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Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook (2007)

Chapter: Chapter 5 - Trends Affecting Freight Movement

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Suggested Citation:"Chapter 5 - Trends Affecting Freight Movement." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
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Suggested Citation:"Chapter 5 - Trends Affecting Freight Movement." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
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Suggested Citation:"Chapter 5 - Trends Affecting Freight Movement." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
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Suggested Citation:"Chapter 5 - Trends Affecting Freight Movement." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
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Suggested Citation:"Chapter 5 - Trends Affecting Freight Movement." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
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Suggested Citation:"Chapter 5 - Trends Affecting Freight Movement." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
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Suggested Citation:"Chapter 5 - Trends Affecting Freight Movement." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
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Suggested Citation:"Chapter 5 - Trends Affecting Freight Movement." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
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Suggested Citation:"Chapter 5 - Trends Affecting Freight Movement." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
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Suggested Citation:"Chapter 5 - Trends Affecting Freight Movement." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
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Suggested Citation:"Chapter 5 - Trends Affecting Freight Movement." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
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Suggested Citation:"Chapter 5 - Trends Affecting Freight Movement." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
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Suggested Citation:"Chapter 5 - Trends Affecting Freight Movement." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
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Suggested Citation:"Chapter 5 - Trends Affecting Freight Movement." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
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Suggested Citation:"Chapter 5 - Trends Affecting Freight Movement." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
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Suggested Citation:"Chapter 5 - Trends Affecting Freight Movement." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
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Suggested Citation:"Chapter 5 - Trends Affecting Freight Movement." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
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90 5.1 Overview of Trends Discussion 5.1.1 Objective This chapter is focused on a single straightforward objec- tive—to summarize key transportation and economic trends that affect the nature of roadway congestion and potential opportunities for using rail freight as a solution to that prob- lem. Since this need to address congestion and the opportu- nity to use rail freight is already presumed in the justification for this very report, informed transportation planners may consider many of these trends to be self-evident. However, the priority that politicians and decision-makers may give to rail freight solutions will in fact be driven by first establishing the strength of the case that: (1) congestion is a growing prob- lem, (2) it is changing in its nature due to shifting economic and land development trends, and (3) rail freight can some- times be part of the solution. 5.1.2 Organization Accordingly, this Chapter is organized in five additional sections: • Section 5.2, Congestion Cost Trends. This section docu- ments the fact that growing traffic levels are leading to increasing road congestion problems. In addition, rising transportation labor costs are exacerbating the costs of congestion delay to shippers. These factors help to justify increased public attention to the business costs of conges- tion and the need for solutions that reduce those costs in the future. • Section 5.3, Role of Trucks in Congestion. This section provides summary data illustrating the fact that truck traf- fic is a major contributor to overall roadway traffic. As more and more roadways approach full capacity, the incre- mental impact of trucks on congestion delays is also rising. These facts help to explain the need for attention to trucks as an increasingly important part of the congestion prob- lem, and thus an important part of its solution. • Section 5.4, Growth in Freight Activity Levels. This section examines how changes in the U.S. economy are increasing freight volumes, particularly for small size, shorter dis- tance, and higher value shipments. These trends are useful to highlight, since the feasibility of rail freight alternatives to truck shipments also vary systematically by distance, commodity value/weight ratio, and ultimate destination. Freight diversion and public investment decision models, discussed later in this report, will build on this type of information. • Section 5.5, Business Location and Land Development. This section examines how business location and urban land development patterns are systematically moving toward a dispersion of activities that tends to favor high- way shipping and disfavor rail shipping. This helps to explain what is already known—that truck is growing faster than rail as a mode for freight movements. However, this information has further use, for it also helps to estab- lish a basis for determining the situations under which rail can (or cannot) be a potentially feasible alternative to truck for freight movements. • Section 5.6, Technology Trends. This section outlines key aspects of technological change affecting the feasibility and cost-effectiveness of both rail and truck to serve freight movements. There is still much debate in the industry over which technologies will blossom in the years to come, so this discussion is focused on documenting what is now occurring and how potential future changes may affect future tradeoffs among rail and truck to move freight in some congested areas and corridors. Note on Freight Data Sources: Some of the information con- tained here derives from the FHWA’s Freight Analysis Frame- work. This body of information is undergoing an update that was not completed when this chapter was assembled. Similarly, C H A P T E R 5 Trends Affecting Freight Movement

