Civil & Environmental Engineering – Freight Transportation

Freight Transportation and Logistics

CE 453 / 553 Winter 2007
Dr. Chris Lecture 1 Winter 2007, Monsere
1

Introduction
Civil & Environmental Engineering – Freight Transportation

• Why is freight important? • How do civil engineers / transportation professionals affect freight mobility? • What is unique about freight when compared to passenger transportation?

Winter 2007, Lecture 1

2

Introduction
Civil & Environmental Engineering – Freight Transportation

• U.S. freight transportation network (2002)
– Over 15 billion tons of goods – Value over $10 trillion

• Bulk goods comprise large share of tonnage
– Grains, coal, ores

• Lighter and more valuable goods make up increasing proportion
– Computers, office, technology

Winter 2007, Lecture 1

3

Civil & Environmental Engineering – Freight Transportation

Winter 2007, Lecture 1 4

Macroeconomic view
Civil & Environmental Engineering – Freight Transportation

• Significant share of economy • Nation’s freight bill in 2001
– $579 billion spent
• Source: BTS NTS 2003

• 6.2% of GDP
– GDP - The market value of goods and services produced by labor and property in the United States, regardless of nationality; GDP replaced gross national product (GNP) as the primary measure of U.S. production in 1991

Winter 2007, Lecture 1

5

Microeconomic view
Civil & Environmental Engineering – Freight Transportation

• Personal budget
– Transportation uses about 11% of disposable income (4th after housing, health care, food)

• One in ten jobs related to transportation
– 4 million total – 75% freight related

• Half of motor vehicle sales are commercial freight units

Winter 2007, Lecture 1

6

Types of Costs
Civil & Environmental Engineering – Freight Transportation

• Transportation
– Fixed (doesn’t change with volume produced) or variable (does change)

• Inventory carrying • Stockout

Winter 2007, Lecture 1

7

Introduction
Civil & Environmental Engineering – Freight Transportation

• Key is understanding freight activity
– Matching infrastructure supply to demand – Incorporating freight-friendly strategies into designs and plans – Assessing potential investment and operational strategies – Increasing economic competitiveness of region

Winter 2007, Lecture 1

8

High Stakes
Civil & Environmental Engineering – Freight Transportation

• The Cost Of Congestion to the Economy of the Portland Region – The regional economy is largely transportation dependent. – Failure to invest will result in an annual loss of $844 million to the economy by 2025. – Additional investment would add 6,500 permanent and 2-3,000 construction jobs. – Return rate of 3 to 1 on transportation investments.

Source: The Cost Of Congestion to the Economy of the Portland Region, Economic Development Research Group, Inc. Boston, Massachusetts, Nov 2005

Winter 2007, Lecture 1

9

Inventory Costs
Civil & Environmental Engineering – Freight Transportation

• Case Study: OrePac Building Products – Relies on just-in-time delivery. – Congestion growth has required OrePac to increase inventory on hand by between 7% to 8%. – Increased costs in inventory can’t be used for more productive investment.
Source: The Cost Of Congestion to the Economy of the Portland Region, Economic Development Research Group, Inc. Boston, Massachusetts, Nov 2005

Winter 2007, Lecture 1

10

Cut-off Times
Civil & Environmental Engineering – Freight Transportation

• Case Study: Intel Corporation – Intel Corp. moved up their last outbound air departure thru PDX four times in 8 years. – Missed flights shut down production lines around globe. – Impacts include inventory surcharges and other production delay penalties.
Source: The Cost Of Congestion to the Economy of the Portland Region, Economic Development Research Group, Inc. Boston, Massachusetts, Nov 2005

Winter 2007, Lecture 1

11

Demand for freight transportation
Civil & Environmental Engineering – Freight Transportation

• Derived demand
– companies want freight transportation because they have something to move

• Demand is generally price inelastic
– elasticity =
• % change in quantity / % change in price

– For example, if, in response to a 10% fall in the price of a good, the quantity demanded increases by 20%, the price elasticity of demand would be 20%/(− 10%) = −2. (Case & Fair, 1999: 109). – negative values, use absolute – demand for freight doesn’t change much with price (but demand for “widget” might) – 1 = elastic
Winter 2007, Lecture 1 12

Transportation of freight allows
Civil & Environmental Engineering – Freight Transportation

– geographic specialization

– large-scale production

– increased competition

Winter 2007, Lecture 1

13

Service of freight providers
Civil & Environmental Engineering – Freight Transportation

• Service measures
– speed – reliability – accessibility – capability – security

Winter 2007, Lecture 1

14

Modal Picture
Civil & Environmental Engineering – Freight Transportation

• Freight modes • Depends on yardstick • Market share based on
– Value hauled – Volume hauled

• Interactive/dynamic nature

Winter 2007, Lecture 1

15

Modal Profile Value
Civil & Environmental Engineering – Freight Transportation

• Total shipper cost
– Truck dominant 79% – Rail second 8%

• Cargo value (see pie)
– Truck dominant – Intermodal second (parcel, postal, courier, rail and truck combination , other combination)

Winter 2007, Lecture 1

16

Modal Profile Volume
Civil & Environmental Engineering – Freight Transportation

• 12.3 trillion tons moved
– Truck still (less) dominant – Water next

• Ton-miles
– – – – – – – Weight x distance Rail dominates: 25% Trucking: 23% Oil pipelines: 16% Domestic water: 16% International maritime: 8% Air: