2010 and beyond a vision of america’s transportation future 21 st century freight mobility icf...
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2010 and BeyondA Vision of America’s Transportation Future
21st Century Freight Mobility
ICF Consulting
in association with DELCAN
AASHTO Annual Meeting
September 20, 2004
Context
Changing economic structure Trade and globalization From a manufacturing to a service economy
Technology Enabled significant decreases in marginal logistics costs Could serve as the catalyst to major changes in freight
systems
Intermodal freight systemsPolicy context is broadeningNetworks are being reshaped
Freight System Performance Growing congestion on critical highway segments
Increased transport costs due to delay
Unreliable travel times that affect logistics and level of service
High “last-mile” costs due to congestion in urban areas
Congestion at terminals and border crossings
Effects of security requirements
Inability to quickly increase system capacity
By 2020 freight volume may nearly double in some sectors (FHWA)
Potential long-run rail capacity problems
Rail infrastructure downsizing, service disturbances, and insufficient on-dock or near-dock rail capacity
Concern about the future performance of the freight system
Freight Transport Externalities Air quality
Diesel exhaust is a primary source of PM and air toxic contaminants, which are deemed as major health threats especially to children
Diesel exhaust is a primary source of NOx emissions, a precursor to ozone
Community livability and environmental justice Location of many freight facilities may lead to a disproportionate impact on
minority and economically disadvantaged communities
Transportation safety In 2002, 434,000 large trucks were involved in traffic crashes in the U.S., of
which 4,542 were involved in fatal crashes
Homeland security The vulnerability of the freight system, especially given globalization, is a
major cause for concern when it comes to terrorism
Transportation and the EconomyEfficient Transportation
Infrastructure Investment
Increased Transportation Capacity, Efficiency, Reliability, and Level of Service
Transportation Cost Savings Transit Time Savings, Reliability Improvements
Business Expansion,Relocation, and
Restructuring
Increased Productivity
Increased Competitiveness
Higher Standard of Living
How do firms react?
Improvements in Network
Connectivity and Density
Industry Investment in
Advanced Logistics
Industrial Reorganization and Enhanced Productivity
Firms reduce stocking points, increase JIT processes, and increase shipping distances
Firms react to reduced late-shipping-delays, valued highly by shippers, by investing more in logistics
Inter-industry trading patterns are affected
U.S. Domestic Freight Movement (2000)
Source: AASHTO, Freight-Rail Bottom Line Report
0
2000
4000
6000
8000
10000
12000
Billions ofDollars
Billions ofTon-Miles
Millions ofTons
Truck
Rail
Barge
Air
Historic Growth Rates by Mode(Ton-Miles)
3.90%
3.50%
-2.50%
5.20%
-4% -2% 0% 2% 4% 6%
1
CA
GR
(1
99
0 t
o 2
00
0)
Air
Rail
Truck
Barge
A Plausible Annual Growth Scenario (2000 to 2020 in Ton-Miles)
2.50%
2.00%
0.70%
4.00%
0.00% 1.00% 2.00% 3.00% 4.00% 5.00%
1
Fo
rec
as
t G
row
th R
ate
(2
00
0-2
02
0)
Air
Rail
Truck
Barge
0
1000
2000
3000
4000
5000
Truck Rail Barge Air
What do these forecasts mean?(Billions of Ton-Miles)
2000
2020
64%
49%More than double
15%
Primary Freight Demand Drivers Growth in economic output
U.S. production of goods for domestic and international markets
Imports of goods for domestic consumption
Trade Globalization – Pacific Rim, Europe, South America
NAFTA and FTAA (maybe)
Advanced logistics Enabled by technology
Carrier productivity Affected by regulation
Economic Output
1987 to 2000 Growth Rate
GDP* 3.19% GDP Mfg.* 1.68% GDP Mfg. + Imports* 4.26% Federal Reserve Board Mfg.** 3.60% BEA Mfg.** 3.25% * Value based ** Based on a combination of value and quantity
President’s budget estimates 3.5% average annual growth in GDP from 2004 to 2009.
This is the number that matters most.
Trade – U.S. Port Container Traffic
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Year
Con
tain
er T
EU
s ('0
00)
East Coast Ports
West Coast Ports
Gulf Coast Ports
Source: American Association of Port Authoritieswww.aapa-ports.org
Wal-Mart estimates it spent $15 billion on Chinese-made products in 2003.
Advanced Logistics
Transportation as an input to production
As the cost of transportation falls, firms substitute more transportation for other inputs This is what economists refer to as the
factor substitution effect
The producer can now generate more output at the same level of cost This is what economists refer to as the
output effect (productivity gain)
End results: An increase in the demand for
transportation from the initial drop in transport cost
A change in the long-term structure of that demand from the reorganization effect
Advanced Logistics Systems…
0.00
0.20
0.40
0.60
0.80
198119
8219
8319
8419
8519
8619
8719
8819
8919
9019
9119
9219
9319
9419
9519
9619
9719
9819
9920
0020
01
YEAR
Rat
io o
f T
ran
spo
rt t
o L
og
isti
cs C
ost
s
0
200
400
600
800
1000
1200
Lo
gis
tics
Co
sts
($B
)
Transport as a fraction of Logistics Costs Logistics Costs
Source: Cass State of Logistics Report, 2002
…enable the substitution of other logistics components for transportation.
