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10 Public and Private Sector Interdependence in Freight Transportation Markets increasingly outsourced to third parties who sometimes combine the goods of different compa- nies to achieve economies of scale across interlaced freight networks. Decision-making control can be far away from the physical locations that make up a network. Where decisions are made continues to evolve over time. These shifts are changing local and regional influence over the freight transportation system. Purpose of Facilities Is Changing In the past, freight facilities such as terminals and warehouses were less sophisticated than today. Modern-day logistics practices have transformed the function and purposes of freight facil- ities. Freight facilities are now much more automated and computerized to meet the needs of just- in-time delivery practices for many manufacturers. Other facilities are organized for storing goods whose final destination is not decided until as late as possible, governed by market demand. The high-volume supply chains of large retailers that extend to overseas manufacturers have facility requirements that permit segmentation of freight flows along geographic lines and by the product life cycle of the individual products. Because consumer products can vary greatly in how long they are viable as products in the market place (contrast the product life of digital cameras with that of graphite pencils), retailers of both have a financial incentive to treat the products differently in their supply chains and distribution centers. Many warehouses are now more commonly referred to as distribution centers (see Figure 9). The emphasis of these facilities is more oriented toward being an intermediary in the movement of the goods than in the storage of goods. The operational goal for many of these facilities is to increase the velocity of goods moving through them rather than manage product storage. Distribution center networks are modified on a regular basis by companies trying to minimize Photo courtesy of Cargo Agencies costs through optimization of space requirements and facility locations. They try to achieve a bal- Diplomat Kft. ance between focusing on their own supply networks versus focusing on the need to serve their customers. Distribution center locations and sizing decisions are specific to the company's own Figure 9. Distribution business network, which is made up of suppliers, stores, factories, and/or customer locations with center. which it does business. Consequently, the market geography served by a distribution center can be as large as the entire continent or as small as a portion of one metropolitan area, depending on the size, density, velocity, and other operational characteristics of the shipper's business. Many freight facilities and distribution centers are used by multiple companies. Involvement of specialty "third-party logistics" companies that manage transportation services on behalf of others has increased the shared use of facilities. The cost savings from economies of scale of larger shared facilities benefits shippers and their customers, but it increases the complexity of the freight networks serving each facility. Manufacturing and Most Freight Activity Happens Outside of Public View freight distribution Although freight transportation and supply chains affect every community, most freight activ- facilities located away ity occurs outside of the public view. Every urban area has extensive freight transportation activ- from prominent ity. Large-scale freight activity tends to be concentrated in industrialized sections of urban areas. public view have far Freight deliveries are concentrated at night and early morning, to minimize exposure to conges- reaching impacts on tion and to have goods ready for sale on shelves during regular business hours. U.S. consumers, jobs, industry, and the The following three examples illustrate freight handling that is largely unnoticed by the public. transportation 1. Port of Wilmington, Delaware. This Atlantic seaport on the Delaware River is the largest network. import port for fresh fruit, bananas, and juice concentrate in North America. It is located in