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10 CHAPTER 2 Overview of the Freight Transportation System What Is Freight Transportation? One can think of freight transportation modes as providing a continuum of speed and service types (see Figure 2-1). One Simply defined, freight transportation is the movement of end of the freight service continuum is characterized by fast goods from one area to another. Freight transportation allows and reliable delivery, but these high levels of service also cost production and consumption to occur at different locations. the most. Air transportation is the most expensive and fastest. Transportation is necessary for economic specialization. Freight Truck transportation provides rapid and flexible service for transportation allows companies to (1) specialize in produc- shippers, but at higher cost than rail transport. Marine and ing the products for which they are best suited and (2) trade pipeline transportation are the least expensive in terms of cost with other companies to obtain products that can be made per ton-mile, but they provide less rapid and flexible freight more efficiently by others. service. Freight transportation can be considered from the perspec- Cargo characteristics determine the type of transportation tives of both supply and demand. Demand comes from busi- service demanded by shippers. Companies shipping high- nesses that need to move raw materials, supplies, and finished value or perishable cargo tend to select truck or air transport products. These businesses, called shippers, are the purchasers to reduce transit time and gain higher levels of reliability. Air of freight transportation. The supply of freight transportation is provided by the freight carries high-value goods for which delivery within a few infrastructure and the companies that move the goods, called hours is often critical, such as express parcels and fresh flowers. carriers. Freight infrastructure includes the roadway system, Trucks move a range of products, but they move a greater per- railroads, airports, marine ports, locks and dams on rivers, cent of higher value commodities like finished consumer prod- and pipelines. Freight carriers are the owners or operators of ucts, computers, and pharmaceuticals. Railroads tend to carry the trucks, trains, ships, and airplanes that provides trans- lower value, slow-moving bulk traffic (e.g., coal and grain), portation to shippers. although they also move some higher value products (e.g., auto Other important private players in freight transportation parts and finished vehicles). Domestic marine transport tends include freight brokers, freight forwarders, and third-party to carry low-value bulk cargo (e.g., coal and grain) for which logistics providers. Freight brokers assist shippers and carriers speed does not matter. Pipelines are used primarily for petro- in assembling paperwork for international or complicated leum products and natural gas. Overall, more expensive trans- shipments. Freight forwarders consolidate multiple small ship- portation services provide shippers greater visibility in terms ments into larger shipments for transport. (This often involves of where their shipment is and when it will be delivered. preparing shipping and customs documents as well.) Third- The length of haul is also an important shipment character- party logistics providers (3PLs) are companies employed to istic that determines mode choice. Trucks tend to capture assume freight/logistics tasks previously performed in house a greater percentage of short-haul freight movements. Rail, by shippers. marine, and air shipments tend to have a longer average ship- ment distance. Freight shipments often use more than one mode of trans- The Freight Transportation Modes portation. Trucks connect shippers to rail or marine transporta- The primary modes of freight transportation are truck, rail, tion modes or provide the "last mile" of freight transportation marine, air, and pipeline. Each of these modes tends to pro- to the customer. "Intermodal" freight typically refers to freight vide different types of services and move different cargo types. moving in containers or trailers that can easily be transferred