Carrier Productivity
50
60
70
80
90
100
110
120
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
1997
= 1
00
General freight trucking, long-distance Line-haul railroads
Trucking productivity has leveled off since 1995 Steady increases in rail productivity, but not enough to make
up for revenue losses due to competition
Freight Capacity Issues Trucking Rail Infrastructure-based
Urban bottlenecks Congestion on rural highway
corridors Border crossing delays Terminal specific congestion
Mainline capacity Deteriorating bridges and
tunnels Height clearances (e.g. double-
stack access) Highway access from terminals Intermodal terminal capacity Inefficient interchanges at rail
hubs
Regulatory- or Institutionally-based
Truck size/weight regulations Hours of Service (HOS)
regulations Regulations slowing project
delivery/capacity improvements (e.g. EIS)
NAFTA harmonization Driver retention Project financing
Organized labor Scheduling challenges Dedicated service vs. mixed Steady decline in rail revenues
on a ton-mile basis due to competition
Return on investment has fallen short of cost of capital, affecting railroads’ ability to generate funds for infrastructure investment
Freight Capacity Issues, cont. Ports and Inland Waterways Air Cargo Infrastructure-based
Land-side access Channel depth (dredging) Road and rail access to
terminals Congested locks and limited
inland waterway infrastructure
Airport capacity (major issue
pre-9/11) Landside connections Air traffic control Cargo/passenger conflicts
Regulatory- or Institutionally-based
Lack of national/regional
focus for port planning and development
Inefficient pricing due to port competition
Jones Act
Landing rights restrictions Cabotage restrictions (Open
Skies) Belly cargo safety concerns
Why is capacity such an issue? Demand across all modes is expected to increase
significantly
Shippers and carriers optimize logistics and supply-chain management around transportation system performance Congestion could force costly redesigns of logistics systems
leading to decreases in productivity
The freight system is evolving to be truly multimodal Capacity shortfalls in one mode strain performance of other
modes
Shippers are mode neutral demanding efficient, reliable, and inexpensive service
Case in point… If investments in our rail system are not made, the
effect on our roadway system will be significant
Equivalent Truck VMT
No-Growth Scenario +31 billion
Constrained Investment Scenario +15 billion
Base Case Scenario --
Aggressive Rail Investment Scenario -25 billion
Shift Relative to Base Case Scenario, 2000-2020 Totals
Source: AASHTO Freight-Rail Bottom Line Report
Another case in point… West Coast docks dispute
Led to 10-day lockout and the 23-day recovery period
Prevented $6.28 billion in goods from being shipped through the ports of Long Beach and Los Angeles
Shippers were affected
Hewlett-Packard made selected use of airfreight to meet commitments to customers
Mattel worked around the problem by having its containers placed where they would be unloaded first from ships
Effects of West Coast docks dispute could have been far worse had the shutdown lasted longer
What does this tell us about port security?
Los Angeles (CA) 6,105
Long Beach (CA) 4,524
Oakland (CA) 1,707
Tacoma (WA) 1,470
Vancouver (BC) 1,458
Seattle (WA) 1,438
Manzanillo (COL) 634
Anchorage (AK) 463
Portland (OR) 256
Fraser River (BC) 101
Ensenada (BCAL) 53
Top West Coast Ports by TEUs (000s), 2002
Source: AAPA
What could be on the horizon?
Widening of the Panama Canal (likely)Effects on U.S. port dredging needs, port competitiveness
Continued explosive economic growth in China (likely)Effects on US/Mexico trade POEs, West Coast ports
“Second wave” of the IT/internet revolution (likely)Effects on logistics systems, freight networks
Major system disruptions (possibly)Effects on system performance, U.S. and local economies
Where do we want to be 10 or 20 years from now?
An efficient, reliable, and integrated freight system, enabled by technology, thatOptimizes generalized logistics costsHelps to maximize manufacturing productivityHelps to minimize the prices of importsEnhances efforts to make our homeland more secureEnhances our ability to deal with congestion in urban areas Is energy and environmentally efficientLimits effects on community livability and cohesivenessMinimizes the probability of accidents and associated
fatalities and injuries
Policy Themes
We need a national vision for our freight system that is the basis for Federal policy
We need regional/local freight transport decisions that are consistent with national goals, objectives, and strategies
We need strong, well-coordinated leadership to forge effective policy
Addressing National System Bottlenecks
Develop and implement a National Strategic Freight Transportation Investment Program Grant program, not administered by a modal agency, to
select and fund freight projects of national significance
Designed to address major capacity bottlenecks and to accelerate the development of projects that enhance the performance of the nation’s freight system
Craft detailed and strict guidelines for project selection, monitoring, and evaluation, including an Annual Report to the President
Addressing the Need for Meaningful Freight Planning
Develop and implement an Innovations Program for State and Local Freight Transportation Decision-Making Grant program to select and fund innovative multimodal
freight planning and programming at the State and local levels
Designed to address issues related to Collaborative institutional arrangements Public/private partnerships Freight-passenger interferences Regional freight networks (e.g., freight villages, city logistics) Land use needs Freight analysis data and tools Operations
Addressing Ports’ Needs Stemming From Changing Trade Patterns
Develop and Implement a National Harbor Improvement Program A program to select and fund channel dredging projects
and ensure rational investment decisions for ports Designed to address current lack of national and/or
regional focus for port planning, as well as needs related increasing/changing trade patterns and to post-Panamax vessels
Include an efficient user fee that adheres to trade treaties, and chose projects according to the national interest
Other Mode-Specific Policy Ideas
Develop a National Freight-Rail Investment Program
Develop a National Dedicated Truck-Lane Highway System
Create opportunities for efficient coastal shipping Repeal the Jones Act
Adopt the Open Skies initiative
Change Truck Size & Weight regulations