical commodities and services to affected populations.

FEMA’s strategic plan makes clear the agency’s growing focus on ensuring that communities have robust, adaptable supply chains that can withstand and recover from the stresses of extreme weather events. To support efforts to translate that goal into effective action, FEMA asked this National Academies of Sciences, Engineering, and Medicine Committee to analyze the functioning of supply chain networks in four primary areas affected by the 2017 storms: South Texas (from Hurricane Harvey), South Florida (from Hurricane Irma), and Puerto Rico and the U.S. Virgin Islands (from Hurricanes Irma and Maria). The committee was asked to identify key lessons from these events related to supply and distribution networks, and to offer recommendations for improving the conveyance and distribution of essential supplies and commodities during disaster response and recovery operations—focused on supply chains for food, fuel, water, and pharmaceutical and medical supplies.

This is a unique National Academies activity in that it was designed as one part of a three-pronged project that also included: (i) a team from the CNA Institute for Public Research conducting background research, data collection, and interviews in order to develop a set of case studies about supply chain issues that unfolded in the four study areas; and (ii) a team from the Massachusetts Institute of Technology’s Center for Transportation and Logistics developing an advanced analytic tool that illustrates supply chain nodes that amplify or dampen cascading effects and that aids the analysis of supply chain network structure,

linkages, and behaviors. Cross-fertilization of ideas and information among these three efforts strengthens their value as a collective resource for FEMA.

BASIC SUPPLY CHAIN CONCEPTS

The fundamental challenge of supply chain management is to match supply with demand in a responsive, accurate, and cost-efficient manner. The ability to meet this challenge can be seriously compromised by disruptive events such as hurricanes. Understanding the mechanics of disruption, as well as options for mitigating the consequences and speeding recovery, requires understanding some key concepts about supply chain dynamics and flows. Two particularly important ones are the bottleneck, the point in a supply chain that limits its flow (or, more formally, the stage in the system with the highest utilization), and the lead time, the duration of time from the initiation of a request for a service or product to its delivery. Under normal conditions, the capacity of a supply chain is determined by its bottlenecks, while the responsiveness of a supply chain is determined by its lead times.

Disruptions to a supply chain can result from several forces, including demand shifts (e.g., spikes in demand for fuel and bottled water), capacity reductions (e.g., when a factory or retail store cannot operate due to damage or power outages), and communication disruptions (due to loss of cell phone, Internet, or point-of-sale systems). The resilience of a supply chain depends on how its bottlenecks and lead times are affected by such disruptions and what capabilities exist for swift restoration after a disruption.

The objective of supply chain resilience is to minimize the impact of such disruptions on the affected population. Policies for achieving this objective can be categorized as readiness (mitigation and preparedness actions to help a system avoid and withstand disruptions), response (emergency relief through the establishment of temporary replacement supply chains), and recovery (the restoration of normal supply chain performance¹ through repair of damaged infrastructure, nodes, links). Knowing how to prioritize among these options requires learning from past experiences and developing systematic analyses of supply chain links and nodes² to understand their criticality (the extent to which a disruption of the component will degrade the functionality of the network) and vulnerability (the likelihood a node or link will be disrupted). A node or link that is both critical and vulnerable is a major source of supply chain risk and hence an opportunity for making a supply chain more resilient. By knowing where bottlenecks are likely to emerge and cause critical supply disruptions, one can identify and prioritize actions to mitigate the harm.

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¹ The reference to “normal” supply chains (used here and throughout the report), simply means the conditions that generally prevailed before the disruptive event—recognizing that economic conditions in any given place can continually evolve and therefore it is not always possible to define an exact pre-storm “set point.”

² “Nodes” refer to locations within a supply chain (e.g., a factory, warehouse, distribution center), and “links” refer to the transportation connections between those nodes (e.g., a ship, a truck, a railroad).

OBSERVATIONS AND LESSONS FROM THE 2017 STORMS

For this study, the committee held meetings in Houston, Miami, San Juan, and St. Thomas to meet with an array of federal, state, and local public officials and managers, private sector stakeholders, and others involved in maintaining the functionality of supply chains before, during, and after the 2017 storms. This input, together with further online engagement with additional experts, and the CNA case study analyses, provided the primary foundation for informing deliberations and developing this report.

