1. Logistics and Infrastructure: Challenges and Opportunities Harry Caldwell Federal Highway Administration Office of Freight Management and Operations

2. Federal Highway Administration Office of Freight Management and Operations 2 Objectives logistics and transportation infrastructure infrastructure and economic development challenges facing future infrastructure development and use approaches to problem solving

3. Federal Highway Administration Office of Freight Management and Operations 3 Challenges Placed on Infrastructure Shippers Transportation Providers Infrastructure Providers Responding to changing markets, demographic shifts– Focus is short to medium term Respond to changing service requirements Responding to changing markets, demographic shifts– Focus is medium-long term Control of Cargo routing Investment Decisions

4. Federal Highway Administration Office of Freight Management and Operations 4 Logistics Productivity Factors Product Supply Chain Concept Government Regulation Equipment Carrying Capacity Mode Optimization Global Logistics & Technology Inventory Reduction

5. Federal Highway Administration Office of Freight Management and Operations 5 Logistics Expenditures and GDP After a long improvement, expenditures have stalled at about 10% Source: Cass/ProLogis 10th Annual State of Logistics Report, 1998

6. Federal Highway Administration Office of Freight Management and Operations 6 2% 4% 6% 8% 10% Average Annual Growth Trade Outpacing Economic Growth Trade In Components & Parts FAR-FLUNG SUPPLY CHAINS Global Trade Global Economic Growth

7. Federal Highway Administration Office of Freight Management and Operations 7 70 100 130 160 199019911992199319941995199619971998 Trucking Costs Have Dropped CPI Average TL Cost Trend (1990=100)

8. Federal Highway Administration Office of Freight Management and Operations 8 0 5 10 15 20 25 198019851990 Weeks Order Cycle Time Development Information Processing Physical Distribution Manufacturing Lead-Time less than 1995 less than TWO WEEKS

9. Federal Highway Administration Office of Freight Management and Operations 9 15% 20% 25% 198319841985198619871988198919901991199219931994199519961997 Inventories Are Shrinking Business Inventory Ratio to GDP

10. Federal Highway Administration Office of Freight Management and Operations 10 Freight Trends and Issues: Themes Presentation of trends and issues is organized around three sets of themes Markets/Logistics (demand)  From national markets to global markets  From a manufacturing to a service economy  From push to pull logistics systems Carriers/Transportation Systems (supply)  From modal fragmentation to cross-modal coordination  From system construction to system optimization  From DoD stovepipes to “Focused Logistics”

11. Federal Highway Administration Office of Freight Management and Operations 11 Themes (continued) Public Policy  From economic deregulation to safety regulation  From modal to multi-modal surface transportation policy  From low visibility to environmental accountability

12. Federal Highway Administration Office of Freight Management and Operations 12 Trends Shaping Demand for Transportation Services Continuing evolution of the U.S. into a service and information economy Increasing domestic, NAFTA, and global trade Outsourcing for comparative economic advantage in production Customer-driven shift to customized, mass-market products and services Manufacture-to-order and time-definite-delivery Emergence of e-commerce and e-business

13. Federal Highway Administration Office of Freight Management and Operations 13 Supplier Distributor Customer Manufacturer Supplier 3PL MarketerDesigner Inventory Information System Transport System “PUSH” METHODS OF CONTROL (relative importance) Inventory Information System Transport System “PULL” METHODS OF CONTROL (relative importance) Point-of-sale data Recycled products From Push to Pull Logistics Systems

14. Federal Highway Administration Office of Freight Management and Operations 14 0%20%40%60%80%100% Parcel/express envelopes Regional or National LTL Local Trucking or Courier Third Party (mode unknown) Long-Haul Truckload Other Heavy Air Freight Railroad (including intermodal) Steamship More No Change Less Source: Morgan Stanley Dean Witter Equity Research, April 2000 E-Commerce and Freight Movement Shippers expect to use more parcel/express, LTL, local trucking, and /courier services

15. Federal Highway Administration Office of Freight Management and Operations 15 Source: Reebie Associates, Transearch (“Truck” comprises primary shipments.) Air: 22% Truck: 7% Rail Intermodal: 6% Average All Modes: 4% Rail Carload: 2% Inland Water: >0% Higher Lower 5%10%15%20%25% Compound Annual Growth, 1990 to 1998 Level of Service Continuum Modal Growth in Tonnage Demand for reliable, high-speed service is growing

16. Federal Highway Administration Office of Freight Management and Operations 16 Transportation Infrastructure is: An Asset to contain costs and make products more competitive Are we using it wisely?

17. Federal Highway Administration Office of Freight Management and Operations 17 17 days 5000 miles 2 days No miles Marine Terminal 4 hours +/- 2 hours 20 miles Infrastructure Concerns add to delays and unnecessary costs 2 days 1500 miles

18. Federal Highway Administration Office of Freight Management and Operations 18 Top Gateways for International Freight Exports and imports in tons Exports Imports

19. Federal Highway Administration Office of Freight Management and Operations 19 Source: Texas Transportation Institute Travel Rate Congestion Index The average percentage growth in peak-period-travel-time compared to off-peak-travel-time in 68 large metro areas was 81%

20. Federal Highway Administration Office of Freight Management and Operations 20 Source: USDOT, Bureau of Transportation Statistics, National Transportation Statistics 1999 System Mileage within the U.S. Highway and air increased modestly; Class I rail lost mileage

21. Federal Highway Administration Office of Freight Management and Operations 21 NHS Intermodal Connectors - Infrastructure Constraints NHS Connectors  Poor physical condition  Port access issues  “orphan status”  inadequate coordination of investment strategies  need for intermodal impact statements

