CHAPTER 2

Supply Chain Context

Approach and Methodology

State and local government agencies play a critical role in facilitating the flow of goods through transportation and infrastructure networks through the development and enforcement of policy and operational decisions. Commercial companies and consumers rely on these agencies to monitor and support various components of the supply chain. State and local agencies must remain adaptive to rapid changes in supply chain performance.

This report includes information for context on broad classification of the components of the supply chain, specifically as it pertains to disruptions from the COVID-19 pandemic. This context informs stakeholders of how potential disruptions will influence supply chain operations and what initiatives and practices are available to mitigate or respond to the disruptions. Case studies are included to provide tangible reference to how historic events have impacted supply chains, the actions taken by stakeholders, and the lessons learned.

This report has an associated Supply Chain Toolkit that provides summary content regarding the supply chain system, challenges, associated case studies, and the synthesis of effective practices identified in this report (see the Appendix for a brief introduction and summary). The toolkit may be found on the National Academies Press website (nap.nationalacademies.org) by searching for NCHRP Research Report 1154: Supply Chain Challenges and Solutions amid COVID-19. The toolkit identifies processes for stakeholders to evaluate and inform their planning initiatives. The toolkit includes resources that provide stakeholders with an understanding of how they can influence supply chain operations as categorized by commodity flows, capacity, resilience, and other factors. This approach encourages stakeholders to ask the following questions:

• What supply chain assets do I control, influence, depend on, and support? At what scale?
• What are the relevant nodes (e.g., locations of origin or destination) associated with my assets?
• Which commodities are transported on the assets managed by my agency? Which commodities am I dependent on?
• What is my role in pulling levers that influence supply chain flow, capacity, and resilience?
• What can I do to prepare and respond to supply chain disruptions?

This chapter introduces terminology and frameworks referenced throughout the report, including elements of the supply chain, the supporting infrastructure, and common commodities moved along it. Terminology and concepts in this report refer to industry standard practices, research, and observations in transportation and supply chain resilience. An emphasis is placed on the operations and experiences documented during the COVID-19 pandemic.

Chapter 2 is divided into three sections based on a literature review of modern supply chain elements:

1. Elements of the supply chain: A primer on the components of the supply chain is presented.
2. Infrastructure supporting the supply chain: This section describes the infrastructure systems that support the flow of goods.
3. Commonly moved commodities and goods: Brief descriptions of common commodities moved within the supply chain are offered.

This content in this chapter acknowledges the inherent complexities of supply chains arising from the system’s interdependencies. This chapter is provided for context; many other resources are available for more detailed information regarding supply chain operations.

Elements of the Supply Chain

A supply chain can be defined as “a socio-technical network that identifies, targets, and fulfills demand. It is the process of deciding what, when, and how much should move to where, and how it will move” [Federal Emergency Management Agency (FEMA), 2019]. Supply chains are complex “systems of systems” and require stakeholders to have a broad understanding of how policies and actions will influence operational performance. For example, increasing production of some commodities will not improve throughput unless there is capacity to move those commodities and methods to deliver them to end users.

A 2017 study of supply chain resilience following hurricanes Harvey, Irma, and Maria found that building a system-level understanding of supply chain dynamics is critical to prioritizing resources and actions in response to a hazardous event (Committee on Building Adaptable and Resilient Supply Chains After Hurricanes Harvey, Irma, and Maria et al., 2020). This section provides a baseline for building this level of understanding for an audience of transportation owners, operators, and infrastructure users, recognizing the critical role that transportation systems play in facilitating the flow of goods in supply chains.

Supply chains can vary significantly depending on what commodity is being moved. The five most common elements of supply chains are listed here to provide a common framework for this report and the case studies.

• Suppliers represent the entities that supply a raw material or product, which is often manufactured or processed before distribution to retailers. Examples of raw materials include fuel, minerals, and food.
• Manufacturers or producers represent those entities that take a raw material or product and turn it into a product to be sold. This group includes producers and processors of food and manufacturers of electronics, vehicles, and other goods.
• Distributors and wholesalers serve as intermediaries, often working with multiple manufacturers or producers on the “upstream” side of the chain and many retailers on the “downstream” side.
• Retailers and other distribution channels sell or give products to end users. Examples include grocery stores, hospitals and health clinics, and nongovernmental organizations such as food banks.
• End users purchase or obtain the products from retailers and other distribution channels.

