LIBRARY

VOLPE JOURNAL

HIGHLIGHTS

PUBLISHED AND
PRESENTED

BIBLIOGRAPHIES

TRANSPORTATION
STRATEGIC PLANS

LINKS

The opportunities afforded by the increase in international trade are significant. The U.S. economy has gained from the surge in trade in three ways: (1) the growth in national income; (2) the emergence of new markets; and (3) the decline in the cost of goods. Specifically:

Productivity gains from the high-technology segments of U.S. export industries have contributed to growth in the gross domestic product (GDP) and in incomes.

As firms have increased their output, labor productivity has grown, raising the real wages of workers in these sectors. In the past two decades, labor productivity in the U.S. has increased by 25 percent. ³

Domestic producers have enjoyed the benefits of economies of scale as new markets have emerged.

Growth in exports has had a ripple effect, making new markets viable targets for U.S. industries. The development of new markets for the Nation’s products has also generated significant economies of scale. With the growth in markets for final products, the markets for intermediate inputs have grown, and the linkages among the firms within the supply chain have allowed producers to expand production. The resulting critical mass and efficiency gains have further reduced production costs, as the growing backward and forward linkages in the manufacturing process have helped to generate network density. ⁴

Average costs in many sectors have declined, as markets have become more competitive.

As trade has grown, production costs have declined through a combined process of removing monopolistic inefficiencies, applying technologies that improve productivity, re-engineering the firm-level production process, and streamlining the movement of goods within the supply-chain network. Downward declines in transportation and inventory carrying costs relative to GDP - from more than 16 percent of GDP a decade ago to about 10 percent today - illustrate the cost-reduction benefits of the growing efficiency of global outsourcing.

Declining transportation costs, coupled with global wage differentials and the universal availability of information technologies, has stimulated global outsourcing among the goods-producing sectors of the economy.

It is now cheaper to assemble components produced and shipped from all over the globe than to try to minimize transportation costs and manufacture the goods in the proximity of the final consumption market. Integrated supply-chain management has allowed trading partners to trim costs by fully integrating transportation into the production and marketing process. Today, the logistics pipeline relies on transportation as its motive power, linking warehousing, distribution, inventory, marketing, sales, supply management, and manufacturing. Integrated supply-chain management has been created by connecting suppliers and customers at each end of the supply chain, with full transparency of the operations ensured through an efficient computerized interface system.

To reduce costs for each link within the supply chain, shippers have undertaken drastic process re-engineering.

Just-in-time production management techniques have cut costs by reducing inventories. Freight transportation costs at the aggregate level have been steadily declining (partly due to deregulation), to about 6 percent of GDP. Freight carriers are expected to continue to lower shippers’ logistics costs by offering value-added services. Today, supply-chain management is increasingly driven from the demand side. "Mass customization" is in demand, as transportation carriers are asked to provide a higher level of operating flexibility for the customer (e.g., in routing and pricing), and to offer customized logistics service as opposed to the traditional point-to-point shipping service. Full integration of logistics and transportation is taking place through shippers’ attempts to leverage their positions when negotiating customized service contracts with carriers.

Despite these benefits and opportunities, the challenges resulting from global trade are significant. Threats to the continued ability of the transportation system to meet the needs of trading partners warrant a strong Federal role in promoting a technology-intensive freight infrastructure.

The 1999 DOT report on the U.S. Marine Transportation System (MTS) identifies a number of trends affecting the Nation’s ports and intermodal infrastructure and the competitiveness of the U.S. marine transportation system, including: ⁵

This strategic plan focuses on a number of specific challenges confronting the U.S. freight transportation system:

Port facilities are increasingly unable to meet the demands of containerships for better port access and on-dock container handling.

The expanding size of containerships has severely strained the resources of major load centers for facility modernization. Rapid rates of containerization, coupled with the imperative to reduce costs, have led to the emergence of large-capacity containerships.

In 1990, less than 6 percent of U.S. containerized cargo was moved on ships of 4,000 twenty-foot equivalent units (TEUs) or more. By 2010, ships in the 4,000 to 6,000 TEU class will handle 30 percent of the cargo.⁶   With container vessels growing in size to 6,000 to 8,000 TEUs, ports face significant infrastructure modernization challenges. Shallow navigational channels and environmental regulations restricting the disposal of contaminated sediments have impeded the ability of ports to handle international cargo efficiently.