some of the national estimates of freight shipment characteris- tics presented in this report are based on Commodity Flow Surveys (CFS), conducted by the Bureau of Transportation Statistics and the Census Bureau every 5 years. Conducted first in 1992 and then in 1997, the CFS is the nation’s primary and most comprehensive federal data source on domestic freight movement. Earlier commodity surveys were conducted between 1962 and 1982, but data for 1982 were not published. No data were collected for 1987. When the information pre- sented in this chapter was assembled, a preliminary report on CFS 2002 had been published. Final CFS data were still com- ing, so some of the traffic and commodity flow trends shown here could be displayed to 2002, and some only go through 1997. Nevertheless, these variations in data availability do not affect the nature of validity of the trends illustrated here. 5.2 Congestion Cost Trends This section provides summary data illustrating the key fact that traffic demand is growing and leading to increasing road congestion over time. Additional factors are also increasing the economic stakes, in terms of the unit cost of congestion delay to shippers. While these facts may seem obvious to informed transportation planners, the depth and breadth of this growing problem is not universally known to all public decision-makers. Yet, an appreciation of the problem is a necessary first step for even considering the investment of time in exploring multi-modal solutions and public-private cooperation. 5.2.1 Road Travel Demand Continues to Increase Total vehicle-miles traveled (VMT) on public roads has continued to grow. It increased 68 percent between 1980 and 1997. The urban VMT growth (83 percent) outpaced rural VMT growth (49 percent) over this period, which is a reflection of population shift from rural to urban areas (see Figure 5-1). 5.2.2 Rising Congestion as Supply Does Not Keep Up with Demand According to the Texas Transportation Institute’s annual report, the average highway congestion index (measured by volume per road lane) has been steadily rising over time. It increased 25 percent between 1982 (average value of .91) and the year 2000 (average value of 1.15) (see Figure 5-2). Urban highway congestion and traffic delay in the United States is particularly rising. According to the urban conges- tion indicators for 70 urban areas compiled by TTI, drivers experienced an average 40 hours of delay in 1996. This was 8 percent more than in 1990 and 150 percent more than in 1982 (see Figure 5-3). 5.2.3 Rising Cost of Congestion The TTI study estimated that the total annual cost of con- gestion in 75 urban areas reached $67.5 billion by the year 2000. That value is estimated to include $58.5 billion due to time delay (labor productivity loss) and $9 billion due to wasted fuel. Aver- 91 Figure 5-1. Highway Vehicle-Miles Traveled by Functional Class, Percent Change 1980–97. Source: Texas Transportation Institute Figure 5-2. Average Roadway Congestion Index.

age costs of congestion ranged from $595 per driver in smaller cities to $ 1,590 in large cities (see Figure 5-4). Even after adjust- ing for inflation, the unit cost of labor in transportation industries has continued to grow. Between 1990 and 2002, transportation labor costs increased by 47 percent (see Figure 5-5). In trucking operations, driver wages constitute about 30 to 50 percent of the costs of operations. Altogether, this means that the unit cost of truck driver time delay is continuing to rise, making the total business cost of congestion rise even faster than the growth in congestion time delay. Recent increases in the cost of motor fuel since 2003 (Figure 5-6) represent another factor exacerbating the increasing costs of congestion over time. 5.2.4 Increasing Breadth of Congestion Traffic congestion is expanding across the United States. Figures 5-7 and 5-8, developed by Battelle Memorial Insti- tute from FHWA data, show the geographic breadth of high- ways that are over-capacity and approaching full capacity, for both 1998 conditions and forecast 2020 conditions. The growth of congestion among inter-city corridors is particu- larly striking. 5.3 Role of Trucks in Congestion This section provides data illustrating how truck traffic is a major contributor to overall roadway traffic, in addition to passenger cars. As more roadways approach full capacity, the incremental impact of trucks on congestion delays is also ris- ing. Again, many of these facts are well known to informed transportation planners, but public decision-makers can sometimes consider congestion to be largely a problem of nuisance among rush-hour commuters. It is therefore impor- tant to help public decision-makers understand the critical role that trucks and freight flow patterns can play as part of the congestion problem and its solution. 5.3.1 High-Volume Truck Routes Figure 5-9 presents data from FHWA’s Freight Analysis Framework showing that the portion of national highway seg- ments with over 10,000 trucks is forecast to rise dramatically 92 Source: Texas Transportation Institute Figure 5-3. Urban Congestion Indicators for 70 Urban Areas (selected years). Figure 5-4. Average Cost of Congestion per Driver. Source: Bureau of Labor Statistics; all values are adjusted for Inflation and shown in constant 1992 dollars) Figure 5-5. Labor Cost for Transportation Industries.

