|
 FindIt@DU | Calendar | News & Events |
| About ITI |
| Executive Masters Program |
| ITI Policy Forums |
| Transportation Research Projects |
| Oral History Program |
| NCIT |
| Related Links |
ITI Home |
|
||
1997 SummitIV. The Proceedings - Panel I: Transportation Modes and Stakeholder Perspectives
Moderator: Thomas L. Finkbiner, Norfolk Southern Corporation Panelists: Clifford J. Hardt, Federal Express Corporation (air) PANEL I OVERVIEW The issues raised by Panel I provide an insightful glimpse into the potential realities and the current weaknesses that will affect the realization of a comprehensive North American intermodal system. The panel highlighted the importance of globalization and its impact on the intermodal system. Despite the variety of perspectives, the common themes that emerged were efficiency, funding, planning, cooperation, and the role of governments. The panelists, all in their own way, suggested that a major shift in attitudes and policy structures by key actors was required if the potential of intermodalism was to be achieved. The paradox that remains is how to achieve cooperation given the high levels of competition that exist within, between, and among the modes. Specific obstacles impeding the growth of an intermodal system include the following:
Above all, for intermodalism to succeed, it is essential that an intermodal transportation system be able to meet customer requirements by increasing reliability and service quality and to take advantage of the strengths of each mode while working to minimize their shortcomings. Nor should the role of culture be ignored. Attitudes and values differ in the NAFTA countries, and any attempt to create a North American intermodal system must take such differences into account. Introduction to Panel I by Moderator Thomas L. Finkbiner We are fortunate to have such an impressive group of people on this panel representing the users of the North American intermodal network. While intermodal represents a significant opportunity for shippers and carriers alike, progress toward the realization of its promise has appeared to be disappointing, for one single reason. All of the intermodal constituencies treat the movement of goods according to the comfort level that they have with their own mode or according to what they wish to obtain. These panelists will discuss their aspirations and will point out what must happen for intermodal to achieve its promise. Transportation Mode: AIR by Clifford J. Hardt I will address, in general terms, the issues affecting aviation. As you can imagine, air transportation has many of the same issues, or concerns, as the other transportation modes, and they include, but are not limited to, infrastructure, funding, regulatory matters, and MPOs, or Metropolitan Planning Organizations. Infrastructure Unlike the other modes, aviation is managed multilaterally by the ICAO or International Civil Aviation Organization. This organization was created 50 years ago as a special agency of the United Nations. The ICAO is instrumental in developing standards and in recommending practices that address safety, security, air traffic modernization, the environment, and technology and research development. The real global system of aviation is founded on the success of ICAO. Even though the ICAO has met with real success, infrastructure issues are still a major concern. For example, the growth in air traffic has created airport congestion; few airports have been built in the last 10 years; the Air Traffic Control (ATC) system has changed little in the past 10 years; and, delays are more frequent. The air industry is in danger of becoming gridlocked. Environment All modes of transportation affect the environment, and
the level of noise, in particular, is of interest in the US.
Airports can establish curfews and limit the time of high
use. Most airports try to Emissions are a global problem, and as such, global standards need to be established by the ICAO. At present, however, US Government is working on US standards, which may or may not agree with global standards. The new ATC system, which can give more direct flights rather then vectoring, is one solution. Safety and Security Air travel is one of the safest modes of transportation, but it has high visibility when accidents occur. Air safety issues need to be more focused on audit and compliance. While much has been accomplished to ensure air security, much more needs to be done. Funding As with all of the other transportation modes, funding is a primary concern. How does the industry pay for improvements? How does the industry receive its fair share of government monies? Usage charges are one way that is being discussed to solve the problem. Today, airlines pay landing fees to support the costs of operating airports. The National Civil Aviation Review Commission began an investigation to examine the services provided, the costs of the services, and the users of the services, or systems. It has made some preliminary recommendations regarding funding and the role and responsibility of the Federal Aviation Administration (FAA). One recommendation states that aviation, like highway transportation, should have its own dedicated sources of funding, such as a tax. However, implementing such a tax will be difficult, and industry consensus does not exist. Regulatory Matters The regulatory bodies and agencies must recognize that the world is truly becoming a global economy. The interdependencies of supply chains around the world and the speed of the various modes of transportation make it critical that regulations recognize the customer's requirements. For the global economy to function, governmental control must be kept to a minimum while maintaining safety, security, and equitable funding initiatives. Metropolitan Planning Organizations or MPOs These organizations have an impact on all modes of transportation, and air is no different. Their historical focus has been on passenger transportation issues and local community requirements. While many of these organizations listen, there seems to be limited efforts to improving airport/truck interface, and in some cases, they are trying to limit truck access in conjunction with airport authorities. These two groups, MPOs and airport authorities, must acknowledge the need for highway infrastructure around airports and must plan this infrastructure for five to ten years in advance. It is unfortunate that what influence we can attain is limited, due to our inability to come together and discuss these crucial issues as intermodal partners. I can assure you that