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Performance Measures for Freight Transportation (2011)

Chapter: Chapter 5 - Freight Stakeholder Preferences

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Suggested Citation:"Chapter 5 - Freight Stakeholder Preferences." National Academies of Sciences, Engineering, and Medicine. 2011. Performance Measures for Freight Transportation. Washington, DC: The National Academies Press. doi: 10.17226/14520.
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Suggested Citation:"Chapter 5 - Freight Stakeholder Preferences." National Academies of Sciences, Engineering, and Medicine. 2011. Performance Measures for Freight Transportation. Washington, DC: The National Academies Press. doi: 10.17226/14520.
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Suggested Citation:"Chapter 5 - Freight Stakeholder Preferences." National Academies of Sciences, Engineering, and Medicine. 2011. Performance Measures for Freight Transportation. Washington, DC: The National Academies Press. doi: 10.17226/14520.
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Suggested Citation:"Chapter 5 - Freight Stakeholder Preferences." National Academies of Sciences, Engineering, and Medicine. 2011. Performance Measures for Freight Transportation. Washington, DC: The National Academies Press. doi: 10.17226/14520.
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Suggested Citation:"Chapter 5 - Freight Stakeholder Preferences." National Academies of Sciences, Engineering, and Medicine. 2011. Performance Measures for Freight Transportation. Washington, DC: The National Academies Press. doi: 10.17226/14520.
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Suggested Citation:"Chapter 5 - Freight Stakeholder Preferences." National Academies of Sciences, Engineering, and Medicine. 2011. Performance Measures for Freight Transportation. Washington, DC: The National Academies Press. doi: 10.17226/14520.
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Suggested Citation:"Chapter 5 - Freight Stakeholder Preferences." National Academies of Sciences, Engineering, and Medicine. 2011. Performance Measures for Freight Transportation. Washington, DC: The National Academies Press. doi: 10.17226/14520.
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Suggested Citation:"Chapter 5 - Freight Stakeholder Preferences." National Academies of Sciences, Engineering, and Medicine. 2011. Performance Measures for Freight Transportation. Washington, DC: The National Academies Press. doi: 10.17226/14520.
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Suggested Citation:"Chapter 5 - Freight Stakeholder Preferences." National Academies of Sciences, Engineering, and Medicine. 2011. Performance Measures for Freight Transportation. Washington, DC: The National Academies Press. doi: 10.17226/14520.
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Suggested Citation:"Chapter 5 - Freight Stakeholder Preferences." National Academies of Sciences, Engineering, and Medicine. 2011. Performance Measures for Freight Transportation. Washington, DC: The National Academies Press. doi: 10.17226/14520.
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40 c h a p t e r 5 Freight stakeholder Preferences In the earlier tasks, the literature was reviewed to analyze the evolution of performance measurement in the private and public sectors, with a particular emphasis upon freight performance measurement. Sources of data also were exam- ined to determine what measures were possible. The next phase consisted of several related efforts to deter- mine the interests of key stakeholders in freight performance measures. To capture private-sector interests, a survey was conducted of members of the CSCMP and interviews were conducted with private-sector freight companies. To assess public sector interests, a survey was conducted of all 50 state transportation agencies, and interviews were conducted with public sector organizations, such as AASHTO and the FHWA. Each aspect of the freight system creates a potential stake- holder who may have an interest in measuring and managing the freight system. These stakeholders cut across nearly all public and private sectors because of the symbiotic relation- ship between the agencies and corporations that build freight networks and the shippers who use them. Significant diversity of interest in freight performance measurement was documented. Among private-sector firms, the cost, timeliness, and reliability of their own supply chains were of intense interest, whereas they expressed considerably less interest in measures of system condition or externali- ties. Private-sector logistics officials and trucking executives expressed keen interest in their own fleets, customers, and vendors but less interest in government-provided metrics. Two-thirds of private-sector respondents indicated that they never sought government-provided freight performance measures. Performance measures are important enough to the members of the Association of American Railroads (AAR) that it produces extensive rail system performance indicators compiled from the Class I railroads. The trucking industry’s research arm, ATRI, is working closely with FHWA to pro- duce measures of truck speed and reliability. However, the American Association of Port Authorities (AAPA) expressed skepticism that measurement of the ports of its diverse mem- bers would be meaningful. AAPA’s position was the ports have such significant variability that comparing performance to means or averages would be suspect. Responses to surveys and interview requests from individual ports were low. State transportation officials were very interested in high- way system performance at the local and regional level. They displayed markedly less interest in national highway mea- sures, or in measures related to modes for which they lack oversight. National transportation officials were interested in national measures, while other national agencies such as the EPA were interested in the air-quality areas for which they have jurisdiction. In short, interest in freight performance measurement was as varied as are the roles of the respon- dents. The eight trucking company officials interviewed each recommended a different set of measures as being important to them, even though they are all in the same industry. No two state DOTs that have identified freight performance measures have adopted the same measures. The CSCMP survey pro- duced great variation among recommended measures. Like- wise, among the state DOTs surveyed, substantial variation in proposed measures was evident. Generally, public-sector officials were interested in policy, planning, and investment measures, whereas private-sector respondents were most interested in cost and operational measures. Beyond those generalities, it was difficult to identify precise measures that appealed to a broad cross section of stakeholders. Private-Sector Perspectives The great diversity of private-sector stakeholders is evident from earlier tables and descriptions of the substantial diver- sity that exists within the U.S. economy. Nearly every category of firm would have some interest in freight system perfor- mance. Those interests, however, would be quite diverse, even within similar categories of industries. A very localized