between 1998 and 2020, for both urban and rural segments of the Interstate Highway System (IHS) and the rest of the National Highway System (NHS). Figure 5-10 shows that a large and growing amount of highway mileage in the United States is forecast to have both high total traffic levels (average total daily traffic over 100,000 vehicles) and high truck vol- umes (average daily truck traffic over 10,000 trucks). These segments are located among many inter-city corridors all across the nation, as shown in the figure. 5.3.2 Truck Contribution to Total Congestion When trucks are added to other traffic on the National Highway System, there is a doubling of the highway miles that approaches or exceeds capacity. This is true for current con- ditions (1998 values) and it remains true as congestion is forecast to grow over time (through 2010 and 2020 forecasts) (see Table 5-1). This effect becomes even more dramatic when viewed cartographically. Figures 5-11 and 5-12 map the breadth of rising congestion, when truck traffic is added to forecast car traffic levels. 5.4 Growth in Freight Activity Levels This section examines how change in the U.S. economy is leading to continued growth in freight volumes and also focusing that growth on smaller size, shorter distance, and 93 Source: Global Insight; All values are in current dollars (not adjusted for inflation) Figure 5-6. Cost of Truck Motor Fuel. Figure 5-7. Traffic and Congested Segments—1998.

higher value shipments. These trends are useful to highlight, since the feasibility of rail freight alternatives to truck ship- ments also vary systematically by distance, commodity value/weight ratio, and ultimate destination. Freight diver- sion and public investment decision models, discussed in later chapters of this report, build on this type of information. 5.4.1 Rates of Freight Growth In general, population growth and economic activity growth are commonly viewed as key factors determining freight demand growth. However, with much news about the loss of manufacturing jobs in the United States, there is a common belief as well that freight output also is declining. All of these beliefs are wrong, as freight value and volume con- tinues to grow at rates exceeding population growth. While population increased 9 percent between 1990 and 2000, total employment increased 18 percent due to a robust service economy. During this same period, freight ton-miles increased 19 percent and the value of manufacturing ship- ments increased 38 percent after controlling for inflation. Sales by the manufacturing sector, wholesale sector, and retail trade sector grew (in constant dollars) by 38, 57 and 70 per- cent, respectively. Figure 5-13 shows the relationships among 94 Figure 5-8. Traffic and Congested Segments—2020 Forecast. Figure 5-9. % of National Highway Segments with Over 10,000 Trucks/Day.

manufacturing value of output, freight tons, and population growth. 5.4.2 Mode Shifts Trucks account for over two-thirds of the total value of all shipments in the United States, as shown in Figure 5-14. This dominant share held by trucking has continued to grow over time, though air travel has the fastest growth rate (as shown in Figure 5-15). 5.4.3 Shipment Value and Weight Over this same 10-year period, there has been a contin- uing trend toward growth of higher value, lower weight, and longer distance freight shipments. Figure 5-16 shows the growth in freight shipments among different weight classes. When measured in terms of either total value or ton-miles, the rate of growth was greatest in the lower two weight classes. In most weight classes, there was faster growth in value than in tons or ton-miles, implying a shift toward higher value shipments. In all weight classes, there was also faster growth in ton-miles than in total tons, implying a shift toward longer average distance for freight movements. 5.4.4 Shipment Distance The complexity of weight, value, and distance trends becomes more apparent when viewed from the perspective 95 Figure 5-10. Highway Segments with High Traffic & Truck Volume—2020. V/C Ratio v/c < 0.8 0.8 < v/c < 1.0 (Approaching) v/c > 1.0 (Over capacity) 3,076(1.9%) 3,731 (2.4%) 151,457 (95.7%) 5,716 (3.6%) 6,577 (4.2%) 145,969 (92.2%) 7,764 (4.9%) 5,707 (3.6%) 144,792 (91.5%) 11,253 (7.1%) 7,078 (4.5%) 15,120 (9.6%) 11,940 (7.5%) 131,203 (82.9%) 139,933 (88.4%) 24,576 (15.5%) 14,849 (9.4%) 118,839 (75.1%) 1998 NHS Mileage (%) No Trucks With Trucks No Trucks With Trucks No Trucks With Trucks 2010 NHS Mileage (%) 2020 NHS Mileage (%) Source: FHWA, Office of Freight Management and Operation Table 5-1. Mileage and portion of NHS that is under approaching or over-capacity (current and forecast future).

of Figure 5-17. Using the same database and the same study period as the prior two figures, this figure shows profiles of total value, total tonnage, and total ton-miles by distance class: • The very short distance class of deliveries (0–99 miles) accounted for the greatest share of total tonnage. • The second shortest distance class of deliveries (100–999 miles) accounted for the greatest share of total value and ton-miles. • Together, the two shortest distance classes account for approximately 45 percent of the value of goods shipped, 29 percent of tons shipped, and 62 percent of ton-miles shipped. 96 Figure 5-11. 2020 Congestion without Trucks. Figure 5-12. 2020 Congestion with Trucks Added.