The supply chains operating in any particular area have unique profiles based on many factors that can inform, and to some degree predict, how a storm’s impact will be felt. This report examines such profiles for the four study areas, focusing on the following broad factors: defining geographical features, directional configuration of the main supply chain links and corridors, concentration of critical nodes and possible points of failure, modal diversity available, and vulnerability of critical infrastructure needed to support supply chain continuity.

There were of course unique impacts and dynamics that unfolded in each of the four study locations.

• In the Houston area, Hurricane Harvey’s record-shattering floods impeded almost every aspect of supply chain operations and emergency response, revealing an underlying vulnerability that was exacerbated by land use and urban development patterns across the region. Yet at the same time, major problems that could have devastated local, regional, and even national supply chains were averted, in part, due to the region’s rigorous systems for disaster preparedness and response, including strong links with key industrial sectors organizations (e.g., the Port of Houston and fuel refineries).
• South Florida also benefited from a well-organized system for disaster preparedness and response, with extensive relationships among emergency management officials and industry groups responsible for maintaining the flow of critical goods and services. Nonetheless, Hurricane Irma did expose some important vulnerabilities, for instance, in terms of meeting fuel demand in the face of a massive evacuation, maintaining a sufficient inflow of supplies in the face of serious delivery bottlenecks, and ensuring adequate coordination in the movement of trucks and supplies across state lines.
• The U.S. Virgin Islands faced many unique challenges when struck by Hurricanes Irma and Maria, for instance, the heavy dependence on ship imports for critical goods; the difficulties in disposing of storm debris; the lack of housing space for relief workers; the limited port space for processing relief shipments; and the disruption of supply chains for critical reconstruction supplies. Despite these challenges, however, some commercial and relief supply chains operated relatively well, and there

• were many signs of resilience among the population (e.g., local businesses re-opened quickly, and most homes and facilities had working generators, fuel, and cisterns to collect water).
• Puerto Rico faced fundamental vulnerabilities that exacerbated the tremendous destruction of Hurricane Maria. For example, there were significant limitations in the coordination of emergency preparedness systems among federal and local agencies and the business community. Fragile, aging power and communications infrastructure were severely damaged, leading to a host of cascading impacts. The Port of San Juan was overwhelmed as large relief shipments poured in while severe bottlenecks limited the distribution of those goods. Some manufacturing plants critical to national supply chains were not prioritized for assistance. Yet many businesses across the island, both large and small, proved impressively resilient and were ready to resume operations quickly after the storm (although still constrained by the prolonged power outages).

Even with the diverse contexts and unique experiences of the different storm-affected areas, there were commonalities in how supply chains were affected across each place considered.

• Post-hurricane bottlenecks and disruptions arose more frequently at the distribution level than at the production level. This is in part because distribution is often carried out by businesses and organizations that are more vulnerable to disruptions (from physical damage to businesses, shortages of delivery trucks and drivers, and diversion of resources to relief efforts). Disruption was also greater at the distribution level because damage to critical infrastructure (e.g., electricity, Internet, municipal water, transportation) often impedes the processing, distribution, and selling of goods.
• Many large companies had invested in continuity planning, partnerships with government officials, employee assistance programs, and resources to harden, back up, and restore critical systems. But small businesses generally had much less capacity to prepare for and avoid supply chain disruptions or to actively engage with local emergency management officials.
• In places where state and local governments invested in reducing the vulnerabilities of critical infrastructure (especially for hardening electric power systems), this did yield benefits in terms of minimizing storm disruptions and thus bolstering the speed with which local economies could resume normal operations. Where these sorts of investments did not occur, more severe disruptions arose.
• The ability of emergency managers to understand post-storm supply chain bottlenecks was constrained by limited pre-storm assessment of vulnerable and critical supply chain nodes, together with information disruptions resulting from power and communication loss. This in turn limited emergency managers’ ability to optimally

• prioritize the allocation of relief supplies and to know when to stop the push of relief supplies into an area.
• There was confusion in multiple regions around the priorities and practices of FEMA and other emergency management officials for providing generators and fuel to parties in need of assistance—in particular for private sector entities that are critical nodes in local or national supply chains.

These findings helped inform the committee’s recommendations, which are aimed at both FEMA and the wide array of state and local officials, private sector decision makers, civic leaders, and others who can play a role in ensuring that supply chains remain robust and resilient in the face of natural disasters.