Federal Express Corporation has a stronger voice in Memphis, Tennessee, than it does in St. Louis, Missouri. It is my opinion that if we spoke with one intermodal voice, we would certainly be better off than we are today. It is meetings such as this, with representatives of all modes and other interested groups, that will provide the opportunities to developing an "intermodal voice" and to becoming "intermodal partners." Transportation Mode: PASSENGER BUS by Agustin Irurita The bus transportation industry in Mexico has had a long and sustained development. Today, it represents the most common means of travel in the country, carrying more than 2 billion passengers annually, and its share in the massive, intercity transportation market is more than 90 percent. Its development has been very closely linked to that of the economy of the country. Now, after more than 30 years of stable growth, the bus transportation industry suffers the growth-development, stagnation-survival cycles that limit its sustained progress. Since 1990 bus transportation has become a deregulated service on federal roads and a regulated and protected industry for local carriers on most state roads. Bus service is provided with some 40,000 buses in several well-defined market niches, such as the following:
A network of bus stations and terminals, from which services are offered, has been developed throughout the country. This is a private network, owned and operated by the carriers, and it allows the user to choose among multiple services. For example, there are four central stations in Mexico City, with one of them offering departures to Puebla, 84 miles away, every three minutes. Carriers operate as any other regular company, but 95
percent of them maintain individual economic results for
each bus, that is, for its corresponding owner. This complex
framework renders highly The quality of the service achieved by most medium to big companies is truly acceptable, with some services equivalent to the world's best. The same does not apply to a number of small, unorganized companies that operate illegally with obsolete and highly polluting vehicles. This contrast is present in many ways throughout the country. The parcel business has developed parallel to passenger transportation through the use of the bus luggage bins. Most bus companies will offer these parcel services solely to the cities to which they carry passengers. Some offer a nationwide parcel service as well as freight services; others, extend it through agreements with other bus lines. Air transportation is also used. The service provided is very comprehensive and prices are extremely competitive. Security, quality, and delivery schedules are equivalent to that of any industrialized country. Connections in Intermodal Transportation Although intermodal transportation is scarcely developed, some interesting connections exist.
The Present Situation in Mexico NAFTA represents an opportunity for the development of commerce among its three members as well as for Mexico. Economic openness, privatization of state-owned companies, and deregulation are important changes that should go hand-in-hand with change in cultural issues. Open and equal systems will allow for expanded economic development between and among countries. The same applies to politics, where democracy is a basic requirement that supports a broad economic relationship. Mexico is immersed in a process of change that affects each and every citizen in all aspects of life. Change can generate uncertainty and encourage a focus on the past. As change happens, the benefits are often not easily seen and resentment can set in, and in this case, NAFTA, economic openness, deregulation, democracy, etc., can be blamed. Competition is not a strong value in the Mexican culture. Time is also viewed differently--not with the modern sense of urgency. It is fairly common to hear "Why such a hurry?" And, corruption exists. For example, the current legal system requires change so that it is applicable to everyone. It is in this environment of abandoning old behaviors and customs, of change, of searching for the new, and of trying to understand, that we, the Mexican entrepreneurs, are evolving. There are some clear examples of change in some companies and in some regions in the country; regretfully, many more have been unable to find their way and their problems have multiplied. This must be understood in order to examine the opportunities, the obstacles, and the challenges to the development of an intermodal transportation system in the region. Opportunities
Barriers There are some obstacles in Mexico to the development of intermodal services, such as:
In addition, open commerce among nations demands
reciprocity in treatment and equivalent legislation to ease
business activities. The accords made under NAFTA for
freight and passenger transportation have not been put into
practice. Several interest groups are lobbying against them,
preventing them from operating. Reciprocity to what has been
agreed upon must be respected, as Developing an intermodal transportation system is essential in order to use resources more efficiently and to provide passengers with better services. It is important to remove all barriers that stand in the way of reaching this goal. It is also necessary to understand the differences in development and culture among the nations and to search for possible solutions. If we, the entrepreneurs and the government, fail to identify the obstacles to establishing intermodal and international services, development will be delayed. The opportunity set forth by this meeting is a valuable instrument for progress. Transportation Mode: RAIL by Katharine F. Braid I am pleased to share some thoughts--based on the Canadian experience--about the future of intermodalism and the railroad role in that future. Opportunities and Challenges Intermodalism is one of the fastest growing rail sectors today. Sustained economic growth domestically and in some overseas markets points to the need for more capacity. Opportunity lies in the ability of railroads to move large volumes long distances; railroads can also help improve overall transportation safety and mitigate environmental and land-use issues. By definition, what one player in an intermodal system
does affects the others. For example, difficulties with
trucking and highways are increasingly apparent--highway
damage, traffic congestion, air-quality problems, safety,
truck-driver shortages and turnover. Making matters worse
are the marginal returns on trucking operations, despite
