 Welcome to MIT Supply Chain Frontiers from the MIT Center for Transportation and Logistics. Each episode features center researchers and staff or experts from the field for in-depth conversations about business, education, and beyond. Today, Jared Gensel, director of MIT Humanitarian Supply Chain Lab, describes how bottleneck analysis can help us better understand the root causes for supply chain shortages. He cites ongoing research conducted in the wake of several disruptions and natural disasters that might offer insights on how to approach future disturbances. Take it away, Jared. So some of you may be with our Humanitarian Supply Chain Lab, but if not, it's a part of CTL where we engage public and private sector organizations during crises to try to help supply chains better serve the population. Mostly, our work is working with the private sector to restore supply chain operations, to recover quickly after a disruption and to meet people's needs. So a lot of our work has been really helping government and NGOs better engage and support private sector supply chains. And in doing so, we've been looking a lot at bottlenecks. We've had a lot of disruptions in supply chains in recent years. So I wanted to walk through some of the work we've been doing. What are we learning as a profession in supply chain management about how to think through systemic issues? We've had some very large systemic issues manifesting themselves in very different ways during the pandemic. And we've kind of realized how maybe we don't understand our supply chains as well as we thought. So this is hopefully going to be a little bit of a journey of our exploration of supply chain disruptions from the past, from more acute crises like hurricanes and so forth. And we can reflect in general on what we've been seeing the last year and a half and what we continue to see as supply chains continue to recover from the huge systemic challenge of a pandemic. As a result of this, we've had lots of bottlenecks in the news. Even my relatives who still don't understand what a supply chain is and what I do for a living can understand some of the bottlenecks that have been out there, the ever given in the Suez Canal in March. Everyone I knew and my family and friends said, what's happening with that ship in the Suez Canal? It was a more easy, a very clear bottleneck to understand. And the solution was fairly obvious. We had to free up the ship and then all those other ships that are sitting there waiting would be able to flow through the Suez Canal. So while it was fairly straightforward, it illustrates the concept of one little disruption can cause ripple effects across supply chains. Some bottlenecks are more difficult to identify and solve. So the colonial pipeline shutdown in May was hard to understand what's going on here, because there was obviously long gas lines with the pipeline shut down. And then there was this question, is there a shortage? When will the pipeline be fixed? Where was the bottleneck in the colonial pipeline? Why was there a bottleneck? Why were gas stations out of fuel? Well, first of all, what happened in the colonial pipeline is that there was a ransomware attack and that ransomware attack caused the pipeline to have to shut down operations for a period of time. So it would not be vulnerable while they dealt with the cyber attack. So there was an operational change in the fuel distribution system in that this massive pipeline that brings fuel up from the Gulf Coast all along the East Coast was shut down as a precaution while the cyber attack was happening. So I guess the question is, did that pipeline shut down mean that suddenly the pumps at the retail station dried up automatically? Meaning the fuel tanker drivers can't haul fuel. They didn't have fuel available because the pipeline was shut down. Sounds plausible. And that's what a lot of people thought. That was the thinking, oh, the pipeline shuts down. Therefore, the tanker trucks that replenish the fuel stations can't load up because the pipeline's not flowing. Well, the colonial pipeline has thought about these kind of disruptions. In fact, they've had disruptions that were even worse than the cyber attack in May in the past. And they've dealt with it. How do they deal with it? How do we deal with when we have a constraint in our supply chain? What do we usually have in place to help us deal with it and by time to solve the problem? With stock or inventory? Inventory. So the colonial pipeline has inventory. And all the terminals along that pipeline have inventory. And sometimes it's difficult to get that inventory because it's a proprietary thing. And people will play for futures markets on fuel to know what exactly it is. But there is some reporting at a very aggregate level that the government provides to show you where the inventories are. And it was fairly clear you could identify from the Department of Energy that there was inventory in the system. A week or two, three weeks, depending on what data you looked at. But I mean, there was weeks of supply. How long was the colonial pipeline actually shut down? About a week. They had more than a week of supply at the terminals. So therefore, was there lack of fuel at the terminals for the drivers? No, plenty of fuel at the terminals for the drivers. So why was there a shortage of the retail pump? Maybe panic buying? Absolutely. You saw, I mean, the headlines were everywhere about this cyber attack, right? Everyone knew about this. And then as soon as somebody hears, oh, there's a pipeline shut down, I better go get fuel. And then it becomes a reinforcing feedback loop that causes people to say, oh, there's a line at the gas station. I better get in line. I might not get fuel. And then it just keeps going. And so the panic buying really surged the demand well beyond what is normal. And so therefore, what's the bottleneck in the supply chain? It's