RECOMMENDATIONS FOR ADVANCING SUPPLY CHAIN RESILIENCE IN THE AFTERMATH OF A HURRICANE

In the aftermath of a disaster, if the normal supply chains are unable to meet the population’s needs for critical items, relief supply chains are established in parallel by FEMA and other organizations to temporarily replace or supplement regular systems for delivering goods and services. Political leaders and citizens typically welcome these relief efforts, as they can be life-saving for impacted communities and are often critical in the hours and days immediately following a disaster. What many fail to recognize, however, is that flooding an area with relief supplies for an extended period—the traditional approach—can have the unintended effect of delaying that area’s recovery. This is because relief supply chains often rely on contracting local resources (e.g., trucks, ships, barges, delivery drivers, port storage, and processing space), which are the same resources needed by local businesses to get their supply chains back to normal. The result is that consumers and storm victims may experience a longer recovery period than necessary while waiting for resources to be freed up and reallocated to normal, pre-disaster use. In addition, this traditional approach does not address the “last-mile” distribution problems that are common after major storms. For instance, if key roads are blocked in or near a community, if fuel supplies are short, if power and communications are down, and if workers are not available, then relief supplies often cannot be distributed to those in a community who need help.

This dynamic can be difficult to overcome. First, elected officials who want to ensure that their communities have sufficient food, water, and medical care will often continue to request relief supplies from FEMA even when there is no clear indication that such supplies

are needed. Additionally, emergency managers often lack the systems and communications processes needed to gauge the conditions, capabilities, and capacities of local supply chains in a systematic way to understand when the transition from emergency posture back to normal can take place.

As an important step forward, the traditional focus on bringing relief supplies to an affected area to meet unmet demand must be augmented with a focus on understanding the causes of unmet demand—that is, identifying bottlenecks, gaps, and broken links in local supply chains—and pursuing strategic interventions to assist local stakeholders in returning regular supply chains to normal operation as rapidly as possible.

This shift in focus requires improved planning and communications that allow FEMA a clearer view into the resilience, capacities, and limitations of stakeholders in critical supply chains. It may also require changing some current expectations regarding the scope of FEMA’s actions. For instance, because damaged critical infrastructure is often the primary factor impeding the operation of supply chains, there needs to be careful consideration of how FEMA could take a more active role in aiding those responsible for infrastructure repair (e.g., to advise the information gathering and analysis needed to identify priorities for infrastructure repairs in an affected area). Likewise, FEMA needs more latitude to prioritize support for key facilities and workers (including in the private sector) that are critical for enabling rapid restoration of local supply chains.

When planning for and responding to a hazardous event, emergency managers must quickly make numerous critical decisions regarding how to prioritize resources and actions. Making such decisions wisely and strategically requires having a big-picture, system-scale understanding of the supply chains operating within an area. In turn, developing this broad understanding requires gathering and assessing a wide array of information stretching across multiple sectors, across the different stages of the disaster cycle, and across local, state, national, global scales. For instance, before a disaster strikes (“blue skies”) it is important to understand:

• how supply and demand drive the flow of critical goods and services into, through, and out of a given area, and how major disruptions such as hurricanes can affect these flows;
• the criticality and vulnerability of key supply chain nodes, links, and supporting critical infrastructure; and
• dependencies and interdependencies among different supply chain nodes and sectors, and the potential for cascading impacts that may affect the region, state, or even the nation.

During and after a disaster event (“grey skies”) one needs systems to gather real-time information about unfolding impacts (e.g., what roads are blocked, what systems are damaged, what stores are closed, who needs urgent help), and the current capacity of local stakeholders to respond to these impacts.

Modeling frameworks are often needed to integrate these complex data streams and extract practical decision-support information. The growing field of disaster and humanitarian logistics offers some useful examples of the types of models and analytical frameworks needed. Such advances would enhance understanding of supply chain vulnerabilities during preparedness stages and provide better visibility into demand/supply gaps during response stages. They would also enable emergency managers to more effectively prioritize the distribution of critical relief supplies and anticipate possible cascading effects of those decisions. Perhaps most importantly, building system-scale understanding enhances capacity to focus on the strategic restoration of broken links in supply chains and infrastructure, thereby helping normal economic activity rebound quickly.