hidden highway subsidies. Railroads can help alleviate some
of these problems through intermodal expansion. Increasing
the size of ships may reduce ports of call and demand
greater investments in the ports selected. Bigger ships and
fewer ports can reduce land transport competition but
improve intermodal economics. For railroads, bigger ships
can mean longer trains and larger inland terminals. In this
context, ISTEA funds should not be diverted to Railroad mergers can be an opportunity and should improve the economics of the mode's participation in intermodal systems and should enhance operations. Reducing the number of interchanges can improve cycle times. Railroads can expand participation in intermodalism by adding routes, cars, locomotives, terminals, and information systems, but to really seize opportunities, they must improve reliability, especially on-time performance. This involves rail service itself and the inter-relationship of railroads with the other modes. The two basic intermodal interfaces--transfer terminals and information systems--can only benefit from joint approaches and lots of cooperation. Port access is a problem for some railroads, as is inadequate dockside infrastructure for marine-rail container transfers. Congestion on the railroads can deter trucking lines from finding intermodal solutions. An intermodal perspective is critical to the quest for optimal transportation solutions, be it for manufactured goods traffic or bulk materials. Opportunities for the railroad vary by commodity and by service requirements over distance in two distinct categories--long haul and short haul. The long haul is the field of natural advantage for rail. It is where interconnectivity among North American rail carriers is critical--be it at traffic transfer facilities or in the flow of information among them. Railroad opportunities lie in bringing increased "seamlessness" to railroad industry-wide and inter-company service approaches and to teaming--individually and collectively--with ocean-shipping lines, trucks, and couriers to meet overland long-haul needs. Short-haul opportunities depend on increasing both the competitiveness and the compatibility of rail with trucks, in part, through technological improvements, such as new container-car types. There is great potential for rail intermodal growth by controlling and lowering costs, through increasing rail intermodal speed and reliability, and by improving information systems. Obstacles and Barriers For all publicly owned railroads, the one major obstacle to intermodal development is investment capital--how to obtain, to generate, or to find the funds or capital to invest in intermodal capacity at the speed of market expansion. Most railroads have not received tremendous rates of return on their investments, and even traditional railroading is highly capital intensive. Capital investment is critical to realizing the potential of intermodalism, and the acceptance of more risk than many public companies like may become necessary. All categories of investment carry risks. This issue is high on the minds of executives of shareholder companies because the ability to spread that risk is less for a corporate project than for a public project. In addition, the rate of return required by privately owned railroads is higher than the rate of return implicit in traditional government spending on roads. And, the low rate of return on terminals, for example, can make it difficult to justify the investments. One of the keys to exploiting railroad participation in
intermodalism is mitigating the risk. Government policy as
well as cooperation between and among the railroads and
among railroads and other modes can help mitigate some of
this risk. Mitigating this risk includes encouraging common
intermodal standards and related public policies. It also
means maintaining these standards and policies for a
sufficient time to permit investments to be repaid. Areas
where standards and policies can tilt the balance one way or
the other include container sizes, truck vehicle weight and For the railroad industry, there is a serious investment risk from technological obsolescence. This risk is perhaps as much regulatory as it is technological. For example, if 53-foot containers become the standard trailer sizes for trucks, some railcars will no longer be economically viable. For their part, however, railroads have failed to standardize railcars, and the continual upward pressure on truck dimensions will keep this issue alive. For many of the opportunities for the railroad industry to be realized, however, there is a need for labor cooperation. For intermodal opportunities, the cooperation needs to take the form of flexibility regarding job functions and a willingness to learn and use the new skills required to make intermodal seamless. Public Policy and Intermodalism No obstacle to intermodalism rivals the basic disadvantage posed by public policies that have favored highways over railways in all three countries. Getting intermodalism right requires modal balance. Today, railroads provide their own roadways, yet they pay property taxes on the railroad rights-of-way. Then, they pay fuel taxes, which in turn help build more highways. In Canada, the transportation laws that were written over the past thirty years contained language to let each mode do what it does best. But, among the various levels of government, modal equity gets lost. Making intermodalism happen will depend on the right policy and tax framework. In Europe, public policy is tilted to favor rail. In North America, I will take basic fairness--from which all society and all modes will benefit. Cross-border harmonization is needed to obtain the full advantage of North American trade. While there is a free-flow of goods, there is not yet a free-flow of transportation services needed to move the goods. Obstacles include the following:
The three North American national governments could foster intermodalism by seeking state-of-the-art solutions to expediting border crossings. Next Steps As we consider how to create the right intermodal
system--the post just-in-time (JIT) system, if you will--a
few considerations come to mind. In any purchase and
delivery (P&D) situation, there are uncertainties and
risks, everything from weather problems to traffic and labor
disruptions. There is always some factor that may be beyond
the JIT planner's control. In most cases, JIT means shifting
the inventory burden to the supplier. The supplier may try
to shift that inventory farther down the line. In any event,
someone is left holding someone else's inventory burden.