the fact that those fuel tanker drivers, while they had fuel at the terminal, there just weren't enough of them to keep up with this surge in demand. And so the bottleneck was we don't have excess capacity of fuel tanker trucks and drivers to deal with a demand panic. And that's what caused the issue. So there was no actual physical disruption in the supply chain. I mean, it shut down, but there was plenty of supply. It was the fact that the demand far outstripped the capacity for last mile distribution. And that's something we see often in a crisis. And I'm going to take you back now to the 2017 hurricane season, where we got involved with FEMA. We, our lab, spent a lot of time at FEMA headquarters helping them understand the private sector and how to support them during hurricanes Harvey, Irma, and Maria. So if you remember back to Harvey, what was the Harvey event? It was a massive rainstorm. And what was the result among many things? A lot of damage. And obviously in Texas, a lot of flooding, but particularly flooding of the Gulf Coast refineries in the Houston area, and they shut down. So that's something that is a cause for alarm, and something that actually the government pays attention to has working groups to work with refineries to understand how they can get up and running again. They know how critical fuel is. There was a concern that fuel would be an issue. Soon after Hurricane Irma came in Florida, and fuel became an issue. And now what we were seeing with Hurricane Irma is trucks to deliver freight. You know, they had a lot of, a lot of shippers planned ahead, had trucks full of goods in Valdosta waiting for their hurricane to pass. And then after the storm passed, they kept sitting there. They weren't driving down. Why? They kept hearing that there wasn't fuel. It's a long way down to the tip of Florida. Would they be able to refuel and come back? So they kept sitting waiting. Most of the freight and the trucks were sitting waiting to have assurance that fuel would be available before they would make that trip down. They didn't want to get stranded. So really it was these tanker trucks replenishing the fuel stations, which was key to getting the all supply chains to flow following Irma. And so where did the bottleneck emerge in the fuel? Why was there a concern for fuel? Why were there fuel outages in Irma? Turns out it's a similar bottleneck. There's a lot of supply in the system. We looked at Irma really carefully. This is, again, aggregate pipeline stocks and bulk terminal stocks. This is following Harvey. You can see that the inventory in the system was pretty robust. There was a lot of fuel available during Irma. And we see, like in colonial, there was a huge demand spike with people evacuating Florida. So they drained all the stations on their way out and evacuating. And then the surge of demand for fuel, there wasn't enough capacity for last mile distribution to keep up. And you saw long lines at these racks, which is where the tanker trucks refill at the terminals, long lines for them to fill up to be able to haul fuel to the retailers. So this bottleneck is a common thing. We started studying this in Irma. We saw it in colonial. There was different things that government tried to do to help facilitate flow, like having escorts for trucks to get through traffic. So they tried to speed up the truck, which is a good thing. You just get the flow of fuel going, but is that the most effective way to help support recovery of fuel supply at retail stations? That's a good question. And then in Maria, we had another fuel issue. Again, diesel sales surged by 10 times in great part there because the power was out and therefore the homes and the businesses required generators. And even the larger facility had larger generators to provide power for that protracted power outage. So fuel is always going to be an issue in a crisis, especially if power is out because generators require fuel as well. Puerto Rico was able to get supply from some international markets. So they were able to bring fuel into the terminals but they had trouble with trucks keeping up with the demand from the power outage. And we held a round table actually with partners, with the CTL partners supply chain exchange to study the 2017 hurricane season. And it's really interesting to see the results of that are things that we could easily say happened and continue to happen as a result of the pandemic. That there's optimized networks and that they'll fail. There'll be bottlenecks that occur during crisis. The importance of drivers and critical employees such as workers across the supply chain, which were obviously the case during the pandemic and then the cascading effects and supply chain failures that are hard to predict and anticipate. So we've continued to live this during the pandemic. After that round table we actually were part of and helped to facilitate a study by the national academies on supply chain resilience. And I'll say that it's available publicly. There's even an online summary that comes up with some recommendations on how supply chains you can be more resilient by assessing them, preparing and then being able to respond in real time. So the core is to build this system level understanding of supply chain dynamics so that we can provide better decision support in crises like the pandemic. So here is a little bit more about how the fuel supply chain works. It divides the overall supply to fuel supply chain into three basic components of upstream, which is the identification and extraction of oil, the midstream of moving oil to the refineries and then downstream includes the refining and distribution of petroleum products. DOE has a lot of focus on the upstream and even the refineries, but there wasn't a lot of understanding of that downstream distribution. And that's where we put our focus specifically on what we then further broke down is there's