logistics and infrastructure: challenges and opportunities harry caldwell federal highway...

Logistics and Infrastructure: Challenges and Opportunities

Harry CaldwellFederal Highway Administration

Office of Freight Management and Operations

Federal Highway AdministrationOffice of Freight Management and Operations2

Objectives

logistics and transportation infrastructure infrastructure and economic development challenges facing future infrastructure

development and use approaches to problem solving


Challenges Placed on Infrastructure

Shippers

Transportation Providers

Infrastructure Providers

Responding to changing markets, demographic shifts– Focus is short to

medium term

Respond to changing service requirements

Responding to changing markets, demographic shifts– Focus is

medium-long term

Con

trol

of

Car

go r

outin

g

Inve

stm

ent D

ecis

ions


Logistics Productivity Factors

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


Logistics Expenditures and GDPAfter a long improvement, expenditures have stalled at about 10%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Per

cen

tag

e o

f G

DP

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

Administrative

Transportation

Inventory

Source: Cass/ProLogis 10th Annual State of Logistics Report, 1998


2%

4%

6%

8%

10%

Avera

ge A

nn

ual G

row

th

Trade Outpacing Economic Growth

Trade InTrade InComponentsComponents

& Parts& Parts

Trade InTrade InComponentsComponents

& Parts& Parts

FAR-FLUNG FAR-FLUNG SUPPLY CHAINSSUPPLY CHAINS

FAR-FLUNG FAR-FLUNG SUPPLY CHAINSSUPPLY CHAINS

Glo

bal

Glo

bal

Tra

de

Tra

de

Glo

bal Econ

om

ic

Glo

bal Econ

om

ic

Gro

wth

Gro

wth


70

100

130

160

1990 1991 1992 1993 1994 1995 1996 1997 1998

Trucking Costs Have Dropped

CPICPI

Average TL Average TL CostCost

Trend (1990=100)


0

5

10

15

20

25

1980 1985 1990

Weeks

Order Cycle Time Development

Information Processing

Physical Distribution

Manufacturing Lead-Time

1995 less thanless thanTWO WEEKSTWO WEEKS


15%

20%

25%

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

Inventories Are Shrinking

Business Inventory Business Inventory Ratio to GDPRatio to GDP


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”


Themes (continued)

Public Policy From economic deregulation to safety regulation From modal to multi-modal surface transportation

policy From low visibility to environmental accountability


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


Supplier Supplier Supplier

Distributor

Customer

Manufacturer

Supplier Supplier Supplier Supplier

3PL

MarketerDesigner

Inventory

InformationSystem

Transport System

“PUSH”METHODS OF

CONTROL(relative

importance)

Inventory

InformationSystem

Transport System

“PULL”METHODS OF

CONTROL(relative

importance)

Point-of-sale dataRecycled products

From Push to Pull Logistics Systems


0% 20% 40% 60% 80% 100%

Parcel/express envelopes

Regional or National LTL

Local Trucking or Courier

Third Party (mode unknown)

Long-Haul Truckload

Other

Heavy Air Freight

Railroad (including intermodal)

Steamship

MoreNo ChangeLess

Source: Morgan Stanley Dean Witter Equity Research, April 2000

E-Commerce and Freight MovementShippers expect to use more parcel/express, LTL, local trucking, and /courier services


Source: Reebie Associates, Transearch (“Truck” comprises primary shipments.)

Air: 22%

Truck: 7%

Rail Intermodal: 6%

Average All Modes: 4%

Rail Carload: 2%

Inland Water: >0%

Higher

Lower

5% 10% 15% 20% 25%

Compound Annual Growth, 1990 to 1998

Lev

el o

f S

ervi

ce C

on

tin

uu

m

Modal Growth in Tonnage Demand for reliable, high-speed service is growing


Transportation Infrastructure is:

An Asset to contain costs and make products more competitive

Are we using it wisely?