This all happens by bilateral contract between two parties
within the overall P&D chain. Somewhere along Conceptually, any post-JIT environment can go one of two ways--towards a perfect P&D paradigm or towards a tailored transportation system. In the perfectly smooth, continuous supply chain P&D paradigm, I go to a retailer to buy a new refrigerator to my own specifications. This purchase triggers all the component manufacturers to start turning out the parts; they are assembled instantly; and, by the time I get home, the refrigerator is installed and working. Nothing is produced until the consumer gives the word. Components flow right through to the consumer as assembled products. This is rapid-fire P&D on demand with no inventory burdens along the way. If achievable at all, it would be highly costly and, quite possibly, very energy-intensive. It would also put enormous strains on most P&D systems. Does the consumer want to pay the fee? Does society? For most shippers, the financial price for something approaching a perfect P&D paradigm would be self-defeating. Price and cost considerations will rule the day. Under a tailored transportation system, JIT, for many shippers, has more to do with reliability and correct information about the scheduling of shipment arrivals than anything else. Usually, these shippers do not care if shipments are on the move for three hours or thirty as long as they get to the unloading dock on time. But, if there is going to be a late arrival, the receiver has to know early so a contingency plan can be implemented. For railways to fit into this paradigm, costs must be controlled, reliability must be assured, information systems have to be first class, and carriers must be geared to striking the optimal balance between price and service in individual situations. Railways can provide an inventory buffer especially over long distances, going faster or slower to keep up with the needs of the P&D system and its price/service requirements. To enhance broad intermodal service coverage, however, railroads have to work together to smooth out their interfaces and strengthen their linkages--not just for dedicated train services but for all intermodal services. The European concepts of Intercontainer and Interfrigo may be worth a visit. The focus on the customer is the point, and the continental economy can only benefit when the use of transportation depends on the true market advantages of each mode. This will depend on the elimination of policy distortions that favor one mode over another, which should then encourage each mode to do what it does best. This process might be facilitated by a para-jurisdictional body, possibly a joint international agency, that can foster intermodalism, promote investments (the right ones at the right time), and work to eliminate inefficient biases and obstacles. Transportation Mode: MARITIME by Theodore Prince Recent developments in intermodal technology have grabbed the attention of industry professionals and observers. As an international steamship line, "K" Line has a primary interest in vessels and an ongoing involvement with railroad, truck, barge, and air transportation. "K" Line is an asset-based network operator, and there are several elements of the intermodal system that it connects with to deliver the service product effectively to its customers. Yet, international steamship lines suffer as an industry. More often than not, in planning the future of the steamship business, the members of my profession and trade consider only the infrastructure, the capital investment, or the technology inherent in intermodal transportation. We overlook the opportunity to redefine the process used to integrate the various transportation modes. Unfortunately, infrastructure is often built for today and not for tomorrow. Concentration on the infrastructure at the expense of the process and underlying service provided is done at great risk. I remember the "old" Pennsylvania Station, built in New York City by the former Pennsylvania Railroad to handle its then booming intercity passenger business. The station was build to last 1,000 years. However, the development of civilian aviation and the construction of the Interstate Highway System caused the intercity passenger business to abandon rail service. Ironically, Pennsylvania Station took three times as long to tear down as it did to build, ignominiously ending as landfill in New Jersey. The maritime industry, like most transportation
industries, has a very diverse service provider chain. Yet,
its various players seem only to see as far as the next
participant. For example, ports see marine terminals as
their customers, who in turn see steamship lines as their
customers, who only Customer Focus How will intermodalism impact marine transportation? The most important thing to consider is customer focus and view. As a service provider, steamship lines must fulfill customer requirements. Otherwise, there will be no customer, and no need for intermodal transportation. Most customers seek a reliable pipeline of transportation for their goods. It would appear that, with rates continuing to decline, customers realize that they can obtain fairly competitive rates from any carrier they choose. As a result, customers are going to select the carrier that best provides the service. It is no longer a choice between high-cost/high-service and low-cost/low-service. The customer of today can have low-cost/high-service. Despite industry fixation on transit time, or speed, for most customers, the real issue is reliability. Customers are seeking complete certainty that the goods will arrive on time and intact. Unfortunately, international customers often encounter a variety of difficulties. Customers may experience problems firsthand, while other problems that impact the underlying carrier may, sometimes, affect the customer. While advancements have been made toward seamless transit, customers still see intermodal as being fraught with obstacles and real or potential problems or hazards to their cargo--and ultimately their business. By its very nature, an intermodal system calls upon various modes of transportation. Several years ago the focus was on seamless transportation. The obvious analogy is a relay race where speed and reliability depend not only on the speed of participants, but also on the ease and the smoothness of the exchange between participants. Despite major technological developments, the process of intermodal transportation begs improvement so that the quality of through transportation will be beyond reproach. Today, inland transportation is much more important to steamship lines than it has been in the past. Twenty years ago, the standard transit