Transcript No Slide Title

2010 and Beyond
A 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 systems
 Policy context is broadening
 Networks 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
Concern about
the future
performance of
the freight
system
 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 neardock rail capacity
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 Economy
Efficient Transportation
Infrastructure Investment
Increased Transportation Capacity, Efficiency,
Reliability, and Level of Service
Transportation Cost Savings
Transit Time Savings,
Reliability Improvements
Increased Productivity
Increased Competitiveness
Higher Standard of Living
Business
Expansion,Relocation, and
Restructuring
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)
12000
10000
Truck
Rail
Barge
8000
6000
4000
Air
2000
0
Billions of
Dollars
Billions of
Ton-Miles
Millions of
Tons
Source: AASHTO, Freight-Rail Bottom Line Report
CAGR (1990 to 2000)
Historic Growth Rates by Mode
(Ton-Miles)
Air
-2.50%
5.20%
Barge
1
Rail
3.50%
Truck
-4%
-2%
0%
2%
3.90%
4%
6%
A Plausible Annual Growth Scenario
Forecast Growth Rate (2000-2020)
(2000 to 2020 in Ton-Miles)
Air
0.70%
Barge
Rail
2.00%
4.00%
1
Truck
0.00%
1.00%
2.00%
2.50%
3.00%
4.00%
5.00%
What do these forecasts mean?
(Billions of Ton-Miles)
5000
64%
2020
4000
3000
2000
2000
49%
More than double
1000
15%
0
Truck
Rail
Barge
Air
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
GDP*
GDP Mfg.*
GDP Mfg. + Imports*
Federal Reserve Board Mfg.**
BEA Mfg.**
* 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.
1987 to 2000
Growth Rate
3.19%
1.68%
4.26%
3.60% This is the
3.25% number that
matters most.
Trade – U.S. Port Container Traffic
20000
18000
16000
Wal-Mart estimates it spent
$15 billion on Chinesemade products in 2003.
Container TEUs ('000)
14000
12000
10000
East Coast Ports
8000
West Coast Ports
6000
Gulf Coast Ports
4000
2000
0
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Year
Source: American Association of Port Authorities
www.aapa-ports.org
Advanced Logistics
 As the cost of transportation falls,
firms substitute more transportation
for other inputs
 This is what economists refer to as the
factor substitution effect
Transportation
as an input to
production
 The producer can now generate more
output at the same level of cost
 This is what economists refer to as the
output effect (productivity gain)
 End results:
 An increase in the demand for
transportation from the initial drop in
transport cost
 A change in the long-term structure of that
demand from the reorganization effect
Advanced Logistics Systems…
1200
0.60
800
0.40
600
400
0.20
200
0.00
0
YEAR
Transport as a fraction of Logistics Costs
Source: Cass State of Logistics Report, 2002
Logistics Costs
Logistics Costs ($B)
1000
19
19 81
19 82
19 83
19 84
19 85
19 86
19 87
19 88
19 89
19 90
19 91
19 92
19 93
19 94
19 95
19 96
19 97
19 98
20 99
20 00
01
…enable the
substitution of
other logistics
components for
transportation.
Ratio of
Transport to Logistics Costs
0.80
Carrier Productivity
120
1997 = 100
110
100
90
80
70
60
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
50
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- Urban bottlenecks
based
Congestion on rural highway
corridors
Border crossing delays
Terminal specific congestion
Mainline capacity
Deteriorating bridges and
tunnels
Height clearances (e.g. doublestack access)
Highway access from terminals
Intermodal terminal capacity
Inefficient interchanges at rail
hubs
Regulatory- or Truck size/weight regulations
Institutionally- Hours of Service (HOS)
based
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- Land-side access
Channel depth (dredging)
based
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 Lack of national/regional
focus for port planning and
Institutionallydevelopment
based
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 supplychain 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
Shift Relative to Base Case Scenario, 2000-2020 Totals
Equivalent Truck
VMT
No-Growth Scenario
+31 billion
Constrained Investment Scenario
+15 billion
Base Case Scenario
Aggressive Rail Investment Scenario
Source: AASHTO Freight-Rail Bottom Line Report
--25 billion
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?
Top West Coast Ports by TEUs (000s), 2002
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
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, 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
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 DecisionMaking
 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