Figure 2-1 provides a schematic of the supply chain with the five listed elements associated with the common framework.

In addition to physical commodities, information flows through the supply chain: upstream from the end user, signaling demand, and downstream from the supplier, signaling product

availability, lead times, and other factors relevant to each stage of the supply chain. Typically, cash flows upstream from the end user to the supplier. People are key actors in each stage of the supply chain, from obtaining the raw materials to handling and processing them through means of production and manufacturing, transportation, warehousing, distribution, and retail. Supply chains cannot operate without individuals providing labor at each stage.

The following section describes how infrastructure, both physical (e.g., trucks and warehouses) and nonphysical (e.g., regulations for transporting hazardous materials), supports the operation of supply chains.

Infrastructure Supporting the Supply Chain

A supply chain relies on its supporting systems of infrastructure to enable the flow of commodities and goods. Supply chain infrastructure consists of transportation infrastructure (road, rail, coastal maritime, inland waterway, aviation, pipeline) and supporting infrastructure, including utility networks that enable operation (such as power, communication, and water), equipment (such as truck chassis and cranes), facilities (such as distribution warehouses), and people to construct, manage, and operate the infrastructure. Supply chains are also subject to external factors such as governing policies, public agency regulations, market conditions, and financial influence.

This section will describe the general operational structures and ownership of these systems. This categorization includes public and private infrastructure systems and will reference both interdependencies and constraints, such as how some commodities may be restricted to certain infrastructure systems. (For example, the movement of hazardous materials may carry restrictions on transportation mode, route, and sometimes schedule.) Within this context, this section will provide a summary of characteristics associated with each component and key performance indicators (KPIs) used to monitor system operations.

Transportation Infrastructure

Goods and commodities in the United States are moved across multiple modes of transportation, including road, rail, maritime, inland waterways, and air, and, for such commodities as natural gas and fuel, pipeline systems. At the national level, the primary mode is by truck along public road systems, representing nearly 65 percent of nearly 20 billion tons of commodities moved each year. Tonnage moved by mode, as reported by the Bureau of Transportation Statistics [Bureau of Transportation Statistics (BTS), 2023a] with 2022 data, is shown in Figure 2-2.

The most prominent mode of transportation will vary by geography and by commodity moved. For example, energy systems rely on pipelines, high-value and time-sensitive goods rely

on air, and water and rail systems are efficient at moving bulk commodities that may otherwise not travel by other modes.

Commodity movement is also measured by value, which varies from tonnage. For example, the weight of commodities moved by air is reported at 8 million tons per year (less than 1 percent of total tonnage) (BTS, 2023a); however, air cargo represents 4 percent of goods moved. By these measures, air transportation represents 80 times the value per good moved compared to trucking. Additionally, while rail represents 8 percent of the tonnage moved, it makes up 3 percent of the value moved, which is consistent with the use of rail services for high-volume and high-tonnage goods.

Identifying the tonnage and value of goods moved provides context to the importance of critical transportation infrastructure. The following section presents a summary of road, rail, maritime, inland waterways, aviation, and pipeline transportation modes.

Road Systems

Road systems include public and private surface transportation infrastructure, from interstate highways to the local street systems that support last-mile deliveries. Included is all ancillary road infrastructure, such as sidewalks and bike lanes. Traditional evaluations of road systems typically measure a network’s level of service using volume-to-capacity ratios and speed. However, as travelers acknowledge the influence of recurrent congestion and external factors, metrics like the Truck Travel Time Reliability (TTTR) index are monitored to reflect performance deviations from normal traffic conditions, rather than ideal free-flow conditions (Pennetti et al., 2020; Pennetti et al., 2021). Road networks are primarily owned and maintained by local government entities (77.4 percent) and are the most widely used mode of freight transportation, especially for door-to-door and last-mile deliveries [Federal Highway Administration (FHWA), 2022].

During the COVID-19 pandemic, labor availability emerged as a critical constraint within the trucking supply chain. Lockdowns and worker illness depleted the pool of available truck drivers, hindering cargo movement and causing delays. This shortage was further exacerbated by a concurrent surge in e-commerce deliveries, straining trucking capacity and leading to backlogs. Additionally, increased border security measures and travel restrictions implemented to curb the spread of the virus resulted in delays in cross-border freight movement.