41 small manufacturer’s interests will be different than those of a multinational manufacturer who relies upon tightly strung global supply chains. Likewise, the real-time high-value- package focus of UPS is quite different from that of an upper Midwest grain shipper barging corn to New Orleans. Their scale of timeliness, cost, waste, and reliability are significantly different. The CSCMP membership was surveyed because it repre- sents a cross section of the private-sector logistics industry. Among its largest groups listed in approximate order by cat- egory are: 1,985 logistics and management planning firms; 1,938 manufacturers; 1,061 third-party logistics providers; 630 food and beverage providers; 420 consulting firms; 411 transportation management firms; 400 educators; 398 ware- house operators; 307 pharmaceutical and toiletry producers; 222 auto and transportation equipment producers; and 206 department store or general merchandise firms. These, of course, are only the largest categories; more than 2,324 mem- bers list themselves as “Other” firms. The remaining members listed themselves among nearly 40 smaller categories. For the survey, not all members were solicited. The intent was to get the opinions of private-sector logistics prac- titioners as to which performance measures would be of greatest import to them. Nonpractitioners, such as academics, other trade associations and consultants, were deleted from the survey list. The remaining 4,000 included groups such as retailers, manufacturers, third-party logistics firms, ware- house operators, and other groups who are involved in day- to-day movement of freight. The response rate was not high. Out of 4,000 firms e-mailed, only 73 responses were received. Clearly, such a low rate does not provide a statistically valid number of responses, but it does provide a useful convenience sample. The comment from two-thirds of the respondents that they had never sought publicly provided measures perhaps helps to explain the low response rate. The responses, however, did provide consistency in several informative areas. Primarily, the results appeared to indi- cate that, although the majority of respondents had never expressed a desire for government-produced freight system performance measures, the private sector would—if such measures were produced—clearly prefer measures related to timeliness, reliability, and costs of shipping freight. This apparent trend will be further explained. Responses to Individual Measures Two-thirds of the respondents rated as “very” or “moder- ately” high their interest in the CSCMP’s measure of the cost of logistics as a percentage of gross national product (GNP), as seen in Figure 5.1. This report tracks a variety of logistics cost indicators and compiles them into an annual report that uses GDP as a denominator. Twenty-seven percent rated it as “somewhat” useful and only 5 percent said it was not useful at all. The relatively high interest in the cost metric by the private sector was not shared by the public-sector respondents, who rated it among the least important measures. Another dif- ference noted was that the private-sector respondents’ role in national and international supply chains caused them to be more consistently interested in national and international measures, as opposed to local or regional ones, which were preferred by the state agency respondents. As seen in Figure 5.2, a significant majority of respondents listed as “very” important potential measures of changes in logistics costs. The CSCMP survey breaks down logistics costs into labor, inventory, overhead, fuel, and other major catego- ries. When asked if such categories were important, the clear majority answered in the affirmative. They also rated highly 3 respondents, who rated it amo g the least important measures. Another difference noted was that the private-sector respondents’ role in national and international supply chains caused the to be more consistently interested in national and international measures, as opposed to local or regional ones, which were preferred by the state agency respondents. As seen in Figure 5-2, a significant majority of respondents lis ed as “ y” important potential measures of changes in logistics costs. The CSCMP survey breaks down logistics osts into labor, invent y, overhead, fuel, and other major cat gories. When asked if such categori s we e important, the clear majority answered in the affirmative. They also rated highly the usefulness of the cost-related performance measures at national, local, and regional levels. Figure 5.1. Respondents’ rating of measurement of cost of logistics. Figure 5.2. Respondents’ rating of measurement of changes in logistics costs. Figure 5.1. Respondents’ rating of measurement of cost of logistics.

