Logistics and Infrastructure: Challenges and Opportunities

1
Logistics and Infrastructure Challenges and
Opportunities
Harry Caldwell Federal Highway AdministrationOffi
ce of Freight Management and Operations
2
Objectives

• logistics and transportation infrastructure
• infrastructure and economic development
• challenges facing future infrastructure
  development and use
• approaches to problem solving

3
Challenges Placed on Infrastructure
Responding to changing markets, demographic
shifts Focus is short to medium term
Shippers
Control of Cargo routing
Investment Decisions
Transportation Providers
Respond to changing service requirements
Responding to changing markets, demographic
shifts Focus is medium-long term
Infrastructure Providers
4
Logistics Productivity Factors

• Product Supply Chain Concept
• Government Regulation
• Equipment Carrying Capacity
• Mode Optimization
• Global Logistics Technology
• Inventory Reduction

5
Logistics Expenditures and GDPAfter a long
improvement, expenditures have stalled at about
10
Source Cass/ProLogis 10th Annual State of
Logistics Report, 1998
6
Trade Outpacing Economic Growth
FAR-FLUNG SUPPLY CHAINS
Global Economic Growth
Trade InComponents Parts
Global Trade
7
Trucking Costs Have Dropped
CPI
Trend (1990100)
Average TL Cost
8
Order Cycle Time Development
9
Inventories Are Shrinking
Business Inventory Ratio to GDP
10
Freight Trends and Issues ThemesPresentation of
trends and issues is organized around three sets
of themes

• Markets/Logistics (demand)
• From national markets to global markets
• From a manufacturing to a service economy
• From push to pull logistics systems
• Carriers/Transportation Systems (supply)
• From modal fragmentation to cross-modal
  coordination
• From system construction to system optimization
• From DoD stovepipes to Focused Logistics

11
Themes (continued)

• Public Policy
• From economic deregulation to safety regulation
• From modal to multi-modal surface transportation
  policy
• From low visibility to environmental
  accountability

12
Trends Shaping Demand for Transportation Services

• Continuing evolution of the U.S. into a service
  and information economy
• Increasing domestic, NAFTA, and global trade
• Outsourcing for comparative economic advantage in
  production
• Customer-driven shift to customized, mass-market
  products and services
• Manufacture-to-order and time-definite-delivery
• Emergence of e-commerce and e-business

13
From Push to Pull Logistics Systems
14
E-Commerce and Freight MovementShippers expect
to use more parcel/express, LTL, local trucking,
and /courier services
Parcel/express envelopes
Regional or National LTL
Local Trucking or Courier
Third Party (mode unknown)
More
Long-Haul Truckload
No Change
Less
Other
Heavy Air Freight
Railroad (including intermodal)
Steamship
Source Morgan Stanley Dean Witter Equity
Research, April 2000
15
Modal Growth in Tonnage Demand for reliable,
high-speed service is growing
Air 22
Higher
Truck 7
Rail Intermodal 6
Level of Service Continuum
Average All Modes 4
Rail Carload 2
Inland Water gt0
Lower
5 10 15 20 25
Compound Annual Growth, 1990 to 1998
Source Reebie Associates, Transearch (Truck
comprises primary shipments.)
16
Transportation Infrastructure is

• An Asset to contain costs and make products more
  competitive
• Are we using it wisely?

17
Infrastructure Concerns add to delays and
unnecessary costs
18
Top Gateways for International Freight Exports
and imports in tons
19
Travel Rate Congestion IndexThe average
percentage growth in peak-period-travel-time
compared to off-peak-travel-time in 68 large
metro areas was 81
Source Texas Transportation Institute
20
System Mileage within the U.S.Highway and air
increased modestly Class I rail lost mileage
Source USDOT, Bureau of Transportation
Statistics, National Transportation Statistics
1999
21
NHS Intermodal Connectors - Infrastructure
Constraints

• NHS Connectors
• Poor physical condition
• Port access issues
• orphan status
• inadequate coordination of investment strategies
• need for intermodal impact statements

22
More Traffic on the HighwaysDaily Vehicle Miles
of Travel per Lane-Mile, 1987-1997
Source Federal Highway Administration, Status of
the Nation's Highways, Bridges and Transit
Conditions and Performance, 1999
23
California Motor Carriers Perception of
Congestion and ResponseCarriers are investing in
technology to counter increasing congestion

