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Optimal Resource Allocation Model to Prevent, Prepare, and Respond to Multiple Disruptions, with Application to the Deepwater Horizon Oil Spill and Hurricane Katrina Industrial and Manufacturing Systems Industrial and Manufacturing Systems Engineering Publications Engineering 1-28-2021 Optimal Resource Allocation Model to Prevent, Prepare, and Respond to Multiple Disruptions, with Application to the Deepwater Horizon Oil Spill and Hurricane Katrina Cameron A. MacKenzie Iowa State University, [email protected] Amro Al Kazimi Iowa State University Follow this and additional works at: https://lib.dr.iastate.edu/imse_pubs Part of the Operational Research Commons, Risk Analysis Commons, and the Systems Engineering Commons The complete bibliographic information for this item can be found at https://lib.dr.iastate.edu/ imse_pubs/261. For information on how to cite this item, please visit http://lib.dr.iastate.edu/ howtocite.html. This Book Chapter is brought to you for free and open access by the Industrial and Manufacturing Systems Engineering at Iowa State University Digital Repository. It has been accepted for inclusion in Industrial and Manufacturing Systems Engineering Publications by an authorized administrator of Iowa State University Digital Repository. For more information, please contact [email protected]. Optimal Resource Allocation Model to Prevent, Prepare, and Respond to Multiple Disruptions, with Application to the Deepwater Horizon Oil Spill and Hurricane Katrina Abstract Determining how to allocate resources in order to prevent and prepare for disruptions is a challenging task for homeland security officials. Disruptions ear uncertain events with uncertain consequences. Resources that could be used to prepare for unlikely disruptions may be better used for other priorities. This chapter presents an optimization model to help homeland security officials determine howo t allocate resources to prevent and prepare for multiple disruptions and how to allocate resources to respond to and recover from a disruption. In the resource allocation model, prevention reduces the probability of a disruption, and preparation and response both reduce the consequences of a disruption. The model is applied to the US Gulf Coast region and considers a Deepwater Horizon‐type oil spill and a hurricane similar to Hurricane Katrina. Keywords resource allocation, oil spill, hurricane mitigation, emergency response Disciplines Operational Research | Risk Analysis | Systems Engineering Comments This is a manuscript of a chapter published as MacKenzie, Cameron A., and Amro Al Kazimi. "Optimal Resource Allocation Model to Prevent, Prepare, and Respond to Multiple Disruptions, with Application to the Deepwater Horizon Oil Spill and Hurricane Katrina." In S. Chatterjee, R.T. Brigantic, and A.M. Waterworth, eds., Applied Risk Analysis for Guiding Homeland Security Policy. New York: John Wiley & Sons (2021): 381-403. DOI: 10.1002/9781119287490.ch15. Posted with permission. This book chapter is available at Iowa State University Digital Repository: https://lib.dr.iastate.edu/imse_pubs/261 Optimal Resource Allocation Model to Prevent, Prepare, and Respond to Multiple Disruptions, with Application to the Deepwater Horizon Oil Spill and Hurricane Katrina Cameron A. MacKenzie and Amro Al-Kazimi Industrial and Manufacturing Systems Engineering Department, Iowa State University Abstract: Determining how to allocate resources in order to prevent and prepare for disruptions is a challenging task for homeland security officials. Disruptions are uncertain events with uncertain consequences. Resources that could be used to prepare for unlikely disruptions may be better used for other priorities. This chapter presents an optimization model to help homeland security officials determine how to allocate resources to prevent and prepare for multiple disruptions and how to allocate resources to respond to and recover from a disruption. In the resource allocation model, prevention reduces the probability of a disruption, and preparation and response both reduce the consequences of a disruption. The model is applied to the U.S. Gulf Coast region and considers a Deepwater Horizon-type oil spill and a hurricane similar to Hurricane Katrina. Keywords: resource allocation, oil spill, hurricane, mitigation, emergency response 1.1 Introduction Disruptions, including man-induced accidents, terrorist attacks, and natural disasters, are becoming more costly and occurring more frequently. Globally, the cost of natural disasters has risen from about $50 billion per year in the 1980s to an annual average of $200 billion in the 2010s (Associated Press, 2014). From 2011 to 2013, the U.S. federal government spent approximately $136 billion in disaster relief (Weiss and Weidman, 2013). The Gulf of Mexico has been especially vulnerable to significant