The greatest opportunities for building resilience come from preparedness efforts undertaken before disasters strike. Some examples of critical preparedness actions that businesses or other organizations can take include to develop and regularly update emergency preparedness and continuity of operations plans, conduct training and worst-case scenario drills, test emergency communication protocols and identify workarounds for communications system failures, and develop plans to protect the health and safety of organizational personnel during disaster events. Other critical factors for enabling successful disaster response are clearly defined processes and mechanisms for coordination and information sharing—especially platforms to engage across levels of government and across public and private sector organizations. It takes time to establish the needed relationships and trust, which is why this engagement must begin well before a disaster occurs. The lack of such mechanisms leads to duplication of efforts, gaps in service delivery, confusion over ownership of issues, and in severe cases, competition for scarce resources.

There are in fact many existing mechanisms for government agencies and responders at the local, state, and federal levels to interact with industry in responding to emergencies impacting supply chains. These include, for instance, the Department of Homeland Security’s Critical Infrastructure Threat Information Sharing Framework and Homeland Security Information Network, the Information Sharing and Analysis Centers, and the Sectoral and Regional Consortium Coordinating Councils. Additional formal and informal mechanisms for coordination and information sharing were utilized during the 2017 hurricane season, such as FEMA’s National Business Emergency Operations Center (which hosts voice/web

conferences for rapid distribution of high-level information to a broad audience), and many sector- and industry-specific phone conferences, task forces, and online engagement platforms. While each of these mechanisms can provide valuable opportunities for coordination, there needs to be ongoing consideration about how to advance this collective “ecosystem” for engagement to minimize the time burdens placed on individual participants.

Many of the individuals engaged in emergency response have had little or no direct experience working with private sector entities or any training specifically for evaluating the impacts of a disaster (or of the response actions taken) on local supply chains and economic dynamics. University programs in emergency management and homeland security have few classes that provide the insights necessary to understand how disasters and emergency management strategies can impact supply chains and the economy as a whole.

To rectify this situation and help critical stakeholders evaluate the decisions they are making in a broader context, education and training should be provided to emergency managers and those supporting operations in a disaster environment (e.g., emergency operations center personnel, incident management teams, federal coordinating officers, and personnel staffing emergency support functions from other government agencies). This material could be provided through platforms such as new courses in college emergency management programs; orientation training provided to new emergency managers, critical emergency operations center staff and stakeholders, and newly elected government officials; and FEMA’s in-person and online training classes.

These training programs could enable participants to analyze factors such as the main economic drivers within their jurisdiction and the ways their actions can affect broader economic dynamics; data that can inform decisions about priorities for restoration assistance to different private sector and nonprofit supply chains; the ways that different supply chain disruptions can impact economic conditions, locally and at higher levels; and the cost of disaster response or mitigation actions versus the costs of not taking those actions.

CONCLUSION

As FEMA’s internal capacity and expertise on supply chain dynamics grows, the agency can play an increasingly valuable role assisting states, local communities, the private sector, and other stakeholders with technical assistance and guidance across each of the areas discussed in this report. While FEMA itself cannot be responsible for carrying out all of these activities, it can provide leadership for convening, coordinating, and empowering key partners.

This facilitating role should be proactive, going beyond grant programs to also provide jurisdictions with concrete guidance for increasing understanding and capacity to implement new programs. Many state emergency management offices have significant capabilities but lack sufficient information access and sharing. They likewise may have insufficient cooperation with other states, or sometimes even with counties and communities within the state. With FEMA’s unique reservoir of experience and cross-jurisdictional scope, the agency could actively advise and guide state and local supply chain preparedness efforts across the country.

As weather disasters are getting costlier, becoming more frequent, and impacting more people, no one government agency can do all that is needed to help communities prepare, respond, and recover. A “whole community” effort is required, involving federal, state, local government agencies, the private sector, and nongovernmental organizations and civic groups, as well as individual households. FEMA’s 2018 strategic plan highlights the goal of ensuring that communities have robust, adaptable supply chains that can withstand the stresses of extreme weather events. This goal is best attained by facilitating community-wide efforts to build systems and relationships that advance preparedness. The more advances that are made on these fronts, the less time, energy, and resources will be needed for emergency response and recovery.

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