17 days

5000 miles

2 days

No miles

Marine Terminal

4 hours

+/- 2 hours

20 miles

Infrastructure Concerns add to delays and unnecessary costs

2 days

1500 miles


Top Gateways for International Freight Exports and imports in tons

Exports

Imports


Source: Texas Transportation Institute

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%

1.00

1.05

1.10

1.15

1.20

1.25

1.30

1.35

1.40

1982 1986 1992 1997

TT

I Tra

ve

l Ra

te In

de

x

Very Large MetroAreasAverage 68 MetroAreasLarge Metro Areas

Medium Metro Areas

Small Metro Areas


0

500

1000

1500

2000

2500

3000

3500

4000

Air Highway Class I Rail NavigationChannel

Pipeline

Sy

ste

m M

iles

(th

ou

sa

nd

s)

1975 1996

Source: USDOT, Bureau of Transportation Statistics, National Transportation Statistics 1999

System Mileage within the U.S.Highway and air increased modestly; Class I rail lost mileage


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


More Traffic on the HighwaysDaily Vehicle Miles of Travel per Lane-Mile, 1987-1997

1987 1997

Annual Rate of

Change RuralInterstate 3,530 4,952 3.40%

Other Principal Arterials 2,090 2,522 1.90%

UrbanInterstate 11,230 13,696 2.00%OtherFreeway 9,240 10,620 1.40%Other Principal Arterials 5,010 5,768 1.40%

Source: Federal Highway Administration, Status of the Nation's Highways, Bridges and Transit: Conditions and Performance, 1999


Source: Regan & Golob, Transportation Journal, Sep. 99

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

Carrier Use of Mobile Communications, Pre-Pass

Transponders, and Automatic Vehicle Location Systems

0%10%20%30%40%50%60%70%80%

Comm Pre-Pass AVL


Compound Annual Growth, 1998 to 2010

Regional GNP Growth Rates to 2010

3.0%

3.1%

3.4%

3.4%

3.4%

3.4%

3.5%

3.6%

4.4%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0%

NEW ENGLAND

MIDDLE ATLANTIC

EAST SOUTH CENTRAL

EAST NORTH CENTRAL

PACIFIC

WEST SOUTH CENTRAL

WEST NORTH CENTRAL

SOUTH ATLANTIC

MOUNTAIN


Growth by Major Region and Mode(Tons in Millions)

0

2,000

4,000

6,000

8,000

10,000

West

- 199

8

West

-202

0

Mid

wes

t-199

8

Mid

wes

t-202

0

South -1

998

South -

2020

Northeas

t-199

8

Northeas

t- 20

20

AirWaterRailTruck


Private SectorEffeciencies

Operational/ITSGains

STIP/TIPs

UnconstrainedNeed

Current

Capacity and the Nation’s Infrastructure

Remaining Need Legislative Strategies


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


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


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


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


Public Sector(States, MPOs)

Private Sector(Shippers, Carriers)

Global

National

Regional

Local

Freight Transportation PerspectivesState and MPO focus is regional and local; private sector focus is increasingly national and global


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


North American readiness…


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


There Is A Role for the Public Sector

ENSURE FREIGHT ENSURE FREIGHT SYSTEM RELIABILITYSYSTEM RELIABILITYENSURE FREIGHT ENSURE FREIGHT

SYSTEM RELIABILITYSYSTEM RELIABILITY

Transportation AgenciesTransportation Agencies& &

Economic Development AgenciesEconomic Development Agencies

Transportation AgenciesTransportation Agencies& &

Economic Development AgenciesEconomic Development Agencies

Air FreightAir Freight

TruckingTrucking

RailRail

PortsPorts


ISTEA

Intermodalism

Innovative Finance

TEA-21

Funding Increase

State/local freight focus

???

Information Technology

Infrastructure Funding

(multimodal?)

Institutional Development

Efficiency Equity Effectiveness

1991 - 97 1998 - 03 2004 - ??

The Evolution of Freight Policy


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


Future Challenges - 3 I’s

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


Future Challenges

Infrastructure - early planning & public/private partnerships

Improve financing options - eligibility issues…multijurisdictional infrastructure banks

Develop financing guidelines Raise freight concerns during the planning process


Logistics Challenges….Policy Responses Comprehensive ops strategy…intermodal ITS support for private sector efficiency gains data and analytical development corridor and border support creation of RCOEs to support inst. dev. Initiate FDP…planning, prog, finance initiate pilot projects illustrating each element

independent T&E

NAFTA component...variations of the above

logistics and infrastructure: challenges and opportunities harry caldwell federal highway...

Documents

economic developmentchallenges

economic growthtrade

logistics systemspage

comparative economic

demographic shifts focus

service economyfrom

service requirementsresponding

global marketsfrom