The Flow of Imports Into the US and the Supporting Movement Infrastructure

1
The Flow of Imports Into the US and the
Supporting Movement Infrastructure
Good Moves Consulting Livi Kerszenbaum, Jeff Coop
er, Kelly Hart, Jerry Chen, David Tam, and Sal
Ceballos UC Irvine Paul Merage School of Busines
s June 7th, 2006
2
Our Role and Objective

• OUR ROLE
• As the UC Irvine MBA student team, we
  researched and provided data and recommendations
  regarding the movement of imported goods within
  the scope agreed upon by the team and the NAIOP.
• OUR OBJECTIVE
• To provide this data and recommendations to the
  NAIOP to help raise awareness of the issue and
  contribute to the search of viable solutions.
  
• NOTES
• Work is cited in written documentation.
• Analysis is representative of our conclusions.

3
Agenda

• PART I
• Current Issue Trends
• Descriptions
• Waterways
• Railways
• Freeways
• PART II
• Analysis
• The Future
• And how we get there

4
Current Issue
RESULTS Congestion causes a ripple effect and b
usinesses can lose millions in revenue.
5
Goods Statistics

• 80 of foreign freight arrives by ship to U.S.
  west coast
  
• 60 transferred by rail or truck to U.S. eastern
  region
  
• Container traffic has more than tripled in last
  20 years
  
• Double again in the next 10 years

6
Major Areas of Global Goods Movement Activity
Panama Canal, Panama
Suez Canal, Egypt
New York/New Jersey
Beijing, China
Shanghai, China
Washington
California
Singapore
Mexico
Kuala Lumpur, Malaysia
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National Port Overview
PACIFIC REGION Seattle Los Angeles Long Beach
SOUTHERN REGION New Orleans Georgia Miami
EASTERN REGION New Jersey New York North Caroli
na
Philadelphia
INTERNATIONAL Mexico, Panama Canal, Suez Canal
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Growth Trend Reflected in TEUs
Shows trend that quantity of imports to the US
are increasing.
9
Current Million of TEU Throughput, 2005
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Future Expected Growth in Millions of TEUs
Over the next 15 years, the top ten U.S. ports
will experience a growth of 33 in millions of
TEUs.
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Example of Expected Growth Los Angeles

• 8 major container terminals
• 4 dockside intermodal rail yards with direct
  access to the Alameda Corridor
  
• 20-mile express railway connecting the Port to
  the rail hubs in downtown Los Angeles
  
• 7500 acres, 43 miles of waterfront and features
  26 cargo terminals, Combined - 162 million
  revenue

25B tons
15B tons
5B tons
1995
2006
2020
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Overview of U.S. Ports

• There are 355 ports in the U.S.
• West Coast Ports
• Ports of Los Angeles/Long Beach reaching
  transportation gridlock
  
• Ports of Oakland Seattle do not have necessary
  infrastructure to keep up with demand of larger
  ship use
  
• Seattle/Tacoma has environmental concerns which
  limits expansion
  
• All Low-cost solutions have been implemented
• Pier Pass (night operations)
• Rail yards operating at capacity

• East Coast Ports
• Planned expansion of ports, but aging and
  congested off-port
  
• infrastructure creates challenges to goods
  movement
  
• Gulf Coast
• Will benefit from west coast port congestion
• Limiting factor is access

13
Port Expansion Projects

• All ports are undergoing projects to expand
  capacity and increase efficiency via
  
• Dredging
• Constructing additional berths/terminals
• Purchasing of new equipment
• Specific expansionary projects include the
  construction of
  
• On-dock rail facility (Los Angeles)
• Intermodal warehouse (Philadelphia)
• Distribution center (North Carolina)
• Across the country, billions of dollars are being
  spent to expand capacity at the ports!
  
• Impact on US Economy
• The U.S. consumer may be impacted through
  higher prices, fewer choices and lower
  inventories on goods
  
• The US ports may lose business and jobs to
  foreign ports because of inability to handle
  demand
  

Cranes transported from China to LA/LB port
14
Suez Canal

• Two way north-south transport between Europe and
  Asia
  
• 163 miles long, 984 ft wide at narrowest point
• Passage takes 11-16 hours
• Capacity to accept ships displacing 150,000 tons,
  53ft draft
  
• Plan to increase draft allowance to 72ft by 2010

15
Panama Canal

• Connects the Atlantic and Pacific oceans
• Cut trips NY to SF trip 14000 to 6000 miles
• Estimated usage 80M tons
• 2005 saw 278M tons
• Estimated by 2011 37 of worlds container ships
  will be too large for the present canal
  
• Third Set of Locks Project 5.25B, open for
  traffic 2015
  

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Overview of U.S. Railway

• 6 main freight lines, privately owned
• LA / Chicago hubs
• Profitable w/ 36.9 billion in revenues
• Approximately 159,000 miles of railroad track in
  the U.S.
  
• 1.7 trillion ton-miles of traffic per year,
  covered by 692,602 freight cars
  
• 1.95B tons of goods valued at 530B shipped via
  rail

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Railway Solutions

• Problems
• Traditionally poor customer service
• Losing business to trucking
• Regional segregation
• Traditionally seen as a slower, less convenient
  mode of goods transportation
  
• Solutions
• Using technology to upgrade scheduling, tracking,
  and routes
  
• Investing in additional rails and yards
• Improving customer service
• Attraction
• As gas prices increase, rail becomes a more
  attractive, cheaper shipping mode
  
• Rail infrastructure development costs less than
  freeway development

1 gallon of fuel takes 1 ton of goods

410 miles by train 59 miles by truck
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Overview of U.S. Freeways

• Influence of the pull system

• Increase of truck travel and freeway usage

• VMT growth versus lane miles growth

• Time and cost measures

19
Freeway Congestion 1998
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Freeway Congestion 2020 (projected)
Shows the trend that infrastructure will not be
able to accommodate increases.
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Freeway Solutions
Goal To move traffic smoothly and efficiently.