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11 Higher Service, Cost Continuum Lower Air Truck Rail Water Pipeline Fastest, Slower Freight service characteristics most reliable, .............................. less reliable, most visible, less visible, most expensive service less expensive service Lowest weight, Highest weight, Cargo highest value, .............................. lowest value, characteristics most time-sensitive cargo least time-sensitive cargo Source: Adapted from National Highway Institute Course 139001, "Integrating Freight in the Transportation Planning Process." Figure 2-1. Freight service and cost continuum across modes. between ships, railroads, and trucks. By reducing the cost of Most passenger airlines carry freight in the belly of passen- using multiple modes of transportation, intermodal freight ger planes. Cargo is carried to maximize the use of the air- movement allows shippers to use lower cost modes (such as rail craft, but cannot be completely loaded until the air carrier or marine) for long-haul movements and then switch to truck knows how many passengers and how much luggage a flight carriers to reach a final destination. will be carrying. Figure 2-2 shows the modal shares of U.S. freight trans- Cargo-only carriers operate aircraft (freighters) that carry portation in terms of value, tons shipped, and ton-miles. (One only cargo on fixed schedules. Express carriers and some ton-mile is a ton of freight moving one mile.) Trucking, mea- passenger carriers may operate some cargo-only planes as sured by value and tonnage, is the dominant freight mode. well. These operators receive cargo directly from shippers Freight in the "multiple modes" category includes parcels and and from freight forwarders. Large cargo-only carriers U.S. mail, most of which involves trucking as well. Rail accounts include Atlas Air, ASTAR Air Cargo, and Polar Air Cargo. for a large portion of ton-miles in part because it involves some A number of air carriers provide only charter air cargo ser- very long hauls. vice. Charter operators are generally small. A single cus- The following sections provide a brief overview of each of tomer, such as a consolidator, may hire the aircraft for a the different freight modes. specific trip. As shown in Figure 2-3, the express carriers transport The Air Cargo System 70 percent of all domestic air cargo tonnage. Air cargo traffic is dominated by large hub airports, such as Los Angeles International, Miami International, and Anchor- The Trucking System age International Airports, and the hub airports for Federal Express and UPS (Memphis and Louisville, respectively). Sev- The roadway network is the infrastructure for freight trucks. eral dozen smaller freight-only airports have an important role The National Highway System (NHS) consists of 160,000 miles in the air cargo system. Virtually every airport handles at least of roadway important to the nation's economy and mobility, some air cargo. including the Interstate Highway System, many state highways, The U.S. air freight industry has four basic types of carriers: and key intermodal connectors. Figure 2-4 shows the major highways on which freight truck activity is concentrated. High- Express consignment air carriers, such as Federal Express way segments shown in red and orange carry the highest truck and UPS, run scheduled flights and use a hub-and-spoke volumes--more than 10,000 trucks on a typical day. On the system, where cargo is flown to a limited number of hub red segments, at least 25 percent of all vehicles are freight airports before being sent on to its ultimate destination. trucks; on the orange segments, trucks are less than 25 percent Express carriers operate as integrated carriers, meaning they of the total. Highway segments in green and black carry fewer provide door-to-door transportation using their own or than 10,000 trucks per day; trucks make up at least 25 percent contracted airplanes and trucks. of the traffic volume on the green segments.

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12 Other/ Express Unknown Charter 3% 3% 70% Multiple Modes 16% Cargo-Only 15% Value Pipeline 4% Air 2% Water Truck 1% Rail 71% Passenger 3% 12% Source: FAA, T-100 data. Other/ Unknown Multiple 2% Figure 2-3. U.S. air cargo tonnage by carrier Modes type, 2007. 5% Pipeline 6% Air Less-than-truckload (LTL) service is used by shippers with 0.03% Tons smaller shipments that do not require a whole trailer. LTL Water 3% carriers provide local pick-ups, consolidate shipments into full truckloads at a terminal, carry shipments to a destina- tion terminal, and then provide local delivery from there. Rail Truck Yellow Roadway, ABF, Con-way, Old Dominion Freight, 69% 15% FedEx Freight, and UPS Freight are the largest national LTL carriers. Truck Private trucking comprises shippers that carry their own 42% Other/ cargoes, usually because they believe it gets them the high- Unknown est level of reliability. Private carriage is often used by major 1% retailers with large and elaborate supply-chain networks. Large private truck carriers include Coca Cola, Sysco, Multiple Modes Walmart, Tyson Foods, and Safeway. 14% Ton-Miles The LTL and TL sectors are completely different in terms of Air 0.12% number of firms. An LTL operation of any size requires a net- Water work of terminals. The large national carriers each have 200 to 5% 300 terminals. In truckload service, by contrast, there are vir- Rail tually no barriers to entry. If an individual can afford a tractor 38% and trailer and find a few customers, he or she can get in the Source: BTS, National Transportation Statistics 2009. business. Including single-truck "owner operators," there are hundreds of thousands of truckload motor carriers in busi- Figure 2-2. U.S. freight transportation by mode, 2007. ness. There is a high degree of competition in the trucking business. Virtually all shippers have access to more than one Nearly all long-haul, intercity trucking is done by combina- trucking firm. tion trucks (i.e., tractor-trailer rigs, typically with five axles), while urban trucking is dominated by single-unit trucks. Inter- The Railroad System city trucking comes in three basic forms: truckload, less-than- truckload, and private. The railroad network in the United States consists of approximately 171,000 miles of track and numerous switch- Truckload (TL) service provides shippers who can fill an ing yards where trains are assembled and disassembled.1 Rail- entire truck with direct point-to-point service. The largest roads provide three basic services: truckload carriers include Schneider National, J. B. Hunt, Swift, Werner, and US Xpress. 1 BTS, Miles of Freight Railroad Operated by Class of Railroad: 2007.