from Hong Kong to New York was 40 days by all-water service through the Panama Canal. In the late 1970s, intermodal transportation became an option. Cargo from Hong Kong was discharged on the West Coast and moved to New York by rail for a transit time of 30 days. In 1984, development of the integrated double-stack service from the West Coast further reduced the transit to 24 days. By 1990, direct service from Hong Kong to the West Coast and further intermodal improvements provided 17-day service. This is transit time reduction of more than 50 percent. The development is due not only to intermodal technology but, more importantly, to an integrated process. Such developments should continue as trading patterns change. In 1984, Los Angeles to and from Chicago was the primary double-stack corridor. Other West Coast ports and major inland points became network points as traffic grew and infrastructure was added. Canadian and East Coast ports were able to offer service as demand and infrastructure grew. As Mexico, Latin America, and South America develop as important trading partners, it is realistic to expect other ports to emerge as key gateways. Quality intermodal connections will need to follow. Infrastructure Concerns It is unrealistic to build a single infrastructure and expect it to be sufficient indefinitely. Economic life and physical asset life are different. A good case study on infrastructure versus process is marine terminals and on-dock rail. US industry practice on the West Coast has been vertical integration. Steamship lines have developed their own independent terminals. Productivity benchmarking indicates this is very expensive when measuring TEUs handled per acre, per year. Hong Kong handles close to 30,000 TEUs per acre per year, yet most US ports handle only a small fraction of this. In the US, we build the infrastructure because it is affordable--not because it is necessary. Lack of government intervention has allowed this over-investment. Although this investment has been successful to-date, the long-term implications may not be so sanguine. Ocean shipping, in a regulated environment, supports cost-based pricing. The price to the customer is based on the costs involved in producing a move and a margin is added. Deregulation eliminates this methodology. As competitive markets develop, price-based costing ensues. Customers determine the value of the move and are willing to pay the carrier up to that amount. If the carrier wishes to handle the business, it must find a way to get under the cost threshold so as to make money and continue to support its business. This simple microeconomics lesson has been demonstrated in other transportation modes, such as air, rail, and truck, and asset-based, network-operating industries, such as telecommunications and electric power. The industry needs to review the paradigm by which terminals are developed. On one hand is the Field of Dreams theory, "if we build it, they will come." These ports seem to feel that they must have the latest and greatest in marine facilities, including on-dock rail to attract steamship lines to their facilities. On the other hand, there exists the model of the lemmings, where one follows the other into the sea as a biological response to over- population or to "over capacity." This is the "if they have it, I must have it, too" theory, which disregards economic sense yet seems to be rampant in the industry. The big, bigger, biggest phenomenon has already happened with vessels. Can terminals be far behind? In the maritime industry today, economic rationale often seems to have been supplanted by ego. The results can be grave. Today's environment supports terminal pricing at average costs; however, deregulation could result in terminal pricing at marginal costs. This could result in the inability of a port to support a sufficient return to pay back borrowed money. Washington Power in the early 1980s demonstrated that technical and engineering superiority, even accompanied by a AAA credit rating, was not sufficient to preclude billion-dollar bond defaults. We may see port revenue bond defaults in the not so distant future. As carriers exit the industry, ports could be left with very expensive terminals. On-dock rail follows in the footsteps of marine terminals
and seems largely unquestioned in its benefits. "K" Line has
been operating on-dock rail longer and in more places than
any other steamship line. It is an integral part of its
product; however, "K" Line recognizes that there are
questions. There are a number of problems involved in the
traditional transfer from marine terminals First, railroads have severe space constraints in West Coast ramps, and international shipments often are delayed. However, marine terminals have congestion problems, too, and on-dock rail can and does exacerbate them. Whereas ramp space can be used for any type of operations, on-dock rail is specialized and therefore limited--that dedicated space in the marine terminal cannot be used for anything else. Second, highway congestion, especially in Los Angeles, is often cited as a key impediment to transfer. However, most ports have switching and short-line situations that are even more congested than the highways. Mode transfer is effective only after cargo is on a mainline train that has departed towards destination, but there are no controls on how efficiently cargo is loaded. Third, there have been well-publicized issues of trucker drayage problems involving the bridge transfer from the marine terminal to the railhead. Yet, there are also constant uncertainties revolving around port labor. Some analyses would show that on-dock rail is a very expensive operation. Although it takes place in a marine terminal, on-dock rail is a traditional, intermodal terminal ground-to-railcar transfer. A study needs to compare what occurs in various intermodal terminals, not just what takes place in marine terminals. Given rudimentary benchmarking, not only is the labor cost per on-dock lift much higher, but the capital required to perform each lift is also significantly greater. Ultimately, economic reason should prevail over the compulsion to build. Infrastructure questions should not be considered apart from other issues, such as transition issues that are as important as construction projects. Improvements will ultimately fail if a bridge to the future is absent. For example, the Alameda Corridor in Los Angeles has been cited as panacea for Southern California on-dock. In anticipation of the Alameda Corridor, significant on-dock capacity has been brought on-stream. Unfortunately, this capacity has been brought on years before the corridor is ready. Existing infrastructure and San Pedro Port