AJOT Digital Edition
Issue #592

Cover of issue-592.png

Breakbulk Quarterly

3PL Quarterly

View Issue #592 Now!

2014 Media Kit

Capacity constraints plague US transportation system

By: | at 08:00 PM | International Trade  

Tax increases may fund new infrastructure

By Peter A. Buxbaum, AJOT

‘Disruptions are increasing in North American supply chains.’ That ominous pronouncement begins a report form the RAND Corporation, a US government think tank, on the growing capacity constraints facing the country’s transportation system.

Those constraints could ultimately threaten North American economic competitiveness, the report warned. North American highway and rail infrastructure has been neither maintained nor expanded despite the increased reliance by North American manufacturers and retailers on imports, according to RAND.

‘Rising shipping costs, increasingly lengthy shipping times, increasingly variable transit times, and increasingly large inventories, all of these are evidence of constraints in the freight transport system,’ the report concluded. Consumers will eventually feel the bite if these trends continue, according to the report.

The RAND report was derived form the proceedings of a workshop conducted last year, in which representatives from shippers, carriers, and governments participated. The report was released in March 2007.

For a shipper like Toyota Motor Corporation, the deterioration of the US transportation infrastructure is felt in the way small events now include major consequences. ‘A snowstorm used to involve a minor disruption,’ said Tony Minyon, the company’s national procurement manager and a participant in the RAND workshop. ‘Now it often creates a major impact on the supply chain.’ The recurrence of major events, such as port shutdowns on the West Coast in 2002 and 2004, also worries Minyon.

From a trucking company’s viewpoint, there are three areas of capacity constraint, according to Randy Mullett, vice president of government relations at Con-way Inc., and a workshop participant. ‘Physical infrastructure constraints means we are not doing a good job adding additional capacity, whether it’s highway, rail, ports, or air,’ he said. ‘The lack of driver availability is also a constraint because we are not keeping up with the changing demographics of the workforce. Policy constraints refer to things like the paperwork required for homeland security, and regulations covering hours of service, truck size, and taxes.’

For Mullett, problems with infrastructure investment go back a long way. ‘They didn’t sneak up on us last year,’ he said. ‘Traditionally we have looked at the highway system as a shared responsibility between the federal and state governments. But the current administration is trying to devolve responsibility to the state level.’

‘This administration is clueless,’ proclaimed Tom Finkbiner, chairman of the board of the University of Denver’s Intermodal Institute. ‘The number one problem is the lack of acknowledgment there is a problem.’

But Mullett expresses some hope things might change for the better at the government level. Rep. Jim Oberstar (D-MN), chairman of the House Transportation Committee is willing to discuss increasing truck sizes, he reported. ‘That would increase transportation capacity without building a single mile of new roadway,’ Mullett noted.

Mullett is also somewhat optimistic about immigration reform, which would provide the trucking industry with a new pool of potential drivers. ‘When the emotionalism dies down,’ he said, ‘the issue will be vetted and some decisions will be made.’

Funding challenges

For Minyon, the biggest conundrum is how additional infrastructure investments will be funded. ‘That’s the biggest challenge,’ he said. ‘Shippers say the government should pay and the government says it wants a public-private partnership.’

But Gil Carmichael, senior chairman of the board of directors at the Intermodal Institute, believes he knows where the money will be coming from: increased fuel taxes and congestion pricing on roadways.

‘State departments of transportation have become increasingly vocal that they can’t live with the current level of fuel taxes,’ Carmichael said. ‘Everyone is getting use