Changes in the location of manufacturing plants and assembly units and increases in just-in-time (JIT) produc- tions and distribution systems over the last two decades are partially responsible for the notable increases in interregional (1,000 to 2,000 mile) freight shipment in ton-miles. 5.4.5 Import and Export Shipment Patterns With continued globalization of business markets, it is becoming increasingly important to understand the pattern of freight flows to and from international borders and ports. First, it is notable that imports are growing at a rate faster than the U.S. economy (measured in Gross Domestic Prod- uct), while exports are growing at a rate slightly lagging the national rate of economic growth (see Figure 5-18.) Canada and Mexico continue to represent the top two trading partners for the United States, accounting for 32 percent of all U.S. foreign trade (see Figure 5-19.) Of course, nearly all of the freight flows to and from Canada and Mexico are transborder movements via surface modes—road and rail. However, the fastest rate of growth in imports and U.S. exports is with Asian nations, and China has already recently passed Mexico as the number 2 source of U.S. imports. Of course, the growing overseas trade requires increasing reliance on sea and air freight, and that puts additional demand on the major U.S. interna- tional seaports and international airports. That trend is accentuating the problem of congestion along major high- way freight corridors. The commodity mix of export shipments shows that agri- culture and fish products, coal and petroleum products, and wood, textile, and leather products represented the highest trade share of tonnage. Waterway is the most common mode of transportation used for these exports. However, when viewed in terms of shipment value, motor vehicles, comput- ers, telecom equipments, and aircraft are among the top U.S. export commodities (see Figure 5-20.) Altogether, the changing nature of freight activity is involv- ing some systematic shifts in products, weight, distance, and destination patterns. Shifts toward smaller size and shorter distance shipments1 are related in part to increasing attention to tight scheduling and logistics planning. Shifts toward higher value exports reflect emerging global trade patterns that are increasingly concentrating export movements at key border and air/seaport sites. However, while a growing por- tion of the higher value exports are being shipped via air, it is still important to keep in mind that all exports going via air- port or seaport still have to travel via surface modes (truck or rail) to those ports. Thus, these trends serve to underscore that the pricing and the economic feasibility of rail diversion will be defined, in large part, by emerging freight movement patterns. 5.5 Business Location Trends This section examines how business location and urban land development patterns are systematically moving toward a dis- persion of activities within urbanized areas that in many (but not all) cases serves to favor highway shipping and disfavor rail shipping. This helps to explain what is already known—that truck is growing faster than rail as a mode for freight move- ments. However, this information has further use, for it also helps to establish a basis for determining the situations under which rail can (or cannot) be a potentially feasible alternative to truck for freight movements. 5.5.1 Development of Rail and Urban Industry In the latter half of the 19th century and first half of the 20th century, industrial businesses were most commonly characterized by firms located to serve their surrounding regions. Business location surveys showed that industrial sites were often located where there was good accessibility to large labor pools, transportation (rail and canal), industrial sup- plies and raw materials, and major markets. This resulted in concentrations of industrial sites that minimized the costs of inbound and outbound freight movement and worker com- mute logistics. During that period, the locations of manufacturing facili- ties were often close to the inner core of metropolitan areas. Because of the relatively high cost of constructing railroad rights-of-way and more constrained engineering parameters, 97 Figure 5-13. Growth in Shipment Value, Ton-Miles and Population. 1While absolute length-of-haul is rising, shipment growth still is con- centrated in the low end of the distance spectrum.

The national rail network, which developed during that period, still reflects this pattern of industrial development and freight shipping. Figure 5-21 shows that the U.S. national rail freight network has clearly identifiable hubs in Chicago, Kansas City, St. Louis, Cincinnati, Cleveland and other cities. Hub by-pass flows exist, but less on a local level (as evidenced by the streaking lines throughout most of Nebraska, and the lack of direct connections between some large city pairs). 5.5.2 Development of Highways and Dispersed Industry The national interstate highway network, on the other hand, was developed during the latter half of the 20th cen- tury. Figure 5-22 shows that the highway network reflects a different sort of spatial pattern in which origins and destina- tions are more diffused than the hub-oriented rail network. 98 Figure 5-15. Growth in Ton-Miles by Mode (index 1980 = 100). Figure 5-16. Shipment Size Percent Growth, 1993–2002. Percent of Total Value, 1993-2002 (in constant 1997 $) Figure 5-14. Domestic and Export Bound Shipments Within the US, by Mode. rail lines tended to take more circuitous routes than today’s highway network. The resulting network was often a hub- and-spoke type operation with sidings woven together to form branches, which merged to form mainlines and trunk routes—taking its cues from the natural system of waterways which often provided logical rights-of-way that decreased the costs of engineering.

more dispersed pattern of highways and truck movements helped to grow a pattern of industrial activities and freight flows that does not always lend itself to more consolidated shipping methods such as rail. This becomes a key issue in screening alternatives, as the Guidebook discusses. Today, we see that the evolution of business location and freight movement patterns has caused a shift toward increas- ing dispersion of business locations. This is evident at two dif- ferent spatial levels. Figure 5-23 shows the relative shift of business growth within metropolitan areas toward suburban locations. Employment in suburban areas increased by 39 percent over 1970–1980, and by nearly 14 percent over 1990–2000. Figure 5-24 shows that there was also an increase in manufacturing employment in non-metro areas and a decline in manufacturing employment within metro areas between 1990 and 2000. 99 Figure 5-17. US Freight Shipment by Distance Shipped. Figure 5-18. Value of Imports and Exports as a % of US GDP. Figure 5-19. Value of US Imports and Exports, by Trading Partner ($ billions). It clearly has visible ‘mainlines,’ but even the smaller cities have direct connection with one another. Today’s more dispersed pattern of development and industrial activities is almost entirely the logical result of the development of automobiles and highways—a transporta- tion system that handles capacity in smaller chunks. This

Along with the dispersion of manufacturing and freight shipping patterns, there has also been a location shift in man- ufacturing across America during the last three decades of the 20th century. In general, the pattern has been a loss of man- ufacturing employment from the North Atlantic and New England regions toward the west, northwest and Midwest region. However, the South and Midwest regions still domi- nate as main manufacturing regions. 5.5.3 Industry Examples Automobile and textile industries provide two examples of location shifts in the manufacturing sector. In early times, transportation cost was the decisive factor in industry loca- tion. Hence, traditional U.S. manufacturing industries were based in big cities, with access to transportation (rail and canal), near major markets, and near industrial supplies. With modern times, markets opened, trade policies changed, and, most important, as operation cost rose, new manufac- turing methods, like JIT penetrated, thus leading to shift in the industrial location. In the 1950s, automobile manufacturers had assembly plants distributed across the country. As the U.S. share in automobile production declined, fewer plants were needed. In the 1990s, new plants were located in the center of the country in order to minimize distribution costs and vehicles 100 Figure 5-20. Shipment Characteristics of Selected Commodity Groups—Percent of Total for 1997 and 2002. Figure 5-21. Rail Freight Network.

had to be shipped to the rest of the country (see Table 5-2). However, the changing manufacturing and supply relation- ships, the use of JIT systems, and the impact of the Internet on supply chains have further complicated the manufactur- ing process. Today, two types of automobile plants are in existence—a few automobile and truck assembly plants and several thousand component plants that manufacture parts. Consequently, manufacture, assembly, and the sale of a sin- gle product may involve several different facilities located hundreds or even thousands of miles apart from one another. The textile, clothing, and apparel industry is another example of a business that has taken on a “global dimension” in the location shift pattern. In the 1960s and 1970s, Taiwan and Korea were the dominant textile export countries. How- ever, in the 1980s and 1990s China, Malaysia, and Indonesia emerged as leading exporters. Lastly, the freight railroads’ share has been declining in part because freight railroads are inherently less flexible than trucks. The freight railroads have slower speed and hence are often less compatible with JIT delivery methods. Railroads can complete direct movements only on a network of 100,000 miles and must transfer loads or cars between railroads. Such transfers take a significant amount of time. In addition, the operating environment of railroads is far more complex than that of trucks. Railroads are one of the nation’s most capital- intensive industries. As a result, it is especially challenging for railroads to maintain and expand infrastructure. Altogether, these trends and examples illustrate the need for any economically realistic analysis of rail freight diversion to focus clearly on differentiating commodity markets and then focus on those most conducive to increasing use of rail freight options. 5.5.4 Land Development Trends While industrial locations are dispersing across the coun- try, localized development is being concentrated in built-up parts of metropolitan areas. According to the Annual NRI “Urbanization and Development of Rural Land” Report for 2001, growth in urban land area development increased by 65 percent between 1982 and 2001, while total land area development increased by a much lower 46 percent (see Fig- ure 5-25). 101 Figure 5-22. Truck Freight Network. Figure 5-23. Level of Employment by Urban/Suburban Location.