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13 Note: AADTT is annual average daily truck traffic; AADT is annual average daily traffic (all vehicles). Source: FHWA, Freight Story 2008. Developed from Freight Analysis Framework, version 2.2. Figure 2-4. Major truck routes on the national highway system, 2002. Unit trains move bulk goods for shippers who can load an able regional operation roughly in the middle of the United entire train at one time. This usually involves 100 or more States. These three carriers together have 8 percent of the com- cars. Unit trains are typically loaded with coal or grain; coal bined revenue of the big four. After that, there are a few hun- trains originating in Wyoming's Powder River Basin account dred small regional carriers and short lines. for a large portion of rail network tonnage (see Figure 2-5). Clearly, there is a high degree of concentration in this sec- Railroads also provide intermodal service. This involves tor. This reflects the enormous investment in infrastructure loading trailers and containers onto railcars. Shippers tend required to be in the railroad business on a large scale. The to use intermodal service for higher value goods. Using rail degree of competition varies with individual markets. As noted, intermodal service can lower rates for shippers for long rail intermodal service is in direct competition with truckload hauls as compared to all-truck transportation. Rail lines service in many markets. Truckload is also a competitor in most between West Coast ports and Midwestern distribution other rail markets, except long movements (more than 200 to hubs (e.g., Chicago) carry heavy intermodal traffic. 300 miles) of coal and grain. There is significant competition Last, railroads also provide carload service. This is for ship- among railroads in most, but not all, markets. Some coal and pers who load one or a few cars at a time and can tolerate grain shippers have access to only one rail carrier. long transit times in exchange for low rates. The Ports and Inland Waterway System The rail sector is dominated by four mega-carriers: Union Pacific (UP) and Burlington Northern Santa Fe (BNSF) in the The U.S. marine freight system consists of waterways and West and CSX and Norfolk Southern in the East. These four ports, including inland ports and ocean ports. Ocean port carriers move more than 90 percent of U.S. rail ton-miles. infrastructure is managed by various public and private port Three other carriers of significant size are the U.S. subsidiaries authorities funded primarily through user fees. Measured by of the two major Canadian railroads, Canadian National and tonnage, the two largest U.S. ports are the Port of New Orleans Canadian Pacific, and Kansas City Southern, which has a siz- and the Port of Houston, both of which handle more than

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14 Source: FHWA, Freight Facts and Figures 2007. Figure 2-5. Tonnage on the railroad network, 2005. 200 million tons of freight (much of it bulk petroleum prod- Collection pipelines move products from sources such as ucts). Measured by value, Los Angeles is the largest U.S. port. wells on land or offshore or from oil tankers or liquefied The neighboring ports of Los Angeles and Long Beach are the natural gas (LNG) tankers. These pipelines move products major gateway for imported freight from Asia; together they to storage, refineries, or other processing centers. handle one-third of all U.S. marine container traffic. On the Transmission pipelines transport large quantities over East Coast, New York/New Jersey, Savannah, Norfolk, and longer distances. Transmission lines deliver natural gas to Charleston are major container ports. The top U.S. container distant power plants, large industrial customers, and munici- ports are illustrated in Figure 2-6. palities for further distribution. Petroleum transmission The inland and intracoastal waterway network is also an lines deliver crude oil to distant refineries. Transmission important component of marine transportation infrastruc- lines also deliver refined products to distant markets, such ture in the United States. This network includes the Missis- as airports, or to depots, where fuel oils and gasoline are sippi River and its tributaries, the Gulf Intracoastal Waterway, loaded into trucks for local delivery. the Atlantic Intracoastal Waterway, and the Columbia-Snake Distribution lines move natural gas and consist of main Waterway in the Pacific Northwest. The system includes lines, which move gas to industrial customers, and smaller 191 commercially active lock sites, which allow barges to service lines that connect to businesses and homes. reach inland ports such as Memphis, Chicago, Minneapolis, Pittsburgh, and Lewiston, ID. The Saint Lawrence Seaway is In total, the United States has more than 2.3 million miles of another important waterway, providing ocean-going vessels pipeline; roughly 450,000 miles of which are collection and access to the Great Lakes. As shown in Figure 2-7, the bulk of transmission lines. Approximately 900 billion ton-miles of domestic marine freight transport occurs on the Mississippi and petroleum and natural gas are moved in pipelines annually.2 Ohio Rivers, and to a lesser extent, the Great Lakes. See Figure 2-8 for an illustration. The Pipeline System Pipelines are used primarily to move petroleum products and natural gas, as well as some other chemicals. The pipeline 2Dennis, Scott, "Improved Estimates of Ton-Miles," Journal of Transportation system consists of several different components. Statistics, Volume 8, Number 1, 2005.

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Source: BTS, America's Container Ports: Freight Hubs That Connect Our Nation to Global Markets, June 2009. Figure 2-6. Top U.S. container ports, 2008. Source: FHWA, Freight Facts and Figures 2007. Figure 2-7. Tonnage on the domestic waterway network, 2005.