production of fuel. There's a middle mile distribution from refineries to terminals. And there's a last mile from the terminals to the fuel stations and the point of sale. And these are the parts we were just talking about. That's where the bottlenecks emerge and that's what we started studying. So one of the first things to understand about the fuel supply chain is it's optimized around modes of transportation. It's about capacity. It's about economies of scale. A pipeline like colonial pipeline can move 105 million gallons per day to replace that colonial pipeline if it was out for a longer period and they ran out of inventory. We would have to have 11,500 of these large semi-trailer tankers to replace it. It's just not possible to replace the colonial pipeline with trucks. It may be possible to use some ports with some long range tankers, medium range tankers. So there may be some ways we could move fuel around by water to help replace a pipeline if it was out longer than the inventory that they have in the system. But it would be hard because not all terminals can receive these tankers. So switching between modes especially in this middle mile is gonna be difficult because they're really optimized around economies of scale. The last mile though is where we typically see these bottlenecks first appear as you've been talking about. And this is a system we can study and understand and help facilitate those bottlenecks that always emerge right away. And really the key is these tanker trucks as we've been talking about. They arrive, they check in at an entry gate and they have to have credentials for this. They have to have credentials not only for hazardous materials but also for loading at that specific terminal. So every terminal does its own training. And so drivers are really specifically tied to the terminal where they visit most often because they have gone through the training provided by that terminal operator. Otherwise drivers just can't come in from outside the area and suddenly go through and load at this terminal for various safety reasons. So we're kind of tied to drivers in the region coming and then they go and they fill up at the bays and then they'll drive to fill the fuel stations. Some of them will fill tanks for especially this is an issue once we have generators involved there may be a surge in demand at facilities for the generators. But the basic flow is optimized around trucks doing this process of checking in, filling fuel, traveling to the station, emptying and arriving and doing this two or three times a day. Fuel is heavy and is not very profitable so you need to have several trips per day in order to get the revenue to offset the cost of transporting. So this system is very tightly optimized around having terminals fairly close to fuel stations and having those trucks be able to be utilized more than once with more than one trip per day. And that's where we get into the issue when we have a demand surge. Once demand goes up, the trucks just can't keep up. And then once that happens then the queues start building up but just a little bit of a surge in demand will cause the whole system to start in bottlenecks. This is further exacerbated if the disaster has taken out some of the other parts of this system such as like during Hurricane Ida recently we had a lot of fuel stations in Louisiana that were out for a long period of time again, because of a protracted power outage. The same with the terminals and the filling bays a lot of the terminals had to recover power with generators and it took some time. We did not see many failures of supply. Again, same thing. There was inventory in the system that was at the terminals was generally able to keep up. It was just that the racks weren't actually working. And then we had drivers that were affected by the storm. Again, they're the ones that have the credentials to go locally. They may be helping their families recover. They weren't working. The tanker truck supply was constrained as well during Ida. So you can see that once you have some constraints coupled with the surge because there was a lot of generator demand because of the power outage in Ida, we again saw a lot of long lines at the terminals and fuel stations being out for a protracted period of time because there was not enough distribution capacity to keep up. If we look at nationally how this again what FEMA is trying to say well, what do we need to be doing for the future? Well, first of all, this is how the middle mile is organized. There's pipelines to move inland and then there's moving by ocean by barge or whatever along rivers and so forth. But that's the middle mile and we can't change it very easily. And then that last mile really to have the capacity to keep up with even regular demand they can't go much for longer than 50 miles or maybe a hundred miles to keep up. If they have to drive further if we have this whole swath of the colonial pipeline out for a period of time there's just not enough capacity of trucks to keep up with driving further to fill stations that are close to the pipeline and can't access ports. So that's the issue. We've been talking with FEMA about various ways they can help the private sector by pulling different levers, different waivers. I'll say we have studied this in more detail but we analyzed Florida specifically we've looked at Florida because of Irma we broke down that the system and understanding all of the distribution terminals the stations that are being supported there's actually a pipeline to come from Tampa that supports the Orlando market. So that Tampa port is really important for fuel in Florida because they don't have a colonial pipeline coming down they rely on everything coming in by barges and tankers. We've done detailed analysis of this and created a simulation to understand under normal conditions there's about a 36% capacity extra capacity to deal