This same trend toward urbanization in terms of popula- tion can be seen in Figure 5-26. This figure shows the concentration of population growth in metropolitan areas, while there was population loss in non-metropolitan areas. This trend toward metropolitan areas is partially responsible for increasing urban traffic (vehicle-miles traveled) and con- gestion levels. 5.5.5 The Example of Chicago The evolution of freight railroads in Chicago illustrates the type of transformation occurring across America. Chicago has long had the highest concentration of railroad activity in the United States since the first railroad reached there in 1850. Recently, as the railroad industry transitioned from the box- car age to the intermodal age, Chicago’s many classification yards were re-cast as intermodal yards in a series of widely documented schemes. Union Pacific’s recent effort to focus its resources on growing the intermodal business has seen the construction of Global III, a dedicated intermodal facility, at Rochelle, Illinois, about 80 miles from The Loop. The inabil- ity to expand its capacity at the downtown and inner-subur- ban sites, plus protests at a number of suburban sites closer to the downtown, contributed to the decision to construct the facility in the exurban area. Higher property values in the inner urban core also contributed to the decision. This is not the first time freight facilities have been moved from the downtown in Chicago. The Rock Island Railroad’s Chicago Terminal, LaSalle Street Station, was a large station with a head house and an adjoining break bulk freight facil- ity constructed in 1903. After the demise of the Rock Island Railroad in 1975, the facility fell into disuse and was replaced by office buildings. The opportunity cost of land in the downtown is clearly extremely high, and not all of Chicago’s downtown freight facilities of yesteryear would be relevant today (for instance, transfer freight terminals that were intended as warehousing for break bulk cargoes are no longer required). However, it is not clear that rail freight options were considered at the time when the cityscape was being dramatically altered—during the transition from an industrial-based economy focusing on 102 Figure 5-24. Percent Growth in Non-Farm Employment by Location Type. State Main Manufacturers Numbers Employed Year Alabama Honda, Hyundai, Daimler Chrysler (Mercedes-Benz) 83,710 2002 Georgia Ford, General Motors 64,000 2002 Kentucky Ford, General Motors, Toyota 87,659 2003 Mississippi Nissan 30,000 n/a South Carolina BMW 42,000 2001 Tennessee General Motors (Saturn), Nissan 62,273 2001 Source: State Statistics; includes part supplies Table 5-2. Employment in motor industry: 2001–2003. Figure 5-25. Trend in Developed Land by Location Type.

warehouses and factories to a service-based economy focus- ing on office towers. Figure 5-27 shows a sequence of three maps illustrating the evolution of developed land in the Chicago region over the period from 1920–1990. The original pattern in 1920 shows land development extending radially along the rail lines. By 1970, motor vehicles using the road network had become more important and land development became more dis- persed, filling in areas not served by rail lines. By 1990, that trend had increased further. These Chicago examples thus illustrate how the role of rail freight today is necessarily dif- ferent from the role it played as the city first developed. 5.6 Technology Trends This section identifies examples of technology trends affecting the feasibility and cost-effectiveness of both rail and truck to serve freight movements. Technology trends clearly have great significance for the determination of economic feasibility of truck to rail freight diversion. Diversion feasibil- ity is accordingly discussed in detail in the next chapter of this report, so the overview provided here is merely intended to illustrate the existence of long-term technology shifts that are coincident with shifts in economic, freight, and business loca- tion patterns. 103 Figure 5-26. Trends in Metropolitan and Non-Metropolitan Population. Figure 5-27. Urban Development Pattern in Chicago Relative to Rail Lines.