disruptions, such Hurricanes Katrina and Rita in 2005 and the Deepwater Horizon oil spill in 2010, which resulted in several fatalities, physical destruction, environmental damage, and business losses ranging from $40 billion to more than $100 billion. Al Kazimi and Mackenzie (2016) review the literature on the economic consequences of disruptions. The largest disruptions—such as an earthquake with a magnitude of 8 or more, Hurricane Katrina, and the September 11 terrorist attacks—led to economic losses that exceeded $100 billion. The Great Hanshin Earthquake in Japan in 1995 may have induced $144 billion in losses (Okuyama, 2009), and the 2011 Japanese earthquake and tsunami resulted in $84 billion in production losses in March and April (MacKenzie et al., 2012c). The United States suffered about $3 billion in lost wages due to Hurricane Sandy in 2012 (Park et al., 2014c), and the 2011 Joplin Tornado in Missouri was estimated to cost $6 billion (Richardson et al., 2014). Some potential but yet unrealized terrorist attacks, such as a dirty bomb or a shoulder-borne missile fired against an airplane, could lead to widespread panic, leading to losses in the tens or even hundreds of billions of dollars (Gordon et al., 2007, Park et al., 2014b). Disruptions that disable key infrastructure systems such as waterway ports (Rose and Wei, 2013, MacKenzie et al., 2012a) or the electric grid (Anderson et al., 2007) can induce economic losses of approximately $10 billion. The occurrence of these disruptions raises questions about how much should the United States prepare to mitigate these disruptions. The U.S. federal government spent almost 16 times more on disaster relief than disaster preparedness from 1985 to 2004 (Healy and Malhotra, 2009), but determining how best to spend money on disaster preparedness is challenging. Disruptions are uncertain, and knowing the time and geographical location of these disruptive events is impossible. There are many competing priorities for resources, and money spent preparing for disruptions cannot be spent on other important items, whether the money is from a federal, state, or local government’s budget or from the private sector. 1 Studies on resources used to prepare for disruptions generally conclude that the benefits of preparing for natural disasters exceed the costs (Rose et al., 2007, Garrett and Sobel, 2003, Healy and Malhotra, 2009). For example, levee improvements in New Orleans would have cost about $3-6 billion and saved New Orleans from the $120 billion in losses due to Hurricane Katrina (Godschalk et al., 2009). This chapter extends backward-looking benefit-cost analysis undertaken by these studies into a forward-looking model to help a decision maker determine how much to spend in preparing for a disruption while accounting for uncertainty in the disruption and competing priorities for other resources. Numerous operations research models recommend how resources should be allocated to prepare and respond to disruptive events (McLay, 2015, Altay and Green III, 2006, Banerjee and Gillespie, 1994). Disaster management models recommend the best way to allocate discrete resources (Chelst and Barlach, 1981, McLay and Mayorga, 2013), determine which vulnerable locations to protect (Church et al., 2004, Morton, 2011, Smith et al., 2013, Willis, 2007, Alderson et al., 2013), and schedule and organize emergency logistics (Campbell et al., 2008, Caunhye et al., 2012). Other models focus on protecting against specific disruptions such as earthquakes (Dodo et al., 2007, Dodo et al., 2005, Ermoliev et al., 2000, Gearhart et al., 2014) or hurricanes (Legg et al., 2013). Game theoretic models recommend allocations to protect against strategic actors such as terrorists (Bakir, 2011, Bier, 2007, Hausken, 2008, Major, 2002). Some game theoretic model trade off between preparing for terrorist attacks and preparing for natural disasters (Zhuang and Bier, 2007, Shan and Zhuang, 2013) and studying organizational cooperation for disaster relief (Coles and Zhuang, 2011). This chapter makes several unique contributions to the literature on operations research models for homeland security. First, it develops a general model of allocating resources that can be applied to any type of disruption. Second, the model accounts for uncertainty in the disruption and incorporates alternatives for what else could be done with resources if they are not used for disruptions. Third, the model is applied to two disruptions: an oil spill in the Gulf of Mexico and a hurricane in one of the five U.S. Gulf States. Unfortunately, the Gulf States experienced both of these disruptive events in the early 2000s. The likelihood of the hurricane is large enough that a decision maker should allocate a significant portion of the budget to preparing for a hurricane like Katrina. However, the chance of a large
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