access remain unchanged. Without significant investment and/or port involvement in controlling the operating, congestion problems in and out of marine terminals will only get worse and the intended benefits will disappear. By the time the Alameda Corridor is ready, some of the intended benefactors may be unintended victims. Furthermore, infrastructure projects need to be carefully considered in terms of cost/benefit tradeoffs. Poorly planned user fees may cause long-term problems. Even worse, some projects are undertaken without any consideration of what user fees should and will be. The Role of Government Finally, we should consider how government might help improve the intermodal process. Understanding that customers require reliable transportation, we need to recognize the role of regulatory issues. On the federal level alone, four agencies are predominately involved with international cargo. They are the Department of Agriculture, the Immigration and Naturalization Service, the Drug Enforcement Agency, and the US Customs. Any one of these agencies can put a halt to cargo movement. While recognizing the government's role to protect public safety, we need to encourage the federal government to consider a more coordinated approach on regulatory holds. Customs issues are most critical. Inbound movement of
cargo is essential. There is not enough space on the West
Coast to hold all cargo until such time that customs
clearance is achieved. A straw man initially proposed by US
Customs two years ago would have eliminated inbound Borders are still not seamless. We still await the intended benefits of NAFTA to enable free trade and transportation within North America. Without addressing some of the more obviously political issues, the fact remains that borders are not as seamless on international cargo as they were intended to be. Cargo destined for Canada, moving through a US port, is at an inherent service disadvantage to cargo that moves through a Canadian port. The same is probably true in reverse and exists as well with Mexico. Furthermore, cabotage restrictions prevent cost efficiencies that could only improve international trade efficiency. Reliability extends beyond transit time and speed. Cargo needs to arrive at destination. Unfortunately, many places in North America are beset by an epidemic of cargo crime. Whether it is hijacking or enroute pilferage, the impact is significant. Local governments seem unable or unwilling to address this problem, given more serious crime issues. Noting that such violations involve international and interstate commerce, the role of the federal government should be a much more aggressive one in this category. Transportation without reliability is nothing. If a service provider cannot provide a reliable product, that provider will be replaced. An intermodal transportation system needs to transcend the issues of reliability so that it can prove itself to be as worthy an option as single-mode transportation.
by Edward M. Emmett First, I must say that it is an honor to be a panelist at such a historical event, and, it is a particular honor to speak for shippers. For those of you who are not familiar with The National Industrial Transportation League, a little history is in order. The League was formed in 1907 to represent the interests of shippers, primarily before the Interstate Commerce Commission, which dealt with railroad issues. Since that time, the League representation has broadened to represent shippers' interests in other modes, including trucking, maritime, and air, which is why I am so eager to speak at an intermodal summit. The League has also changed in another way. We now deal
regularly with international issues. In that regard, the
League delegation to the recent Tripartite Shippers Meeting
in Scotland included representatives from the Canadian
Industrial Transportation League and the Canadian Shippers There are two irrefutable facts about transportation. The first fact is that modes of transportation exist only to serve customers who, in the case of freight transportation, are shippers. Too frequently policy makers forget this because governments tend to organize along modal lines and reflect the interest of the carriers. The other fact is constant change, and change brings winners and losers. Too frequently, governments and the public focus on potential losers. This is understandable because the winners from change are not yet present. Here are two examples of change. First is the Interstate Highway System. What would have happened if all of the owners of cafes, motels, and gas stations along the old US highway system had banded together and organized a large political action committee? They could have argued that the multi-billion dollar interstate highways would put them out of business and cause the loss of millions of jobs, and they would have been correct! However, how much better off are we, as a nation, because of the Interstate Highway System. A similar example is trucking deregulation. Thousands of inefficient motor carriers could not compete in a deregulated market, but many thousands more have been created to take their place. Change creates losers, but it makes winners of us all in the long run. The two irrefutable facts--modes existing for shippers
and constant change--are blended in intermodalism. It is the
product of customer demand for seamless service, and it is
major change. Since shippers have a perspective on all transportation modes, I will review each mode, listing observations of each with a focus on concerns for the future. Ocean shipping is the only mode with tariff filing and enforcement administered by the US Government. No confidential contracts are allowed for US importers and exporters, unlike shippers in the rest of the world. As a result, we are already seeing cargo diversions to Canada. In the near future, I suspect cargo will be diverted to Mexico, too. There is deregulatory legislation before the US Congress now that the US Department of Transportation has endorsed in principle. It is supported by shippers, US ocean carriers, and forward-thinking foreign flag carriers. Railroads and truckers should be in the forefront seeking change, too. Organized labor and some ports have opposed deregulation, but ports really need to consider the needs of their ultimate customers, the shippers. The bottom line for ocean shipping is that deregulation will occur and it will be a good thing. To many shippers and to most of the public, air cargo is mysterious. Freight is usually given to a ""middleman" and magically reaches it destination. In the case of integrators, like UPS or FedEx, shipping is as easy as mailing a letter. However, a number of scary policy issues arose