Productivity Gains in Rail, Trucking, Container and

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Productivity Gains in Rail, Trucking, Container
and the Impact on Supply Chain in Urban Areas
John Falcetta Director Logistics UMA - AECOM
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Contents

• History of Productivity Gains in the Supply Chain
• Drivers of Labor Productivity with Supply Chain
  participants
• Impediments to Gains
• The Future

John Falcetta Director Logistics UMA - AECOM
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Supply Chain refers to the distribution channel
of a product, from its sourcing, to its delivery
to the end consumer (also known as the value
chain). The supply chain is typically comprised
of multiple companies that coordinate those
activities.
As in any other Chain it is only as strong as
its weakest link!
John Falcetta Director Logistics UMA - AECOM
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Productivity Gains Why is it significant

• Labour productivity is directly linked to quality
  of life within a nation as a result of its
  ability to compete globally.
• Labour productivity" or "worker productivity"
  is the value of goods and services produced in a
  period of time, divided by the hours of labor
  used to produce them.
• Last year, labour productivity in Canada grew by
  1.1 less than one-third the rate of the US.
  Within the OECD, Canadas productivity growth is
  ranked 17th among 30 countries.
• .

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History of Rail, Trucking and the Container in
the last 50 years

• Labour Productivity in Rail increased
  dramatically. In train service alone gains of
  over 250 have been made since the mid 20th
  century to present.
• In that same time period freight handling costs
  at major port areas (such as New York) reduced by
  40 to 80 per ton of freight handled as a direct
  result of containerization.
• Trucks improved haulage capacity from an
  approximately 15 tons to 30 tons in that period
  representing a 100 improvement in productivity.
  
• The supply chain is handling much more tonnage
• with far fewer people and resources!

John Falcetta Director Logistics UMA - AECOM
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Drivers to Labor Productivity In Supply Chain

• The North American Perspective - Rail

• Capital spending has a bigger impact on Labour
  productivity than training
• and investment in people (Baldwin Beckstead
  2003) (Statistics Canada 2007 )
• Steam locomotive to Diesel to high adhesion
  modern locomotives improved
• haulage capacity from 1000 tons to about 4000
  tons per locomotive (train size).
• Train Crew size reduced from 5 to 2 people.
• Fewer numbers of people required to repair track
  and roadway average size
• track gang reduced from 200 people to 60
  today.
• Locomotive and car repair has reduced
  dramatically as result of improved wheel and axle
  technology including defect detection technology.
• Rail car loading from 166,000 LBS to 286,000 LBS
  (72 productivity improvement)
• Containers are typically double stacked on
  trains.
• Administration and support has reduced about 70
  of full time equivalent staff
• as result of computing technology (AEI).

John Falcetta Director Logistics UMA - AECOM
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Drivers to Labor Productivity In Supply Chain

• The North American Perspective - Trucking

• Capital spending has a bigger impact on labor
  productivity than training
• and investment in people
• Load limits increasing dramatically from 15 ton
  average lading to in excess of 30 tons today
• Fuel Consumption has improved by some 30 to 60
  tons/gallon
• Administration and support has reduced about 70
  of full time equivalent staff as result of
  computing technology.

John Falcetta Director Logistics UMA - AECOM
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Drivers to Labor Productivity In Supply Chain

• The North American Perspective -Containerization

• Capital spending has a bigger impact on Labour
  productivity than training
• and investment in people
• Costs of handling freight per ton at Ports
  decreased by 80. Longshoreman work rules and
  unnecessary freight handling demanded that
  factories be located close to ports. The use of
  containers drastically reduced handling costs and
  efficiency at ports so that labour could be
  utilized at alternate locations mid west and
  deep south rather than in major urban areas.
  Eventually Labor was offshored to the Asia
  Pacific.
• Ship efficiency far fewer ships and personal
  are required to move the tonnages from off shore
  locations to and from North America due to
  standardized containers moving the freight.
• The ability to move the freight to a location
  where cross docking from one mode to another can
  occur rather than simply moving freight in bulk
  has enabled better use of resources in the supply
  chain i.e. rail car to container.

