There has been a growing crescendo of complaint and worry about the state of U.S. transportation infrastructure, and with good reason. It’s in pretty poor shape, and not much indication I can see that there is anything much happening to change that.
As UPS CEO Michael Eskew said in a speech a few months ago, “Our highways, waterways, railroads and aviation networks are simply not keeping up with ordinary demands.”
Many of you probably saw results from the 2005 report of the American Society of Civil Engineers, grading many aspects of U.S. infrastructure. While I’m not clear how the assessment was done, and recognizing there may be some self-interest in the ratings, the ASCE dished out the following grades:
- Bridges – “C”: It will cost $9.4 billion a year for 20 years to eliminate all bridge deficiencies. Long-term underinvestment is compounded by the lack of a Federal transportation program.
- Navigable waterways – “D-” - Of the 257 locks on the more than 12,000 miles of inland waterways operated by the U.S. Army Corps of Engineers, nearly 50% are functionally obsolete. By 2020, that number will increase to 80%. The cost to replace the present system of locks is more than $125 billion.
- Rail – “C-”: For the first time since World War II, limited rail capacity has created significant chokepoints and delays. This problem will increase as freight rail tonnage is expected to increase at least 50% by 2020.
- Roads – “D”- Total spending annually is well below the level needed to improve transportation infrastructure conditions nationally. One estimate said in our busiest markets, already choked with traffic, volumes would increase by 70% by 2020.
Then there are the ports. While the “crisis” of 2004 has temporarily moderated, in the end, containers volumes are growing at approximately 10% annually. While there are certainly some improvements happening, including automation and process improvement (e.g., Savannah’s efforts, the Pier Pass program at Long Beach/LA), the total effort seems well under the projected volume growths. Very few U.S. ports, especially those on the east coast, are capable of handling the new generations of supersized cargo vessels. Plans for new port facilities in Virginia are the only real major new port development plans I am aware of.
But the real question is: Does it matter, really? And to whom? Interestingly, as I talk about this topic with supply chain and logistics professionals, it’s clear that the major urgency is felt by large importers, who are battling where to bring in product, and all the delays and uncertainties the ports, drayage and rail/intermodal networks are causing. Domestic-focused shippers are aware of the issues and the traffic congestion, but in general seem less concerned, and at one level with good reason. The pain isn’t acute yet, and certainly second to capacity and fuel surcharge issues. When UPS reduces by a day the time it takes packages to get to the west coast, for example, as it did in 2005, then maybe things aren’t getting better, not worse.
But with more and more companies moving to offshore manufacturing and global sourcing, they too will be impacted by the challenges of inbound logistics. I recently spoke to head of supply chain for one of the country’s largest container importers, who noted they were less worried in a sense because of their volumes and contracts, CT-PAT compliance, etc. Their containers would be first off the boat, first out of the port, etc. The smaller importer: “They are going to be in real trouble down the road.”
Congestion is going to continue to cause increased transit times, which in the end has to increase costs for carriers and shippers, and probably at some level leads to even more driver attrition. With the driver shortage already acute, further attrition will only exacerbate the capacity issue and in the end lead to higher labor costs and freight rates.
Lastly, in a global economy where many of the traditional competitive advantages of the U.S. are disappearing, and where most agree efficient supply chains are a key element of corporate competitiveness, it would sure seem we need an infrastructure that is also world class to support those supply chains. Here I will note the leading Asian ports are something like six times as productive as those in the U.S.
As Rosalyn Wilson stated in last month’s 17th annual state of logistics report, “We have not made sufficient investment to maintain and improve our aging transportation system and it can no longer meet the needs of the record setting growth in freight flows. We face capacity constraints at virtually all major freight gateways and congestion and bottlenecks throughout the system as it approaches full capacity.”
But who is responsible for doing something: the ports, the cities, the states, the Feds, the rail carriers? All of the above? And what should or more importantly realistically can be done? We passed a pork barrel transportation bill in Washington earlier this year – will that do much to help?
I am going to share my thoughts in a future column, but I’d welcome a broad response from SCDigest readers on their opinions.
Is the U.S. transportation infrastructure in dire shape, or is the hand-ringing overblown? Is it an issue, really, for importers and shippers? And what do you think needs to be done, and what realistically can be done?