2010 and Beyond A Vision of Americas Transportation Future 21st Century Freight Mobility ICF Consult

1
2010 and BeyondA Vision of Americas
Transportation Future21st Century Freight
MobilityICF Consultingin association with
DELCAN

• AASHTO Annual Meeting
• September 20, 2004

2
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 systems
• Policy context is broadening
• Networks are being reshaped

3
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
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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

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Transportation and the Economy
Efficient 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
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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

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U.S. Domestic Freight Movement (2000)
Source AASHTO, Freight-Rail Bottom Line Report
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Historic Growth Rates by Mode(Ton-Miles)
Air
Barge
Rail
Truck
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A Plausible Annual Growth Scenario (2000 to 2020
in Ton-Miles)
Air
Barge
Rail
Truck
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What do these forecasts mean?(Billions of
Ton-Miles)
2020
64
2000
49
More than double
15
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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

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Economic Output
This is the number that matters most.
Presidents budget estimates 3.5 average annual
growth in GDP from 2004 to 2009.
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Trade U.S. Port Container Traffic
Wal-Mart estimates it spent 15 billion on
Chinese-made products in 2003.
Source American Association of Port Authorities
www.aapa-ports.org
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Advanced Logistics

• 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

Transportation as an input to production
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Advanced Logistics Systems
enable the substitution of other logistics
components for transportation.
Source Cass State of Logistics Report, 2002
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Carrier Productivity

• Trucking productivity has leveled off since 1995
• Steady increases in rail productivity, but not
  enough to make up for revenue losses due to
  competition

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Freight Capacity Issues
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Freight Capacity Issues, cont.
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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
  

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Case in point

• If investments in our rail system are not made,
  the effect on our roadway system will be
  significant

Shift Relative to Base Case Scenario, 2000-2020
Totals
Source AASHTO Freight-Rail Bottom Line Report
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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
  

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What does this tell us about port security?
Top West Coast Ports by TEUs (000s), 2002
Source AAPA
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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
  

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Where do we want to be 10 or 20 years from now?

• An efficient, reliable, and integrated freight
  system, enabled by technology, that
  
• Optimizes generalized logistics costs
• Helps to maximize manufacturing productivity
• Helps to minimize the prices of imports
• Enhances efforts to make our homeland more
  secure
  
• Enhances our ability to deal with congestion in
  urban areas
  
• Is energy and environmentally efficient
• Limits effects on community livability and
  cohesiveness
  
• Minimizes the probability of accidents and
  associated fatalities and injuries

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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

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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 nations
  freight system
• Craft detailed and strict guidelines for project
  selection, monitoring, and evaluation, including
  an Annual Report to the President
  

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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

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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

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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