Rail Systems

Rail systems are used to move both freight and passengers. Rail is efficient at moving goods for long distances; at moving large goods, such as heavy industrial equipment; and at moving large volumes of bulk commodities, such as grain, coal, or lumber. Rail is most often dependent on intermodal operations (e.g., coastal port to rail, then rail to inland port, then inland port to truck). Rail lines are primarily owned and operated by private companies.

During the COVID-19 pandemic, the rail sector, like the trucking industry, faced challenges of significant labor shortages. A diminished workforce translated into disruptions in shipment schedules and overall reliability. Pandemic-induced disruptions in other sectors, particularly maritime shipping, also induced fluctuations in rail freight demand. This volatility made it challenging to optimize rail operations and efficiently allocate resources. Furthermore, congestion at overwhelmed maritime ports created bottlenecks, with build-ups of cargo awaiting onward rail transport.

Maritime

Maritime transport is vital for international trade, enabling the transfer of goods between oceangoing vessels and other transportation modes. Maritime seaports facilitate global commerce and connect businesses worldwide. Ports handle a large proportion of international freight, making them essential for a robust national economy. While only accounting for 20.1 percent of the total U.S. freight value, the concentration of logistics activities at these points creates a disproportionate impact, influencing regional economies and global value chains. There are thousands of maritime transportation facilities in the United States, with over 200 ports that handle at least 250,000 short tons each year. The top 25 ports handle nearly 70 percent of the total maritime transport.

Port operations were significantly hampered during the COVID-19 pandemic by labor shortages stemming from worker illness and lockdown restrictions. Dockworkers and other crucial port personnel were unavailable, causing slowdowns in cargo loading and unloading. Global shipping disruptions further compounded these challenges. Reduced container availability and pandemic-induced alterations to shipping routes resulted in delays and significant increases in freight costs. Moreover, the COVID-era e-commerce boom led to a surge in shipments of containerized cargo, overwhelming port capacity and causing substantial congestion.

Inland Waterways

Inland waterway systems include navigable rivers, canals, and other waterways that facilitate the transportation of bulk goods, such as coal, agricultural products, and industrial materials. These systems are crucial for regions dependent on bulk transport, leveraging natural and manufactured channels to move large volumes of cargo efficiently and cost-effectively. Inland waterways are primarily managed and maintained by federal and state agencies, providing a reliable and sustainable mode of transportation.

The demand for bulk goods typically transported on inland waterways declined during the COVID-19 pandemic due to lockdowns and business closures. The effect of this decrease in demand was further amplified by labor shortages on barges and supporting infrastructure, leading to operational slowdowns. Reduced labor and handling capacity hampered response efforts to disruptions caused by extreme weather events.

Aviation

Air transportation, the fastest and most direct mode of transport, is used primarily for time-sensitive and high-value commodities. By connecting distant points quickly, air transportation works well for the manufacturing sectors and healthcare services. Some regions of the United States rely on air transportation as the primary mode for moving people and goods (e.g., Alaskan villages and certain island communities in Hawaii). There are over 20,000 airports in the United States, 75 percent of which operate for private use (BTS, 2021a).

The near-complete grounding of passenger flights during the COVID-19 pandemic resulted in a substantial reduction in belly cargo capacity, a critical source of air freight movement. Airlines adapted by increasing dedicated cargo flights to address the demand for essential goods. However, this shift did not fully compensate for the loss of belly cargo capacity, and overall capacity for air freight remained limited compared to pre-pandemic levels. Border restrictions and closures added another layer of complexity in their impact on the movement of air cargo crews, causing delays and logistical challenges.

Pipeline

Pipelines form a vital component of the U.S. supply chain, transporting vast quantities of natural gas, crude petroleum, and refined petroleum products. These pipelines operate within networks, each network playing a crucial role in moving energy resources:

• Natural gas pipelines: These pipelines function as the link between production fields and end users, delivering natural gas to households and businesses across the country.
• Crude petroleum pipelines: Unlike natural gas pipelines, crude oil pipelines focus on moving unrefined crude oil from extraction sites (oil fields) to processing facilities (refineries). These pipelines often connect oil fields directly to marine terminals, facilitating export or further domestic transport.
• Petroleum products pipelines: Once crude oil is refined, a separate pipeline network is used to carry refined products, such as gasoline, diesel, and heating oil, from refineries to distribution centers throughout the country. These distribution centers then act as hubs for further transport to gas stations and other endpoints.