• Managed Lanes concept to relieve congestion

• Improves efficiency and throughput

• HOV and HOT lanes

• Reversible Lanes (I-15 San Diego)

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Agenda PART II

• Analysis
• China
• Business Solution Example
• Emerging Trends
• Risk management by diversifying port docking
  locations
  
• Short Sea Shipping
• Greater use of Automation
• Moving Forward
• Intermodal Freight Technology Working Group

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Cargo Transit from China to US

• Determinants of Transit Time
• Number of Port Calls
• Carriers Schedule
• Access to Suez and Panama Canal

• Determinants of Shipping cost to consumers
• Number of TEUs
• Type of Cargo
• Who is the customer?

• Effective Goods Movement depends on port usage
• West Coast ports congested
• East Coast ports are less congested but longer
  transits

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Cargo Transit from China to US
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Shanghai to North American Port Destinations
Shanghai to NY by sea 29 days
Shanghai to NY through LA 158 23 Risk of
up to 7 day delay DECISION Convenient LA route
with risk of delay?
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Business Solution Example
International Retailer Manufactures in China
GOAL 2010 We will be shipping product more
efficiently and at a lower cost than any other
retail company (in their industry) in the world
and will have saved 10 million over five years.

• Changed from carrier volume percentage awarded
  relationships with specific shipping companies
  
• Highlighted hidden costs
• Consolidating containers with three core partners
  
  
• Leverage multi-year contracts
• Placing a dedicated company person
• Buy-in at all levels
• Visit them onsite face-to-face

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Emerging Trend Short Sea Shipping

• Current situation
• Aging infrastructure
• Very high costs for infrastructure expansion
• Increasing pollution
• Low efficiency due to congested traffic
• Low fuel efficiency

• SSS is a good option
• 25,000 miles of inland and coastal waterways
• Promotion of intestate and international (with
  NAFTA partners) commerce
  
• Creation of new jobs

28
Emerging Trend Short Sea Shipping

• Movement of freight along coasts and inland
  waterways
  
• Popular in Europe since 1995
• Environmentally friendly
• Cheaper than road transport
• Reliable

• Represents more than 40 of all freight moved
  today in Europe (reducing road transport to 45)

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Maritime Administration Short Sea Shipping
30
Emerging Trend Port Automation

• Leading Innovator International Terminal
  Solutions
  
• System Improvements Container position
  determination, Radio data, Truck identification,
  Truck/carrier positioning
  
• Automation Benefits Real-time monitoring/reportin
  g of data, Automatic identification of the
  terminal truck providing automated container
  identification for the container handling
  equipment
• Overall Increased Efficiency thru increased
  access to container and trucking data

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It is only a matter of time
Before the current logistics system will topple.
Processes will come to a halt, time and money
will be lost. The balance will shift and
businesses will be the losers.
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Bridging the Communication Gap

• Awareness amongst key stakeholders
• Coordination of private and public entities
• Need to collaborate industry and government
  priorities to leverage collective knowledge and
  financial investment
  
• Impact of technology on system improvements

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Intermodal Freight Technology Working Group
(IFTWG)
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What is the IFTWG?

• Existing group formed by the US Department of
  Transportation
  
• Goal is to improve the efficiency of intermodal
  freight movement through technology-based options
  
  
• Public-Private partnership
• Requirements for participation

35
IFTWG Latest Project Proposals

• Encouraging private sector involvement
• Sharing data via the Electronic Freight
  Management Initiative (EFM)
  
• Centralized database for private sector
  proprietary information
  
• Cross Town Improvement Project
• (C-TIP)

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Challenges for IFTWG

• Inability to strictly regulate initiatives
• Lack of consistent communication between
  participants
  
• Private sector involvement- How does it affect
  profitability?
  
• Limited funding sources

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Recommendations for IFTWG

• Increase participation through change in
  perceptions
  
• Raise awareness of IFTWG efforts and membership
  opportunities with key stakeholders
  
• Enforcement of project proposals
• Involve Members of U.S. House and Senate in
  enforcement procedures
  
• Seek further funding opportunities

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C A S T C R E W Sal Ceballos Jerry Chen J
eff Cooper Kelly Hart Livi Kerszenbaum D
avid Tam S U P P O R T Emile Pilafidis A
l Beaudette ORGANIZATIONS UCI Paul Merag
e School of Business Lowe Enterprise Real Estate
NAIOP
?
Questions
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Facts Figures
Railway LA / Chicago hubs 50 hours from LA to C
hicago and 4-5 days from Chicago to New York
Freeway Most frequent freight transport method
(67 of domestic shipments) 2020 Freeways conge
stion projected increase from 10 to 29
Time 240 million hours lost from truck delays
annually 47 annual hours of delay/person in 2003
(urban) Money Truck delays costs 32.15 per ho
ur, which amounts to 8 billion annually. Annual
cost per person is 794 SSS There are 25-thou
sand miles of Inland and Coastal Waterways in the
United States they connect to
45-thousand miles of interstate highways,
152-thousand miles of rail, and
460-thousand miles of pipelines