after the crash of TWA 800. For example, some proposed banning cargo from passenger aircraft or requiring the named shipper to appear in person when shipping cargo. Another suggestion has been security clearances for everyone in the manufacturing and packaging chain. Any one of these proposal could become a nightmare for shippers and the air-cargo industry. The Federal Aviation Administration, at the direction of the White House, has organized a Cargo Working Group to examine issues of air-cargo security. The League is pleased to have representatives as members of this group as it works on such a major international transportation issue. Now to railroads, where the bright spot of the present-day intermodal system is growing dim with the service meltdown on the Union Pacific, a situation that raises questions about rail-to-rail competition. Most observers, and railroad operators, will admit that trackage rights do not provide adequate competition. Of course, the fundamental nature of railroads has to be
understood. The vast majority of rail shippers are served by
only one railroad. If they are unhappy with the service
provided by that railroad, they cannot call another
competitor to come to their facility. Shippers have no
recourse, so whenever I hear railroads talk about how much
they compete with each other, I find it amusing. There is no
free market in the railroad industry, and I am not saying
there should be. Pretending that market forces work for rail
shippers, however, is "hogwash." International partners of The last, but certainly not the least important, mode is trucking. There is a truck involved in almost every intermodal freight movement. Deregulation of the motor-carrier industry has been wonderful for US shippers and the overall economy. In fact, deregulation has allowed intermodalism to work. However, there are still some problems in the trucking industry. A major obstacle to the development of an integrated transportation system for North America is the failure of the United States to implement fully NAFTA. This is embarrassing and counter productive to progress. The continued efforts of the railroads to stagnate efficiency by opposing truck size and weight improvement are bad for business. Ultimately, their efforts are bad for safety, too, because they will result in more trucks on the roads. My bottom line is that deregulation has created the need for partnerships among shippers, carriers, and others. Intermodalism is the result of such partnerships and intermodalism creates the need for more partnerships. That is the reason for this Summit. Transportation Stakeholder Perspective: THIRD PARTY by Thomas R. Brown It is a pleasure to comment from the perspective of an
intermodal marketing company (IMC) on the challenges and the
opportunities implicit in the development of a North
American intermodal network. IMCs are the "token
entrepreneurs" of what is primarily a big ticket, big asset,
large institution business. Accordingly, IMCs are at the
bottom of the intermodal food chain. No one in this business
really takes you seriously unless you have
assets--especially large, highly visible, heavy, slow-moving
assets. However, during 1996, IMCs accounted for
approximately 38 percent, or 3,230,000 intermodal In North America today, we experience what is probably the world's most efficient logistics system. In the US, for example, while the nation's freight expenditures have quadrupled from $116 billion in 1975 to over $450 billion in 1996, transportation costs have declined from 8 percent to 6 percent of GDP over the same period. We can be justifiably proud of the role that the intermodal network has played in North America. It is, in many ways, a phenomenal success story that has been recognized throughout the industrial world. Some even see it as a model for their future growth and development. Yet, as we face the future, we also encounter a fundamental truth about this network and its commercial framework--the past in the intermodal business is a very poor author to the future. Why? Because, today's network evolved out of a unique set of circumstances, which are largely no longer in existence and which are unlikely to be reproduced in the future. What were the circumstances of growth during the past three decades? Essentially, North American intermodal grew:
As a stakeholder in this business, I continually experience cognitive dissonance when I focus on its nature. At the same time that it demonstrates great economic vitality, social significance, and customer value, intermodalism is also lacking in strategic direction from its major stakeholders. It is fragmented, overly complex, undercapitalized, and largely dysfunctional in its information exchange between trading partners. Perhaps this business is much as Dr. Johnson said of the dancing dog--"It's not so much that it is done poorly as that it is done at all." None the less, even with a very imperfect framework, intermodal volume has grown for the past 15 years at over twice the growth rate of the US economy--an average 5.5 percent annually. For all of its apparent success, however, IMCs still have a very modest share, just 3 percent, of the overall domestic freight market. Yet, this rate of growth impresses. In a quote from the State of the Truckload Industry on 8 August 1997, Alex Brown states that "intermodal has grown from 2% to 3% of the market. While intermodal remains small in the context of the overall market, growth since 1985 has been impressive. Our sense of intermodal is that it works well in high density lanes, but that it is not really much of a factor in the bulk of the transportation markets in the U.S." So today, 16 October 1997, as we attend this intermodal summit, we are asked to look not backward but forward, to identify what opportunities avail themselves and what obstacles appear as we enter the next century. Planning with the Customer in Mind Implicit in the mixed review presented here is the notion that we "wouldn't, shouldn't, and couldn't do it this way in the future." The future needs to be more planned and more clearly orchestrated to meet the customer's requirements than has been in the past. The capital preconditions of growth are too large to allow for a continued anecdotal approach to growth. Again, the cognitive dissonance is apparent. At the same moment that what brought us here seems frail and under-structured, it also seems to engender its own mitigation. The stable and separate hierarchies of railroads,
trucking companies, IMCs, and shippers are being superseded
by a new railroad route map, new relationships--often
between former competitors and blurring lines between sales
channels, and far fewer asset owners and train operators.