This dedicated network of pipelines ensures efficient and cost-effective transportation of energy resources across vast distances, underpinning the smooth operation of the U.S. supply chain.

While generally less affected by the COVID-19 pandemic compared to other sectors due to lower reliance on labor, pipeline operations were not entirely immune. Some operators may have deferred noncritical maintenance activities due to lockdown restrictions or prioritization of essential tasks. While generally one of the most efficient ways of transporting hazardous materials, pipelines are susceptible to leaks and disruptions, including the Colonial Pipeline ransomware cyberattack, which occurred during the pandemic in 2021.

Supporting Infrastructure and Labor

The infrastructure that supports supply chains consists of physical elements (utility systems, equipment, facilities, and communication networks), human elements (the labor force), and external elements (regulatory frameworks, market dynamics, and financial resources), all essential for maintaining efficient and reliable transportation and logistics operations.

Utility Systems

Utility systems provide the foundation for the supporting infrastructure. Reliable access to electricity, water, and gas ensures smooth operation of the supply chain. Operation of these systems requires continual oversight, upgrades, repairs, and maintenance from a skilled workforce. Weather events, cyberattacks, and physical damage can disrupt them.

Equipment and Facilities

Equipment and facilities encompass all the physical assets, including vehicles, machinery, warehouses, and ports, used in transportation and logistics for handling and moving goods efficiently. Proper preventative maintenance and a readily available supply of spare parts for repairs are crucial for mitigating disruptions caused by damaged or inoperative equipment.

Communication Systems

Communication systems ensure the seamless exchange of information across the supply chain, utilizing technologies like the Global Positioning System (GPS), radio, and internet to coordinate and optimize transportation and logistics activities. System outages, cyberattacks, or communication breakdowns can hinder coordination and decision-making, leading to inefficiencies.

Labor

Labor includes the workforce involved in transportation and logistics operations, from drivers and dockworkers to engineers and planners, whose roles are essential for maintaining the flow of goods. Labor shortages or illness outbreaks can significantly impact the capacity of the transportation supply chain and supporting infrastructures.

External Environment

The external environment refers to naturally occurring factors, like weather or earthquakes, as well as geopolitical events and changing economic conditions. Events like natural disasters,

pandemics, trade wars, or economic downturns can disrupt production, transportation and logistics, and consumer demand, requiring adaptive strategies to maintain efficiency.

Regulations

Regulations encompass the legal frameworks governing transportation and logistics, including safety standards, environmental laws, and trade policies, ensuring compliance and orderly operations. Changes in regulations can necessitate adjustments in transportation practices. Failure to comply with regulations can lead to fines and operational disruptions.

Market

The market influences the dynamics of supply and demand, pricing, and competition within the transportation and logistics sectors, driving efficiency and innovation. However, market disruptions caused by sudden shifts in demand, volatile fuel prices, stiff competition, or other factors can affect profitability and service offerings. The impacts that events like the COVID-19 pandemic can have on supply chains are examples of how natural disasters and other emergencies can disrupt markets.

Finance

Finance involves the funding and financial management necessary for sustaining supply and logistics operations, including investment in infrastructure, equipment, and technology. Economic downturns or cash flow shortages can limit an organization’s ability to invest in and maintain systems, potentially leading to operational inefficiencies.

Commonly Moved Commodities and Goods

This section categorizes commodities commonly transported in supply chains and highlights specific considerations for each. Utilizing information from sources like the BTS, the section provides high-level summaries of commodity sources, volumes moved, main distribution networks, and relevant context, including their transportation requirements and logistical challenges. The commodities include raw materials, bulk goods, large equipment, fuel and energy, consumer goods, and water.

Raw Materials

Raw materials are the foundational inputs in manufacturing and industrial processes; they include ores, minerals, and agricultural products. These materials are extracted from natural resources and serve as building blocks for producing finished goods. Efficient transportation of raw materials is critical, often involving specialized vehicles like bulk carriers for minerals and agricultural commodities to ensure timely and cost-effective delivery to processing facilities.

The COVID-19 pandemic significantly impacted the raw materials market. In the United States, mining was deemed an essential operation by Department of Homeland Security (DHS), but operations were still impacted by decreased demand, equipment procurement, and worker health. Outside the United States, there were severe disruptions in the supply and demand for various metals. For example, cobalt, a mineral essential to the lithium-ion batteries used in many electronics and electric vehicles, experienced an increase in demand that was challenged by mine closures and labor shortages in regions like the Democratic Republic of Congo (responsible for more than half of global cobalt production).