with the normal ups and downs of Memorial Day weekend, travel, et cetera. So there is extra capacity in the system combining everything together, but only 36%. So if we have a massive spike in demand it cannot keep up under normal conditions especially it goes down if some of these constraints start happening but if we were able to somehow alleviate things like pulling different levers the biggest one is FEMA can extend hours of service if trucks can drive longer make more trips that's the biggest thing to provide extra capacity in distributing so we can go from 36% surge capacity to 85% surge capacity. And if we combine this with other things to help with terminals and so forth we maybe get up to 250% capacity which might keep up with that surge in demand in a protracted crisis where power is out for a period of time. I'll say also fuel bottlenecks are now popular in the UK. It was interesting to read this article recently that again panic buying driving this that the government saying that there's plenty of fuel available it just needs to be trucked, same issues it's the same bottlenecks the government is doing some creative things on their side to help to get more drivers by like putting a backlog of the truck driving tests relaxing visa restrictions to allow drivers to come in from the EU as a following Brexit and even some things of suspending competition rules to allow sharing of information. And this is something that we hope can happen more. We want the government to create safe places for the private sector to without giving away competitive secrets together try to understand how these systems work how bottlenecks emerge and how we can all work together to address the bottlenecks so that we can all help our supply chains flow. And we believe like the principles of the supply chain exchange in general that we learn from each other and help each other be more competitive by helping our supply chains all flow and that that advantage of understanding the system better is greater than any kind of proprietary secret that might come out in sharing this information. So we're hoping that that kind of a collaborative activity can continue to be supported just in general I think there's a lot of learning we can do to help our supply chains overcome bottlenecks during crisis and we would love to continue working with the private sector in solving those problems. Excellent, this is great Jared. Thank you so much. Earlier you were talking about some of the bottlenecks being caused by maybe not enough drivers or some regulatory issues. Could it also be just simply a hardware issue like not enough trucks? Yeah, it's an important point. Yeah, it's often more than just drivers. So you have to have a lot of things come together. So in the fuel case, in order to have more tanker truck last mile distribution capacity, we need a driver who has the credentials who has a trailer and a truck like, there's a lot of things that have to come together to be able to have that transfer that distribution capacity to move to the retailer. So yeah, absolutely, we need to look, the problem is not always obvious at the resource or the asset that's required is not always obvious in understanding the bottleneck. So it sounds like to me, you kind of need to have an insurance policy, whether that's government or private industry or some kind of cooperation, there needs to be some kind of insurance. What kind of insurance do we wanna buy? Because you have to pay for insurance and so who's gonna pay for the insurance of the extra equipment? The pandemic's a little different because it was a global thing, but in a hurricane, we often have it's more regionalized like Ida. And so do we need to have extra tanker trucks for fuel distribution in Louisiana? Not really. We just need to be able to enable the tanker trucks that extra 36% capacity, I don't know what it is in other regions, but there's some extra capacity in other markets to deal with the natural ups and downs of a supply chain. How could they be able to join the market and have incentives to come there? And there was some of that effort in Ida actually. So the private sector took initiative on this. So some of the refineries allowed for rapid training or for, if you were trained at one marathon terminal, you could go to this one, even though you haven't gone to the training at this location, there was some flexibility with the credentialing to enable drivers who are not normally working in that Louisiana market to add capacity. So there was some creativity on that front. And there was also some calls from some of the associations to their drivers, hey, come help out, we could use some support here. So there's the ability of a kind of a mutual aid concept to provide that capacity for regional outages. And by the way, the power sector has done this extensively, they're very mature in this mutual aid process where a power company in Louisiana has agreements ahead of time on how to call in repair crews from all over the US. And so that ability to have mutual aid agreements ahead of time, maybe that should be extended to other parts of the supply chain and not just to the power restoration. But your idea of equipment brings up a good point. I think we didn't talk about the ports in Los Angeles. I'm guessing that you're not caring about fuel now, you're caring about like, how do I get my container from China at this point? So what's the issue with the bottlenecks at Port of Los Angeles, you know, 70 some ships waiting to offload. Why is the, what's the bottleneck there? Well, from what I've been reading in the news, it's related to labor. So, but again, this is part of this is diagnosing exactly where we might have a labor issue. The support that might be needed might be different if it's going to be a crane operator in the longshoremen, or, you know, is it a drage driver or is it, you know, so which labor do you think is