5.6.1 Intermodalism On the macro level and apart from information systems, transportation technology has changed relatively little in the past 20 years. Although legislation has forced truck manu- facturers to produce more fuel-efficient and less polluting vehicles, and size limits expanded, the basic form of the truck has not changed. The ocean-going container cube standard, at 20 by 8 by 81/2 feet (and the double-length 40-ft types), has also remained fixed. Operations of trailer- on-flatcar trains, pioneered by the Chesapeake & Ohio in the 1950s and later pushed into production phase by the New York Central, have remained largely unchanged since the advent of stack trains in the 1980s. The ‘intermodal’ rev- olution is more of an evolution than a revolution, in the sense that the traffic mix on the railroad evolved from one dominated by carload traffic to one becoming dominated by intermodal traffic. 5.6.2 Motor Carriage There has been a variety of “extensions” to truck size and weight standards, which have modified the economics of trucking and shipping in the background. Domestic trailers and containers, for traffic in the United States, were progres- sively extended from 40 to 45, 48, and finally to 53 feet at the beginning of the 1990s. Progressive changes in highway design standards have allowed these longer trailers to run without causing safety problems. The hi-cube containers have also made an impact, extending the height from 81/2 to 91/2 feet. The newer domestic trailers with low-profile wheels, low floor, 91/2-ft minimum height, and 53-ft length, could replace ocean-going containers on a two-for-three basis. This has contributed to increased transloading activi- ties at West Coast ports for light-density imports that ‘cube- out’ before they ‘weigh-out.’ Driven by changes in highway standards, many states allowed double and triple trailers to operate. Increases in trac- tor diesel engine performance have allowed higher tractive effort, thus making it possible for a single tractor to tow mul- tiple trailers at acceptable operating speeds. Engine improve- ments also boosted fuel efficiency and prolonged operating life. Although these changes have been incremental, they expanded competitiveness and market reach for trucks as operating costs were reduced. Costs and business capture have been further improved by the substantial gains in equip- ment utilization and service quality afforded by control tech- nology. Two-way mobile voice and data communication, global positioning systems, truck monitoring devices, optical readers, and information software have made assets in the field more productive and more responsive to customer requirements. 5.6.3 Railroads In general, railroad technology improvement in the last 20 years has been focused on (1) larger/longer equipment or consists; (2) lower operating and maintenance costs, includ- ing signaling; (3) the double-stack innovation; (4) the auto- mobile-rack innovation; and (5) safety improvements. To understand the philosophy ‘bigger is better,’ one simply needs to examine a list of equipment that has increased in size in the past 20 years: the boxcar, the coal hopper, the grain hopper, the articulated flatcar, the locomotive horsepower, and the length of train. The only piece of equipment that has not evolved much in this manner is the plain gondola car. Lower operating and maintenance costs have come from a variety of sources. The elimination of the caboose and of crew positions and the use of the remote-controlled locomotives have allowed railroads to compete for freight at even lower costs. Changes in network and operating practices have also decreased the railroad’s cost base—by cutting maintenance of way, concentrating trains on increasingly fewer core lines, and by eliminating intermediate classification yards while focusing on long-haul through traffic. The incremental improvements in both maintenance of way equipment and the components (such as concrete ties and Pandrol fasteners) have allowed rail- roads to achieve higher axle loads, higher tonnages, lower costs, and less downtime. Signaling improvements have allowed many towers to close while centralized dispatching evolved to deal with trains with increasingly tighter headways. As a result, railroads have become capable of handling large loads more efficiently while becoming less efficient at handling smaller loads. This has allowed them to conquer certain dense traffic markets while continuing to cede carload traffic to trucks. The double-stack and automobile-rack innovations per- mitted the carriers to make more effective use of a great rail asset: the ability to carry heavy, consolidated loads with effi- ciency. Double-stack trains almost halved the cost of inter- modal operations, making it much more competitive with road-based transport—to the extent that the majority of marine import freight today travels by train. The three-level automobile racks made much more effective use of train capacity while protecting the cargo (compared to finished automobiles carried on flatcars). Since 1980, railroads have also developed a safer operating environment, due to incre- mental improvements in tank car design. Development of new types of couplers, defect detectors, and fiber-optic net- work have both reduced the instances of failures and enhanced the railroad’s ability to detect problems. 5.6.4 Marine Technological changes in marine shipping have been dom- inated by the quest to build increasingly larger ships. As the 104