22. Federal Highway Administration Office of Freight Management and Operations 22 More Traffic on the Highways Daily Vehicle Miles of Travel per Lane-Mile, 1987-1997 Source: Federal Highway Administration, Status of the Nation's Highways, Bridges and Transit: Conditions and Performance, 1999

23. Federal Highway Administration Office of Freight Management and Operations 23 Source: Regan & Golob, Transportation Journal, Sep. 99 California Motor Carriers’ Perception of Congestion and Response Carriers are investing in technology to counter increasing congestion 82% see congestion as serious or critical  Costs of slower speed  Scheduling problems  Driver morale  Accidents & insurance  Higher fuel & maintenance 85% see congestion worsening over next five years

24. Federal Highway Administration Office of Freight Management and Operations 24 Compound Annual Growth, 1998 to 2010 Regional GNP Growth Rates to 2010

25. Federal Highway Administration Office of Freight Management and Operations 25 Growth by Major Region and Mode (Tons in Millions)

26. Federal Highway Administration Office of Freight Management and Operations 26 Capacity and the Nation’s Infrastructure Remaining Need Legislative Strategies

27. Federal Highway Administration Office of Freight Management and Operations 27 From System Construction to System Optimization Highway congestion, especially landside access to ports and terminals Insufficient rail and intermodal terminal capacity fragmented operational strategies; immature national and international ITS and automated identification standards Shortages of labor and skills Limitation of public and private finance for system maintenance and new capacity Public-public and public-private integration of ITS and IT systems

28. Federal Highway Administration Office of Freight Management and Operations 28 From Modal to Multi-Modal Surface Transportation Policy Trends  Evolving public sector awareness of the need for multi- modal policy, planning, and investment (ISTEA and TEA-21)  Increasing state and local control of transportation investment  Increasing use of highway trust funds for system preservation  Growing demand to re-link transportation investment and economic development

29. Federal Highway Administration Office of Freight Management and Operations 29 From Modal to Multi-Modal Surface Transportation Policy (continued) Implications for freight  More complex planning and investment environment  Mismatch between scale of transport operations (increasingly regional and global) and public sector jurisdictions (local and state) Issues  Role of multistate freight and trade corridor programs  Identifying and financing freight projects of national significance  Use of highway trust funds for non-highway freight projects

30. Federal Highway Administration Office of Freight Management and Operations 30 From Modal to Multi-Modal Surface Transportation Policy (continued) Issues...  Slow, inflexible public planning and project delivery compared to private sector  Disjointed modal planning  Difficult to engage private sector freight interests in state and MPO planning processes; limited freight representation  Inadequate freight planning data and analysis tools

31. Federal Highway Administration Office of Freight Management and Operations 31 Public Sector (States, MPOs) Private Sector (Shippers, Carriers) Global National Regional Local Freight Transportation Perspectives State and MPO focus is regional and local; private sector focus is increasingly national and global

32. Federal Highway Administration Office of Freight Management and Operations 32 Why Identified Projects Go Unprogrammed Low priority in State/MPO plans Lack of local match or sponsorship Lack of private sector participation Neighborhood/Community opposition Environmental concerns Physical/Other Constraints

33. Federal Highway Administration Office of Freight Management and Operations 33 North American readiness…

34. Federal Highway Administration Office of Freight Management and Operations 34 The Challenge Over the past 20 years, highway travel demand has increased an average of over 3.0 percent per year During that same time, highway capacity has increased at a rate of 0.3 percent per year. Over the next 20 years, freight movements are expected to double, with more intense growth in major traffic lanes, hubs, and POE customer expectations will increase; environmental issues will intensify

35. Federal Highway Administration Office of Freight Management and Operations 35 There Is A Role for the Public Sector ENSURE FREIGHT SYSTEM RELIABILITY Transportation Agencies & Economic Development Agencies Transportation Agencies & Economic Development Agencies Air Freight Trucking Rail Ports

36. Federal Highway Administration Office of Freight Management and Operations 36 ISTEA Intermodalism Innovative Finance TEA-21 Funding Increase State/local freight focus ??? Information Technology Infrastructure Funding (multimodal?) Institutional Development EfficiencyEquityEffectiveness 1991 - 971998 - 032004 - ?? The Evolution of Freight Policy

37. Federal Highway Administration Office of Freight Management and Operations 37 Future Challenges Institutional Development - break the paradigms  Encouraging multistate, regional, and binational intermodal freight coalitions  Establishing statewide and metropolitan freight advisory groups  Developing tools to evaluate freight improvement options

38. Federal Highway Administration Office of Freight Management and Operations 38 Future Challenges - 3 I’s Information Technology - leverage technology to optimize system performance ITS - need full deployment; links throughout supply chain  Border crossings and ports of entry - national security, trade processing, credentialing  Data needs - develop real-time operations information system - technology as enabler

39. Federal Highway Administration Office of Freight Management and Operations 39 Future Challenges Infrastructure - early planning & public/private partnerships  Improve financing options - eligibility issues…multijurisdictional infrastructure banks  Develop financing guidelines  Raise freight concerns during the planning process

40. Federal Highway Administration Office of Freight Management and Operations 40 Logistics Challenges….Policy Responses Comprehensive ops strategy…intermodal ITS support for private sector efficiency gains data and analytical development corridor and border support creation of RCOEs to support inst. dev. Initiate FDP…planning, prog, finance initiate pilot projects illustrating each element  independent T&E NAFTA component...variations of the above