Supply Chain Frontiers issue #15. Read all articles in this issue.
The number of imports into the United States, as measured by TEU lifts, has risen from under 50 million to over 400 million in the past 26 years, and the rate of growth is increasing sharply. The capacity growth rate of the nation’s transportation infrastructure has remained static by comparison. If the imbalance persists, the result could be an economy slowed by traffic-choked transportation networks. Industry experts gathered at CTL’s 2006 Innovations in Transportation Symposium this May to review the situation.
Chris Caplice, CTL Executive Director of the Master of Engineering in Logistics Program, opened the symposium with a summary of the 2005 MIT Transportation Infrastructure and Capacity Survey. Completed by more than 500 shippers, carriers, and government agencies, the survey indicates that shippers and carriers are focusing on operational issues, such as the growth of international imports and West Coast port congestion. Government, on the other hand, seems more concerned with long-term issues, such as the lack of funding and investment in freight infrastructure. Unfortunately, there is a lack of dialogue between the two sides, according to the survey (for more information see the lead article Capacity Crisis Bypasses Government in the March, 2006 issue of Frontiers).
Symposium attendees, who represented industry, government and academia, identified a number of potential remedies for boosting infrastructure capacity.
1. Short-Term Solutions
Smoothing the various cargo volume peaks would help reduce congestion. For example, the Port Authority of NY/NJ sees better vessel scheduling as a low-cost, short-term solution for boosting effective berth capacity. Some carriers are working to stagger sailing dates to avoid simultaneous arrival of too many ships on the West Coast. One company is changing its sales force incentives and staggering quota periods in an effort to flatten the peaks. Shipping and logistics group APL highlighted the collaborative PierPass program in the port of Los Angeles/Long Beach that uses a peak hour surcharge on local cargo movements to help drive the use of more off-peak movement.
Routing Asian goods to East Coast ports eases the burden on West Coast terminals, but this is a short-term fix since the Panama Canal is becoming a bottleneck. There are proposals to expand the Canal, which would offer more permanent relief.
2. Mid-Term Solutions
More asset utilization could add capacity to the system, as evidenced by acres of empty containers in freight yards and excessive deadhead miles. The Port Authority of NY/NJ is working to increase terminal capacity by reducing the number of empties, improving chassis management, and reducing dwell-time. These projects are relatively cheap, but it takes time to implement the new processes.
Freight velocity is a critical metric for improving the true capacity of the transportation network. Low velocities create demand for more infrastructures to handle the same freight volumes. Although each mode has some upper limit on velocity, most freight moves at less than maximum velocity. According to APL, high-priority intermodal freight moves at about 24 to 30 mph, and low-priority freight moves an average of 20 to 22 mph.
Carriers complained that grocery stores are notorious for tardy handling of deliveries, which delays the trucks. Yet the stores complain that they often don't know when the deliveries will occur and thus can't schedule labor for unloading. Better advance notice and delivery windows would help both sides to accelerate unloading. APL recommended that shippers provide improved demand forecasts to carriers. Better real-time data on congestion could help carriers make more accurate predictions of arrival times.
Toyota is a strong proponent of correcting internal company processes that might sub-optimize or waste transportation resources. The company takes account of transportation costs during the design phase of new car development. For example, if a component can be physically shortened to improve cubing of a trailer, Toyota will consider the design change.
3. Long-Term Solutions
In the long-term, the costs and reliability of long distance freight transportation could affect sourcing strategies. Whether the escalating cost of transportation might drive companies toward domestic or more local sourcing is, as yet, unclear. Some automakers seem to be increasing domestic content, and companies might be less likely to move more production offshore in the current environment of high energy costs. However, domestic sourcing does not necessarily solve core network capacity problems, because the strategy fails to eliminate freight.
Government and carrier respondents in the MIT infrastructure survey recommended more intermodal and rail yard facilities in their list of top five priorities for easing the capacity crunch. A promising development is on-dock rail: dropping shipping containers directly onto railcars without any intermediate drayage or terminal yard stowage. This can boost a terminal's productivity per acre by 50%, according to the port of NY/NJ. The technique does require new infrastructure with rail extensions alongside berths. CSX cautioned that on-dock rail only works if the containers are sequenced.
The more effective use of existing capacity offers some opportunity for improvement. But these large projects take time and exacerbate congestion before relieving it. More investment in rail systems is critically important, and the railroads are devoting resources to much-needed expansion measures, such as double-tracking in congested segments of the network
Overall, solutions to the nation’s chronic freight capacity problems will include a range of measures such as more collaboration, better system visibility, and the sharing of costs and benefits. Perhaps the most serious threat to an expanded freight network is inaction, since it will take years to implement meaningful, long-term remedies.