• 82 see congestion as serious or critical
• Costs of slower speed
• Scheduling problems
• Driver morale
• Accidents insurance
• Higher fuel maintenance
• 85 see congestion worsening over next five years

Source Regan Golob, Transportation Journal,
Sep. 99
24
Regional GNP Growth Rates to 2010
Compound Annual Growth, 1998 to 2010
25
Growth by Major Region and Mode(Tons in Millions)
26
Capacity and the Nations Infrastructure
Legislative Strategies
Remaining Need
27
From System Construction to System Optimization

• Highway congestion, especially landside access to
  ports and terminals
• Insufficient rail and intermodal terminal
  capacity
• fragmented operational strategies immature
  national and international ITS and automated
  identification standards
• Shortages of labor and skills
• Limitation of public and private finance for
  system maintenance and new capacity
• Public-public and public-private integration of
  ITS and IT systems

28
From Modal to Multi-Modal Surface Transportation
Policy

• Trends
• Evolving public sector awareness of the need for
  multi-modal policy, planning, and investment
  (ISTEA and TEA-21)
• Increasing state and local control of
  transportation investment
• Increasing use of highway trust funds for system
  preservation
• Growing demand to re-link transportation
  investment and economic development

29
From Modal to Multi-Modal Surface Transportation
Policy (continued)

• Implications for freight
• More complex planning and investment environment
• Mismatch between scale of transport operations
  (increasingly regional and global) and public
  sector jurisdictions (local and state)
• Issues
• Role of multistate freight and trade corridor
  programs
• Identifying and financing freight projects of
  national significance
• Use of highway trust funds for non-highway
  freight projects

30
From Modal to Multi-Modal Surface Transportation
Policy (continued)

• Issues ...
• Slow, inflexible public planning and project
  delivery compared to private sector
• Disjointed modal planning
• Difficult to engage private sector freight
  interests in state and MPO planning processes
  limited freight representation
• Inadequate freight planning data and analysis
  tools

31
Freight Transportation PerspectivesState and MPO
focus is regional and local private sector focus
is increasingly national and global
Private Sector(Shippers, Carriers)
Global
National
Regional
Local
Public Sector(States, MPOs)
32
Why Identified Projects Go Unprogrammed

• Low priority in State/MPO plans
• Lack of local match or sponsorship
• Lack of private sector participation
• Neighborhood/Community opposition
• Environmental concerns
• Physical/Other Constraints

33
North American readiness
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The Challenge

• Over the past 20 years, highway travel demand has
  increased an average of over 3.0 percent per year
• During that same time, highway capacity has
  increased at a rate of 0.3 percent per year.
• Over the next 20 years, freight movements are
  expected to double, with more intense growth in
  major traffic lanes, hubs, and POE
• customer expectations will increase
  environmental issues will intensify

35
There Is A Role for the Public Sector
Transportation Agencies Economic Development
Agencies
Air Freight
ENSURE FREIGHT SYSTEM RELIABILITY
Trucking
Rail
Ports
36
The Evolution of Freight Policy
Efficiency
Equity
Effectiveness
1991 - 97
1998 - 03
2004 - ??
37
Future Challenges

• Institutional Development - break the paradigms
• Encouraging multistate, regional, and binational
  intermodal freight coalitions
• Establishing statewide and metropolitan freight
  advisory groups
• Developing tools to evaluate freight improvement
  options

38
Future Challenges - 3 Is

• Information Technology - leverage technology to
  optimize system performance
• ITS - need full deployment links throughout
  supply chain
• Border crossings and ports of entry - national
  security, trade processing, credentialing
• Data needs - develop real-time operations
  information system - technology as enabler

39
Future Challenges

• Infrastructure - early planning public/private
  partnerships
• Improve financing options - eligibility
  issuesmultijurisdictional infrastructure banks
• Develop financing guidelines
• Raise freight concerns during the planning process

40
Logistics Challenges.Policy Responses

• Comprehensive ops strategyintermodal ITS
• support for private sector efficiency gains
• data and analytical development
• corridor and border support
• creation of RCOEs to support inst. dev.
• Initiate FDPplanning, prog, finance
• initiate pilot projects illustrating each element
• independent TE
• NAFTA component...variations of the above