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From page 13... ... 13 2.1 Overview This chapter reviews the literature that covers both the fundamental concepts associated with, and the methods of assessing, economic impacts of supply chain disruptions. A general framework reflecting a hierarchy of possible approaches that are progressively more complex is used to organize the literature review. Read the entire page →
From page 14... ... 14 Methodologies to estimate the economic Impacts of Disruptions to the Goods Movement System considered the immediate, or first order, economic impact of the disruption. Inter-industry linkages or residual economic and societal dislocations may or may not be considered in these models, depending on the economic impact tool used. Read the entire page →
From page 15... ... Methodologies to Measure Direct and Indirect economic Impacts of Disruptions to the Goods Movement System 15 models such as those included in the TransCAD GIS-based modeling software and VISUM also fall in this category of model. Industry Supply Chain Models Business Supply Chain Optimization Models: These models aim at optimizing business operations including the flow of goods (raw materials, intermediate and finished products) Read the entire page →
From page 16... ... 16 Methodologies to estimate the economic Impacts of Disruptions to the Goods Movement System these direct changes to an economy -- indirect impacts and induced impacts. Direct changes to an economy usually are represented by employment, sales, or purchases (spending) Read the entire page →
From page 17... ... Methodologies to Measure Direct and Indirect Economic Impacts of Disruptions to the Goods Movement System 17 The paper proposes an operational measure of direct economic resilience (DER) , defined as the extent to which the estimated direct output reduction deviates from the likely maximum potential reduction given an external shock. Read the entire page →
From page 18... ... 18 Methodologies to estimate the economic Impacts of Disruptions to the Goods Movement System McKinnon concludes that much of the risk management research focuses on vulnerabilities of individual entities, such as companies or supply chains and the impact of localized disasters such as fire, bad weather, etc., but overlooks the wider effects of systemic collapse/catastrophic failure of critical infrastructure systems. Standard risk mitigation measures such as increasing safety stock, diversifying supply base, and building redundancy into logistical systems are unlikely to afford much protection in such systemic failures while also increasing costs. Read the entire page →
From page 19... ... Methodologies to Measure Direct and Indirect economic Impacts of Disruptions to the Goods Movement System 19 The study uses this structure to analyze the role of different stakeholders in improving supply chain security. The paper concludes that as a first step the public sector needs to take the lead in bolstering fault tolerance and resilience in the system by creating an appropriate policy environment. Read the entire page →
From page 20... ... 20 Methodologies to estimate the economic Impacts of Disruptions to the Goods Movement System 2.2.1 Key Conclusions from Research on Disruption and Impact Assessment • The spatial or geographic scale of disruption will likely have a direct bearing on the magnitude of the economic impact. Thus, for example, the closing of a major port or key links in a land transportation network could have negative impacts throughout the supply chain, assuming little resiliency in moving goods on alternate paths. Read the entire page →
From page 21... ... Methodologies to Measure Direct and Indirect economic Impacts of Disruptions to the Goods Movement System 21 efficient and not enough drivers and/or highway capacity may exist to handle the increased shipments. In other cases, the methodologies might rely on tools such as scientific surveys (see, Washington State DOT 2008b) Read the entire page →
From page 22... ... 22 Methodologies to estimate the economic Impacts of Disruptions to the Goods Movement System Freight Performance Measures (FPM) Data The FHWA Office of Freight Management and Operations, through a research partnership with the American Transportation Research Institute (ATRI 2010) Read the entire page →
From page 23... ... Methodologies to Measure Direct and Indirect economic Impacts of Disruptions to the Goods Movement System 23 iThink/STELLA (isee systems Software) This tool provides a graphically oriented front end for the development of system dynamics models. Read the entire page →
From page 24... ... 24 Methodologies to estimate the economic Impacts of Disruptions to the Goods Movement System allows for determination of choke points and vulnerabilities within the nation's systems. The outputs of the consequence models are captured in a consequence database from which "decision metrics" tuned to particular decisionmaker profiles are computed (Bush et al. Read the entire page →
From page 25... ... Methodologies to Measure Direct and Indirect economic Impacts of Disruptions to the Goods Movement System 25 increases in first order output to derive full regional or state economic impacts. Supply chain cost savings are applied to shippers and consignees based on market conditions, and output is assumed to increase based on underlying demand and constant returns to scale assumptions. Read the entire page →
From page 26... ... 26 Methodologies to estimate the economic Impacts of Disruptions to the Goods Movement System 2.3.4 Dynamic Economic Simulation Modeling Tools Long-term Inter-industry Forecasting Tool (LIFT) LIFT is a full macroeconomic model of over 800 variables. Read the entire page →
From page 27... ... Methodologies to Measure Direct and Indirect economic Impacts of Disruptions to the Goods Movement System 27 • Average travel speed of trucks and truck demand for I-40, • Spot speed and roadway utilization that identifies specific points where trucks are operating, and • Freight flow information that identifies trends in truck movement. The research presents, by means of maps and graphics, several variables such as truck flows, system speeds, spot speed analysis to assess alternative routing during the closure of the I-40 segment, and freight flow diagrams that contrast truck flows before and after the incident. Read the entire page →
From page 28... ... 28 Methodologies to estimate the economic Impacts of Disruptions to the Goods Movement System authority's perspective) are critical. Read the entire page →
From page 29... ... Methodologies to Measure Direct and Indirect economic Impacts of Disruptions to the Goods Movement System 29 analysis uses the REMI Model with an I-O model at its core. Different data and refinements are needed for various types of closures -- shutdown of imports, exports, international travel, and immigration. Read the entire page →
From page 30... ... 30 Methodologies to estimate the economic Impacts of Disruptions to the Goods Movement System 2.5 Construction of Freight Cost Matrices For the purposes of simulating both modal and market competition, a consistent treatment of transportation costs is required. This means that the costs computed for each mode, and for each source-market pair, should include the same generically defined set of cost elements. Read the entire page →
From page 31... ... Methodologies to Measure Direct and Indirect economic Impacts of Disruptions to the Goods Movement System 31 • Mode -- Cargo can sometimes shift to alternative modes when disruptions occur. The extent and nature of this shift will depend on many factors, such as whether the alternative mode serves the same geographic markets, the degree of redundancy in alternative mode, the flexibility in a shipper's business practices, the economics of goods movement for different modes (e.g., low value-added bulk goods moving by barge will not likely shift to truck, but rather to rail as the next best alternative) Read the entire page →
From page 32... ... 32 Methodologies to estimate the economic Impacts of Disruptions to the Goods Movement System effects on some parts of the country such as the Pacific Northwest, where high value-added electronics and computer parts manufacturing occurs. • Geographic area involved -- The spatial level can affect the degree of impact, as well as the types of models used in the assessment. Read the entire page →

From page 13...

... 13 2.1 Overview This chapter reviews the literature that covers both the fundamental concepts associated with, and the methods of assessing, economic impacts of supply chain disruptions. A general framework reflecting a hierarchy of possible approaches that are progressively more complex is used to organize the literature review.