John Falcetta Director Logistics UMA - AECOM
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Impact on Urban Areas and traffic flows

• Transportation inevitably flows to and from or
  through urban areas on road, rail and marine
  ports.
• More and cheaper freight has been accommodated by
  bigger railcars and double stacked trains bigger
  trucks and larger ships.
• If that same freight moved exclusively by only
  truck this same freight would add greatly to
  urban congestion and air pollution and cost.
  Conversely, if it moved all by rail or marine,
  the length of time involved would increase and
  other supply chain and production costs
  (inventory in transit, working capital) would be
  negatively impacted. And some consumption might
  not be possible.
• Productivity gains in transport have lowered the
  costs of distribution. This has made urban
  centers more attractive places to live by
  encouraging economic growth further in land.

John Falcetta Director Logistics UMA - AECOM
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Impact on Urban Areas and traffic flows

• The success of transport has also put it at odds
  with some urban dwellers.
• Residents in cities such as Vancouver want to
  build condos on the waterfront that hosts
  transportation terminals.
• Auto drivers are impatient to wait for longer
  trains and demand grade separated crossings.
• Port are congested Long Beach, Vancouver

John Falcetta Director Logistics UMA - AECOM
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Six Impediments to productivity improvements in
Supply Chain

• Redistribution of Costs - Are supply chain
  participants willing to pay.
• No!

John Falcetta Director Logistics UMA - AECOM
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Impediments to productivity improvements in
Supply Chain

• 2. Lack of Leader The big player drives
  change not the small innovator i.e., Wal-Mart, CN
  etc

John Falcetta Director Logistics UMA - AECOM
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Impediments to productivity improvements in
Supply Chain

• 3. Uncertainty of the outcome
• Will the improvement help as intended?
• Corporate bureaucracy and principal agency may
  inhibit the interests of the supply chain and
  shipper.

John Falcetta Director Logistics UMA - AECOM
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Impediments to productivity improvements in
Supply Chain

• 4. Market condition must be conducive for the
  change to occur.
• Good times Bad Times.
• Recession has a tendency to encourage shippers to
  re-engineer the supply chain.
• Supply chain participants particularly
  transportation companies experience the burning
  platform Possible extinction vs. certain
  extinction.
• In better market and economic conditions, those
  firms that are able to make capital improvements
  may not due to a perception that dont fix it if
  aint broke.

John Falcetta Director Logistics UMA - AECOM
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Impediments to productivity improvements in
Supply Chain

• 5. The only people that embrace and desire change
  are babys with wet diapers.
• Often change in transportation has come with a
  great deal of anxiety strikes, walkouts.

John Falcetta Director Logistics UMA - AECOM
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Impediments to productivity improvements in
Supply Chain

• Any supply chain or system that has existed for
  50 or more years is a candidate for re
  engineering.
• Rail Yards and Terminals
• Rail main line plant
• Marine terminal
• The above mentioned comes with price tags in the
  tens of millions to hundreds of millions

John Falcetta Director Logistics UMA - AECOM
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Change in Supply Chain is also driven by factors
outside of Supply Chain

• Two major factors that have enabled the freer
  flow of goods world wide are
• The Internet
• The marine container

John Falcetta Director Logistics UMA - AECOM
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Who are the Winner and Losers

• North American Consumers and workers that
  benefit from greater consumption and
  re-deployment of labor from low value to higher
  value activities.
• Asia Pacific benefiting from the re distribution
  of wealth.

• Mexico and Central America lost that opportunity
  to become more industrialized losing to more
  efficient use of labor in other regions of the
  world

John Falcetta Director Logistics UMA - AECOM
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Globalization The China Affect has not caused
more shipping
Rather the efficient supply chain has facilitated
the free flow of capital allowing comparative
and absolute advantage in labor both domestically
and intentionally
John Falcetta Director Logistics UMA - AECOM
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The Future of Productivity Gains

• RFID technology facilitating greater
  improvements in JIT thus improving working
  capital.
• Integration of information system allowing for
  Supply chain decisions to be made in real time
  from consumer and producer information at source
  (Wal Mart).
• Greater loading on trucks and railcars i.e..
  315,000 LBS from 286,000 in railcars and 255,000
  LBS on quad chassis.
• Finally we will need to do all of this in a
  environmentally responsible manner.

John Falcetta Director Logistics UMA - AECOM
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Productivity Gains in Rail, Trucking, Container
and the impact on Supply Chain in Urban Areas
Thank you for your attention Questions?
John Falcetta Director Logistics UMA - AECOM