volume of containers being shipped throughout the world increased, the generation of very large ‘Panamax’ class ships—the largest that could fit through the Panama Canal— was surpassed, and it became economical to construct super- size vessels and routes without dependence on the Panama passage. In the meantime, clearance-restricted routes, such as the St. Lawrence Seaway, became less important as railroads replaced ships in those trade lanes. On the whole, propulsion and loading/unloading technologies have not changed a great deal in the shipping industry. There have been incremental improvements in coatings and engines, and environmental regulations have forced changes from single to double hull and separate ballast and cargo tanks, but all of the ‘break- through’ technologies proposed, including nuclear propul- sion, ‘fast-ship,’ and hovercraft, have received limited niche acceptance or none at all. Navigation has greatly benefited since global positioning systems were developed and satellite communication improved. This has made it cheaper to trans- mit information about shipments and increase safety by allowing advance notice of dangers. 5.6.5 Commodities While the technology of sea transport has not changed a great deal over the past 20 years, technologies behind the commodities being shipped have undergone fundamental transition. The advanced technology and high degrees of automation, along with the high level of wealth generated by technological innovations at the turn of the 21st Century, have allowed many everyday items to migrate from the durable to the disposable category. Greater information tech- nology and data processing capability have allowed a much greater degree of customization than in the past. Technology-driven economies, rather than manufacturing- driven economies, have a tendency toward generating non- material products such as intellectual property, software, banking, medical, and legal services and highly customized products in small batches (such as scientific instruments) created to order in smaller production facilities. This has con- tributed to some regeneration of cities and higher degrees of congestion, as it is now possible to be productive without con- suming great tracts of land area to set up mass-production plants. For the freight industry, this has meant trends toward (1) disposable goods, with higher use rates and more ship- ments; (2) greater customization, with more seasonal prod- uct categories; (3) non-material or made-to-order products, with smaller shipment sizes; and (4) miniaturized goods, with high cost per unit volume, higher logistics costs, and higher speeds required. Although some goods are still sold with methods similar to those of 20 years ago (e.g., gravel or coal), others have migrated to the Internet and mail-order market, resulting in more small packages than before. Goods distribution and supply chains have become based more on a “totally con- nected network” than a “hub-and-spoke network,” and the network itself has begun to define the business enterprise. New forms of knowledge-based specialization have occurred, where design may take place in one location, production in several others, and assembly in a third. This is one of the mechanisms of globalization; linkages take place in the information and transportations systems, which replace inventory and centralized structure as the methods of control. The organization typically aims to pro- duce and locate goods according to immediate demand rapidly communicated up the chain, and this form of demand-oriented pull logistics has begun to dominate over production-oriented push-logistics. (As illustrated in Figure 5-28, “Pull” means that events at the consumption point draw product through the system, instead of product being pushed down toward an expected demand.) Consolidation of freight is increasingly difficult due to small order sizes issued frequently, and this leads to new methods being created to organize product flow. Thus, the staging of goods and the integration of the far-flung supply chain become critically important functions, and the precision of transportation along with its operational information are made vital parts of the system. These changes in the logistics market have created opportunities for rail through the growth of containerized imports, yet they are also changing consolidation patterns and are placing new demands on all carriers for their cost and level of service. 5.6.6 Economy New technologies such as radio frequency and computer- directed storage and handling systems, satellite-supported GPS for tracking and expediting shipments, and use of the Internet to connect trading partners and customers are being widely used to create more effective and efficient distribution of raw material and goods. Internet-based catalogues offer products such as consumer electronics, luxury goods, sports goods, freshly produced foods, prescription medicines, and replacement parts. Customers are expecting overnight deliveries of this Internet- based e-commerce. This is leading to either a network of market-based distribution centers filled with inventory, or fewer fulfillment hubs requiring much less inventory, where overnight delivery is possible. The movement toward globalization with the emerging markets, cheap supply sources, new trading partners, and increasing industry competitiveness is compelling enterprises to develop new strategies to track orders and react to changes in real time in the handling and transporting of materials, as 105

they move across the supply chain from originating suppliers to end customers. 5.7 Summation This chapter has reviewed the spread of congestion and the rising dependence on trucks, the expansion in freight activity and shifts in business location, and the changes to technology and business forms. Together these trends make for steady ferment in the transportation industry. The need is growing for alternatives of the sort that rail can represent, while the factors that shape its economic feasi- bility are offering new opportunities and imposing higher demands. 106 (A) Push Logistics (B) Pull Logistics Figure 5-28. Urban Development Pattern in Chicago Relative to Rail Lines.

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TRB's National Cooperative Highway Research Program (NCHRP) Report 586: Rail Freight Solutions to Roadway Congestion-Final Report and Guidebook explores guidance on evaluating the potential feasibility, cost, and benefits of investing in rail freight solutions to alleviate highway congestion from heavy truck traffic.

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