Freight Mobility

1
Freight Mobility

• A Shippers Perspective
• Mississippi Valley Conference
• Of State Highway and Transportation Officials
• July 18, 2002
• Ron Dvorak
  The Dvorak Group

2
Background

• The Paper Forest Products Industry is the 3rd
  largest freight commodity group in the USA
• The value of shipments originating in the
  Mississippi Valley States are in excess of 75
  billion annually
• It utilizes just about every transportation mode
• It is Global
• It has had to re-invent itself to meet customer
  requirements - it learned what the term pull
  means

3
Four Points

• A healthy economy depends on Mobility
• Freight Mobility Personal Mobility are closely
  linked
• Shippers pay the bill
• Shippers are concerned

4
Consider What a Shipper Does

• They are in the order fulfillment business
• They are customer driven
• Their economic success is achieved by meeting
  certain metrics
• Service Level
• Time
• Total delivered cost

5
MobilityTodays Reality

• Customers demand predictability and seamless
  execution whether they are buying something or
  going somewhere in their car
• Customers expect the right product, in the right
  place, at the right time, in the right amount,
  and at the right price
• Goods today are rarely produced in the market
  (let alone the same country) they are consumed
• Nearly 10 of our GDP is spent by shippers to
  meeting customer needs

6
Freight MobilityThe Conundrum

• A fundamental disconnect exists in our personal
  understanding of what is required to meet our
  needs as a customer and what is required by a
  shipper to meet those needs
• The money, time, and effort spent to fulfill
  customer requirements is also seen as a nuisance
  and a major constraint on our personal mobility
  by the very same customer
• Yet shippers know that if they fail to meet those
  requirements, the customer will go somewhere
  else, and the shipper will loose the business

7
Shippers Pay the BillThe True Stakeholder

• Shippers spend nearly 1 Trillion annually on
  logistics
• Shippers invest another 1.5 Trillion in
  inventories to service their customers
• Shippers fear logistics costs in the future will
  far outpace all other operating expenses
• Regulatory actions
• Existing capacity constraints, projected
  double-digit growth rates, and no definitive plan
  to address it

8
Shippers are Concerned

• The expectations of customers to get what they
  want, when they want it, and at the right price
  will only continue to rise
• Failure to respond is lost business customers
  will continue to substitute to get what they want
• Shippers see their logistics cost rising
• Every day low pricing will put further pressure
  on margins
• Concern over the inflationary impact of a strong
  economy on logistics costs
• Shippers traditionally relied on government
  planning agencies to figure it out when it
  comes to transportation planning
• Today, shippers cannot see a light at the end of
  the tunnel
• They fear agencies will attempt to regulate
  their way out
• They are reliant on a political process that
  doesnt understand their needs
• They characterize the risks as significant
  without fundamental change

9
Shippers are ConcernedWe need to find a new
approach to an old problem!

• In the 1950s the public and elected officials
  considered highway congestion the main urban
  transportation problem.
• Consequences of the Development of the
  Interstate Highway System for Transit National
  Research Council Report 1997

10
Moving Forward

• Shippers feel that we do have a productive
  transportation network that generally supports
  our existing customer driven process
• It is competitive and it does work
• It is our perceived inability to grow this
  network to keep pace with demand that deeply
  concerns everyone

11
Moving Forward

• Freight planning, and specifically the need to
  understand freight movements, needs to be a
  required part of any transportation plan
• An ongoing freight movement review process needs
  to be in place to monitor system performance,
  identify trends, and inform the public
• Start by focusing on regional corridors. It can
  jump-start the freight planning process and serve
  as a foundation for the future
• Utilize industry representation as a way for
  shippers to work with regional planning agencies

12
Moving Forward

• Avoid the temptation to regulate various freight
  modes as a tool to gain short-term relief to
  personal mobility issues. Absent of a decline in
  demand, it will only make the over-all problem
  worse
• Find ways to fast track the transportation
  planning process to allow for substantive changes
  and the necessary infrastructure investment to
  occur in a more timely manner
• We need a measurement system to track system
  performance over time and to better inform the
  stakeholders (public)
• A full-time commitment by all stakeholders to the
  process is important right now. Shippers are
  optimistic that we can find effective solutions