Demands for high-capacity terminal lift equipment have compounded the costs of dredging. Steamship carriers’ specifications for a "super container hub" have sparked further competition among ports for expansion and capacity improvement. Recently, Maersk Lines and Sea-Land Service put out capacity requirements for such a hub that included up to 16 post-Panamax cranes; 6,000 contiguous feet of berth; on-dock or near-dock rail; and the ability to handle 550,000 lifts annually. Currently, not one of the East Coast ports can offer these ocean carriers what they need. ⁷

view full image

Figure 1. U.S. Ports and Intermodal Facilities

Land-side access bottlenecks and lack of adequate on-dock or near-dock rail pose other impediments. Only 40 percent of the container traffic on the West Coast and 24 percent on the East Coast moves by rail. The impediments faced by ports were addressed in a 1993 Transportation Research Board study. ⁸ This report cited a number of port constraints, including lack of bridge or tunnel clearance to accommodate double-stack trains for more than one-third of container ports; at-grade crossing on local streets, where trains tie up local traffic at half of all ports; inadequate access routes for trucks; local opposition to land-side improvements; and regulation of wetlands and dredged sediment disposal.

Finally, vessel logistics and cost-minimization objectives of steamship companies have reduced the number of ports of call. This has led to the funneling of container traffic through a handful of load centers on each coast, compounding other access problems and creating severe capacity constraints. ⁹

Outcome goals 1 and 2 of this plan address the technology application strategies relevant to port throughput and intermodal terminal capacity.

Capacity constraints hamper railroads’ and other intermodal carriers’ abilities to meet the demand for container shipments while responding to pressures to cut costs.

As global container trade has grown, U.S. railroads and other intermodal carriers have become severely capacity-constrained; at the same time, the competitive post-deregulation environment has intensified pressures to reduce costs. In the aftermath of the 1980 Staggers Act, U.S. railroads face competitive pressures to cut costs. The move toward consolidation is partly in response to these pressures. The more competitive environment has reduced the Nation’s total freight logistics costs from more than 16 percent of GDP to less than 11 percent. Though railroad profits have risen in some segments, intermodal operations have for the most part generated lower levels of profit. (These operations account for 18 percent of railroad revenues, but less than 10 percent of profits.) Recent rail service disruptions, capacity shortages, and "service meltdowns" at the Nation’s ports and rail terminals have been due in part to merger-related adjustment difficulties and the "bunching" of container traffic that occurs during peak periods of vessel loading and unloading. ¹⁰

Advanced technologies have allowed U.S. railroads to pursue aggressive modernization programs to deal with the pressures to cut costs. These technologies have allowed railroads to reduce track miles and locomotives in service while carrying more freight and having fewer accidents. In 1995, Class I railroads carried some 2 billion tons of cargo, a 16 percent increase from the 1.6 billion tons carried in 1980 (while the railroads lost market share to trucks in the same period). To compete with trucks, Class I railroads have had to keep costs down while maintaining a high level of capital investment. By investing in track infrastructure and new freight car technologies, the railroads have improved their capacity, and can now carry heavier loads and provide greater ton-miles of service on fewer miles of track.

New investments notwithstanding, track and yard congestion has posed a serious problem for rail carriers for the first time in U.S. history. Compounding track capacity shortages have been the higher maintenance costs due to the increasing average gross weight per train, higher locomotive speeds, more frequent train dispatching schedules, aging track infrastructure, and deteriorating rail bridges. Although rail operations are relatively safe and the number of rail accidents has been steadily declining, the publicity generated by recent incidents, coupled with downsizing practices that have reduced the number of maintenance workers, has given rise to popular concerns about the safety of rail freight transportation. ¹¹

Outcome goals 1, 2, and 3 address the strategies recommended for supporting next-generation rail and intermodal technologies and for funding advanced intermodal terminals.

The costs of financing modern, large-scale, multi-jurisdictional freight facilities are spiraling.

The high costs of financing a modern terminal and the multi-jurisdictional nature of many advanced technology projects preclude effective single-source financing strategies for deployment of state-of-the-art freight technologies. For example, the Alameda Corridor project cost close to $2 billion and took more than a decade to plan, finance, and construct. Another project, the Freight Action Strategy (FAST) in Washington State, required legislative action and a public referendum for planning and financing.

Private stakeholders and local decision makers often lack the ability to formulate strategies that provide a globally optimal solution. The short planning horizon of the private sector, and the inability to capture non-local or non-commercial benefits from projects of national significance, preclude effective investment strategies at the local level. Often, the optimal approach to capacity shortages and congestion lies not at the local source of the problem, but at the regional or corridor levels - where infrastructure strategies such as feeder ports and revitalization of short-haul railroads provide the best solution.

Outcome goals 3 and 4 address the strategies related to promoting next-generation rail and marine technologies, joint use of underutilized military facilities, and shared information systems and technology standards.

Freight technologies are becoming increasingly complex.

The growing complexity and sophistication of freight technologies has created the need to set standards for interoperability and to facilitate data sharing.

Outcome goal 4 addresses efforts to coordinate the development of standard technology protocols and shared information systems.

Return to Top

Next Section