Supply Chain Frontiers issue #13. Read all articles in this issue.
Even though a capacity crisis in the nation’s freight transportation system threatens economic growth, collaboration between carriers, shippers, and government agencies to find solutions to the problem is “virtually non-existent,” according to a survey carried out by the MIT Center for Transportation & Logistics (CTL). There is increased dialogue between carriers and shippers to develop new approaches to the crisis, but the government - particularly at a planning level - is notably absent from these discussions, the survey shows.
“There is an urgent need for the freight industry and government to come together to overcome the system’s chronic capacity constraints, because long-term solutions require major policy and investment decisions,” said Chris Caplice, CTL’s Executive Director of the Master of Engineering in Logistics Program and author of the survey. Under his direction, CTL is planning a research project that will look at short- and long-term strategies for fixing the nation’s overtaxed freight system. The research and related issues will be the focus of the 2006 Innovations in Freight Transportation symposium on May 16, 2006, in Cambridge, MA. The symposium theme will be Finding Capacity: Short- and Long-Term Solutions. Attendees will be presented with the results of the CTL survey at the symposium.
The web-based survey of more than 500 shippers, carriers, third party providers, and government agencies was carried out over the summer and fall of 2005. The main aim: to find out how shippers and carriers can better handle demand and supply uncertainties in a capacity-constrained market.
The survey set out to answer three main questions:
1. What are the root causes of the freight transportation congestion and capacity crisis?
2. What are the impacts on business?
3. What actions are being or should be taken to alleviate these impacts in the future?
The findings highlight a wide perceptual gap between the various stakeholders –most markedly between government agencies and practitioners.
1. Root cause of congestion
The top three root causes (ranked for all three stakeholder groups) were highway congestion near metropolitan areas, growth of international imports, and West Coast port congestion. The three key insights garnered from this analysis are:
* Shippers and carriers have very similar perceptions as to the root cause of freight congestion, while the government view is very different. The shippers and carriers are focused on operational causes, while the government is focused on structural / infrastructure causes.
* The most critical fundamental causes, as ranked by all stakeholders, are those that deal with how the freight network interfaces with the larger population, for example with passenger transportation demands.
* Shippers seem to be more concerned with the cost and availability of the inputs (drivers, cost of fuel, volatility of fuel costs, hours of service rules, etc.) to their suppliers (the carriers) than the carriers themselves.
2. Impacts on business
All three groups agreed that the modes where capacity is tightest are rail, long haul truckload, and intermodal, while parcel and air (domestic and international) were the least affected.
There was agreement on the top five aspects of transportation that have deteriorated the most over the previous five months. These included total landed transportation cost and carrier equipment availability. Interestingly, the magnitude of the impact on shippers was perceived as larger by the carrier and government respondents than by the shippers surveyed. For example, 52% of the carriers and 46% of the government respondents perceived that the shipper’s total freight bill, on average, increased by more than 5%, while only about one-third of the shippers responded similarly.
3. Actions being taken now
The most common and persistent action that shippers reported taking during the previous year was more frequent and deeper collaboration with their carriers. Of the top 10 actions listed by shippers, the top four dealt specifically with shipper-carrier collaborations. “Perhaps the transportation function is no longer regarded as just another commodity within the shipper community,” suggested Caplice. Other key actions noted by shippers include extensions of contracts and re-routing shipments to less congested ports.
The increased collaboration did not extend to the government stakeholders, however. As Caplice noted, the majority of the shippers and carriers responded that they never talk or meet with government agencies concerning freight transportation issues. Eighty-three percent of shippers reported that they never interact with metropolitan planning organizations.
”Our research indicates that we are at a critical juncture in the development and health of the US freight transportation network,” Caplice said. Meeting the challenge of current constraints and the needs of future growth will require a two-pronged approach that deploys short- and long-term solutions, he believes. An example of a short-term measure is finding better ways to uncover “hidden capacity” that is available without additional investments in infrastructure. In the long term government and industry interests must pool their efforts to develop new investment models based on national priorities for the nation’s transportation system. “CTL plans to play its part by fostering interaction between these key stakeholders,” Caplice says.
For more details of the 2006 Innovations in Freight Transportation Symposium, or CTL’s transportation infrastructure research effort, contact Chris Caplice. For a copy of the CTL Freight Transportation Infrastructure Survey, which will be available later this month, please send your contact details, including company, job title, phone number and email address, to Chris Caplice.