Bulk Goods

Bulk goods are transported in large quantities without packaging. These include a wide range of commodities such as grains, coal, and chemicals, and are typically moved using modes like rail, maritime, or barge transport via inland waterways, designed to handle high volumes efficiently. Bulk transport maintains the flow of vital commodities in the supply chain, ensuring that essential materials reach their destinations, whether for export, industrial use, or domestic distribution.

Transportation of bulk goods, especially commodities like grain, experienced considerable challenges due to congestion in the supply chain. This congestion directly impeded rail car fulfillment, resulting in record-high unfilled grain rail car orders as reported by the U.S. Department of Agriculture (USDA). The reduced velocity and increased dwell times of rail assets, inherent to congested networks, diminished the effective capacity of the rail system, thereby preventing the timely delivery of ordered rail cars to grain elevators. In the summer of 2022, over 17,000 rail cars went unfilled, compared to less than 1,000 in prior years. The number of unfilled cars peaked again at nearly 19,000 in early 2023 (USDA, 2024). Downstream impacts of unfilled grain cars included shortages of livestock feed, shutdown of ethanol and biodiesel facilities, delays, and increased shipping costs. These impacts were attributed to various factors, including pandemic-related disruptions [U.S. Department of Homeland Security (DHS), 2022].

Large Equipment

Large equipment includes heavy machinery, vehicles, and construction equipment that require specialized transportation modes due to their size and weight. This category encompasses items like cranes, excavators, and industrial machinery critical for construction, manufacturing, and other sectors. Transporting large equipment often involves logistics solutions like flatbed trucks, heavy-duty trailers, and sometimes rail or maritime options to accommodate the equipment’s substantial dimensions and ensure safe, secure delivery.

The transportation of large equipment is highly specialized, involving detailed planning to navigate logistical challenges such as route planning, load securing, and obtaining necessary permits. The COVID-19 pandemic exacerbated these challenges due to several conditions. Factory shutdowns and reduced production capacities led to delays in the availability of new equipment. Port congestion and a reduced workforce slowed down the movement of large equipment, increasing lead times and costs. Disruptions in the supply of critical components like semiconductors affected the manufacturing timelines of large equipment.

Fuel and Energy

Fuel and energy commodities consist of fossil fuels like oil, gas, and coal, along with renewable energy sources such as solar panels and wind turbines. These materials are crucial for power generation, heating, transportation, and industrial applications. Efficient transportation of these energy commodities is essential, involving pipelines for oil and gas, rail for coal, and specialized shipping for renewable energy components, ensuring consistent supply and supporting energy infrastructure.

In 2020, crude petroleum and products pipeline shipments declined by 10 percent due to conditions caused by the pandemic, such as reduced passenger car and airline travel. However, the sector recovered in 2021, reaching 92 percent of pre-pandemic levels. While there was a 14.7 percent decrease in overall transportation energy use in 2020, demand rebounded in 2022 due to a recovery in vehicle travel, though use remained 3.4 percent below 2019 levels (U.S. Energy Information Administration, 2024).

Consumer Goods

Consumer goods are everyday items produced for personal or household use, including electronics, clothing, food, and household products. These goods move through complex supply chains involving manufacturing, distribution centers, and retail outlets. Transportation modes such as trucks, rail, air freight, and maritime shipping are used to ensure timely delivery, meet consumer demands, and maintain inventory levels across markets.

The pandemic triggered a massive shift in consumer behavior, leading to a surge in e-commerce. This trend, coupled with pandemic-related disruptions, led to significant congestion at ports, particularly for container ships. While the demand for consumer goods remained high, the supply chain struggled to keep up, leading to delays and shortages.

Water

Water is transported for various uses, including drinking, irrigation, and industrial applications. The transportation of water often involves pipelines, tanker trucks, and ships, especially for regions facing water scarcity or for industries whose processes require large volumes of water. Ensuring a reliable supply of water through efficient transportation methods is crucial for supporting agriculture, industry, and maintaining public health.

Restrictions on construction activities and labor shortages led to delays in water infrastructure projects and maintenance, affecting the reliability of water supply systems. Shortages of treatment chemicals and essential equipment disrupted water treatment processes and infrastructure repairs. Water utility companies faced operational challenges due to remote working arrangements and, in some areas, increased demand for emergency water supplies.