These shifts, of course, are only a part of a larger
transformation that is embracing the entire
economy-- Clearly, the IMC channel is undergoing its own major changes. The Hub Group and CH Robinson have become very successful public companies. The Hub Group, consequently, is moving toward more centralized control and execution, while RISS Companies, Mark 7, and others continue to build toward becoming multi-service logistics providers. The IMC channel will continue to consolidate, especially as rail carriers move to increase minimum revenue thresholds for contract holders. These changes, however, should be the footnotes in the white paper entitled "The Year 2000 and Beyond: The North American Intermodal System." The bold print, headline and text, should be the intermodal formula for meeting the changing and increasingly demanding expectations of the customers, something that is barely accomplished today. The information path between the real customer and the carrier has to be dramatically shortened. The fin de siecle intermodal system in North America is a product of what the carriers had left over and what the entrepreneurs could create with minimal resources beyond their own sales acumen and desire to succeed. Credit these folk with a lot--they put the ball in motion and the business has grown beyond anyone's expectations. And credit the customers--especially the liner company--whose needs and demands drove the major intermodal product innovation of our time--the double-stack train. Customer Expectations What will the customers expect of intermodal vendors in the future? While not complete, the list will include the following:
The characteristics that will meet these needs in an economically rational fashion include the following:
Where do the market opportunities reside? Here is where
the merger picture comes into crisp focus. Looking past the
immediate problems, mergers, if properly executed, will
create opportunities for intermodal growth. If the vision
includes the Norfolk Southern and CSX partitioning and
operating Conrail, we see a multiple of new, shorter
distance, inter-regional markets that will represent the
most important growth opportunity for intermodal since its
inception. CSXT's Peter Carpenter put it well in a recent
interview, stating that "the sizzle--the synergy--has to be
north-south--long haul, single line service between the
growing, boom, increasingly industrialized, southeast and
the Norfolk Southern's application indicates that there is, essentially, a potential to double Conrail's intermodal volume between certain local city pairs in a relatively short time frame. Norfolk Southern argues that, for a number of reasons, Conrail typically has a much lower current share of on-line traffic potential than the average for other carriers that are serving city pairs at similar distances. Assuming that this structural deficit in market share is corrected by the investment of Norfolk Southern in capacity and in marketing acumen, and assuming that CSX is correct about the intermodal potential in its territory post-acquisition, this may lead to the possibility of major new obstacles. First and foremost will be intermodal capacity and access to it, and the question will be who gets access to the network and on what terms. Second will be rationalizing and restructuring the intermodal delivery mechanism to make it more efficient and more customer friendly. IMCs have an enormous responsibility in this context. Today, the intermodal industry is straining to handle the volumes of traffic available to it. The future will require even more investment. And, that leads to the conundrum that must be faced--how does an asset intensive industry finance rapid growth from its earnings stream when Wall Street continues to expect sufficient free cash flow to protect dividends in those years when the business cycle trends downward? One financial analyst refers to this as the investment-growth dilemma, a dilemma that has ramifications for IMCs as well as for the rest of the "intermodal food chain." To Panel II Intermodal Transportation Isues--Passenger and Freight |
maintain
a balance between the needs of the community and the
interests of business. However, establishing restrictions
and maintaining this balance can create operating
opportunities.
competitive
and efficient results. A number of big corporations control
more than 60 percent of the services offered, with each one
of them operating in a different region.
well
as current legislation that has been approved in each
country. Mexico is being pressured to enact parcel
regulations allowing American freightliners free transit,
but NAFTA provides for the exclusivity of freight movement
within Mexico for Mexican carriers. Such pressures make it
difficult to reach understanding and closeness between
companies and nations.
road-only
projects. A reauthorized ISTEA should be used to enhance
transportation efficiency by focusing on intermodal
projects.
dimension
specifications, fuel taxes, and customs and international
issues concerning the free and smooth flow of goods.
the
way from the mine site to the smelter--to the component
plant--to the assembly plant--to the wholesaler--to the
retailer--to the customer's address, JIT usually involves
one or more inventory buffers.
then
see the actual customer. This linear relationship can be
made more complex by the addition of other players, such as
railroads and Non-Vessel Operations Common Carriers
(NVOCCs). There is little or no real communication or
effective connection between the actual customer and the
various service providers. Decisions made on existing
relationships may cause an overall misjudgment of the
ultimate commercial reality.
to
rail intermodal terminals, and using on-dock rail does not
eliminate them, it merely shifts the obstacles.
movement.
In a rare display of unanimity, steamship lines
overwhelmingly objected to such a proposal. The subsequent
tin man is still under review.
Transportation
Stakeholder Perspective:
Council.
In the future, we hope to include Mexican shippers, too.
With
globalization, intermodalism will spread around the
world.
US
rail shippers should be concerned over developments in the
US railroad industry as mergers give us fewer and fewer
mega-railroads.
shipments
in the US, the single largest source of intermodal revenue
for US railroads.
globalization--and
a drive to more efficient uses of capital in a world of
increasing scarcity.
major
population centers of the northeast." CSX believes it can
quadruple rail share in these markets and convert 321,000
truckloads in three years.
|
Intermodal Transportation Institute - University of Denver 2400 South Gaylord Street, Denver, Colorado 80208 PHONE 303.871.4702 - FAX 303.871.7819 Contact Us: du-iti@du.edu |
|