the bottleneck here? Well, I don't know, maybe all of the above. Absolutely. So it's, I don't have the answer, honestly, where the labor shortage might be greatest around the whole system of Los Angeles ports right now. To figure out what's a remedy to help address that labor issue, you'd need to know more specifically where it is. And therefore, you know, some kind of sharing of information, you know, among private sector there could help mobilize some kind of government support if that could be helpful, or maybe helping each other out, again, the mutual aid concept. What else? Well, as you mentioned before, is there a demand side issue? Are consumers just wanting to consume more right now and causing more demand and then affecting some kind of bottleneck? Absolutely. In fact, one of the quotes in one of the articles with one of the port operator, Spokespeople said that supply chains have moved from just in time to just in case. So not only have the normal Christmas surge, all this, but human behavior has been such, we've been burned during the pandemic, we're gonna keep a little bit more safety stock than we have in the past because we don't know what's gonna happen. So yeah, there's definitely been a spike in demand and same kind of panic buying, but across all sorts of supply chains and all sorts of commodities. So that very likely, and they've been reporting much higher numbers of flows through the ports this year. So that's definitely part of the picture. Absolutely, more demand than you're gonna get a bottleneck. It's not sized to support this kind of demand on a ongoing basis. But there's one more thing in the articles. There's a shortage of chassis to be able to move the containers from the port to the warehouse. And this is something we actually saw and reported on last spring in the early parts of the pandemic. We saw this issue that at that time it was because chassis were going inland and the operations might be slowed down or constrained. And so they had to park it there because they couldn't offload it. And so chassis were beginning being held in the longer dwell times to be offloaded because the pandemic was locking things down. Now it's just that there's maybe more demand than the number of chassis we have to support this number of containers. Again, these are hypotheses. These are things in the news. I don't think anyone can definitively tell you what is the key bottleneck here and how to undo it. But we see lots of the similar things we saw in fuel with the West Coast ports now. And I'm not sure there's anyone if you gave them the complete authority to control everyone's behavior, I'm not sure they could solve it. I don't think we fully understand these systems well enough to be able to pinpoint a solution. Much less there's no ability to create a centralized control. So, we're gonna kind of rely on each other and sharing information to help each other out in dealing with these. Now, of course, if you feel like you have a better mouse trap and you can do it better than your competitor, you won't wanna share information. I know that can be there, but I think that by having a better system understanding, we can all benefit. And that's what we're trying to do and facilitate not only during, for humanitarian reasons, but for business reasons now on the West Coast ports. Right, thanks, Jared. This is great. So, how do you think we could get there? There's a concept in public health called sentinel points that I love. Sentinel points are these places where you're trying to track a trend and figure out what's going on. And the classic one is you track the number of people presenting with fever in the winter to see if there's gonna be a flu spike or not. And so you continually track information at the same place and see what's changing. Because it's really hard to understand invisible viruses as we know. And so the public health system has set up this surveillance approach to understand it. I think we can do similar things in supply chains. They're too complex to really understand everything that's going on, especially because it involves a lot of human behavior. But by together having different sentinels, people who are out there and looking at their part of the supply chain, sharing information, we can better understand the invisible viral issues that emerge because of these optimized supply chains and anticipate them earlier. Think about how to address and come up with your own solutions in your supply chain earlier. We believe that that kind of real-time, collective intelligence, gathering and sharing can be really important to address bottlenecks that nobody fully understands and can solve for. That's what we're trying to do as academics now is create that kind of space for those conversations to happen among the private sector. And it's really modeled after what we do with the supply chain exchange. It's been, we've had decades of experience of convening roundtables, of people, even competitors, who can learn from each other. You gain more by learning from someone else than you give away by sharing some information that people may know about anyway. So, and it can be a productive space without attribution. So we hope to keep convening these conversations because we all need to understand supply chains better. If there's something we've learned in the last 18 months, that we don't know as much as we thought and we can all benefit from understanding these systems and the dynamics that play out much better. Great. Thank you so much, Jared. It's been really great hearing from you today and best of luck in your work. All right, everyone. Thank you for listening. I hope you've enjoyed this edition of MIT Supply Chain Frontiers. My name is Arthur Grau, Communications Officer for the Center and I invite you to visit us anytime at ctl.mit.edu or search for MIT Supply Chain Frontiers on your favorite listening platform. Until next time.