42 3 respondents, who rated it among the least important measures. Another difference noted was that the private-sector respondents’ role in national and international supply chains caused them to be more consistently interested in national and international measures, as opposed to local or regional ones, which were preferred by the state agency respondents. As seen in Figure 5-2, a significant majority of respondents listed as “very” important potential measures of changes in logistics costs. The CSCMP survey breaks down logistics costs into labor, inventory, overhead, fuel, and other major categories. When asked if such categories were important, the clear majority answered in the affirmative. They also rated highly the usefulness of the cost-related performance measures at national, local, and regional levels. Figure 5.1. Respondents’ rating of measurement of cost of logistics. Figure 5.2. Respondents’ rating of measurement of changes in logistics costs. 4 In regard to truck travel speeds on major corridors, Figure 5.3, a plurality of respondents rated the potential of such a measure as “very” important to them and gave near equal weight to such measures at the local, regional, and national levels. Fewer than 14 percent indicated the measure would be of no value to them. Open-ended comments also revealed considerable interest in operating-speed data to be available daily, as opposed to monthly or annually. Travel-time reliability was another highly rated measure. When responding to performance measures regarding congestion, slightly higher preference was shown for state and local measures. Local granularity was desired. One trade association reported that 20 percent of its members reported that they had lost or risked losing a customer during the past five years because of a freight bottleneck. Figure 5.3. Respondents’ rating of measurement of travel time. Slightly less interest was stated for measures that reported upon environmental issues, such as air pollution, energy use or GHE related to freight, as shown in Figure 5.4. There was a slightly smaller majority who rated such measures “very” or “moderately” important to them. As will be seen later, these measures appeared to be of more interest to the public-sector respondents than to those from the private sector. The public-sector respondents face many environmental compliance requirements that create a strong interest in such data. the usefulness of the cost-related performa ce measures at national, local, and regional levels. In regard to truck travel speeds on major corridors, Fig- ure 5.3, a plurality of respondents rated the potential of such a measure as “very” important to them and gave near equal weight to such measures at the local, regional, and national levels. Fewer than 14 percent indicated the measure would be of no value to them. Open-ended comments also revealed considerable interest in operating-speed data to be available daily, as opposed to monthly or annually. Travel-time reliability was another highly rated measure. When responding to performance measures regarding con- gestion, slightly higher preference was shown for state and local measures. Local granularity was desired. One trade asso- ciation reported that 20 percent of its members reported that they had lost or risked losing a customer during the past five years because of a freight bottleneck. Slightly less interest was stated for measures that reported upon environmental issues, such as air pollution, energy use, or greenhouse gas emssions (GHE) related to freight, as shown in Figure 5.4. There was a slightly smaller majority who rated such measures “very” or “moderately” important to them. As will be seen later, these measures appeared to be of more interest to the public-sector respondents than to those from the private sector. The public-sector respondents face many environmental compliance requirements that cre- ate a strong interest in such data. By a fairly wide margin, the respondents reported that they had never desired freight performance measures that would be produced by the public sector. Sixty-three percent of respon- dents (Figure 5.5) said they had never desired such measures, and approximately 36 percent indicated that they had. Also, the respondents reported little certainty as to how they would use such measures if provided. As can be seen in Figure 5.6, the Figure 5.2. Respondents’ rating of measurem nt of changes in logistics costs. Figure 5.3. Respondents’ rating of measurement of travel time.

43 5 Figure 5.4. Rating of environmental measures. By a fairly wide margin, the respondents reported that they had never desired freight performance measures that would be produced by the public sector. Sixty-three percent of respondents (Figure 5.5) said they had never desired such measures, and approximately 36 percent indicated that they had. Also, the respondents reported little certainty as to how they would use such measures if provided. As can be seen in Figure 5.6, the majority of respondents did not report a specific use for such measures, beyond approximately 30 respondents who said they would use such data for budgeting and planning purposes. Figure 1.5. Respondents seeking measures. 5 Figure 5.4. Rating of environmental measures. By a fairly wide margin, the respondents reported that they had never desired freight performance measures that would be produced by the public sector. Sixty-three percent of respondents (Figure 5.5) said they had never desired such measures, and approximately 36 percent indicated that they had. Also, the respondents rep rted little certainty as to how they would use such measures if provided. As can be seen in Figure 5.6, the majority of respondents did not report a specific use for such measures, beyond approximately 30 respondents who said they would use such data for budgeting and planning purposes. Figure 1.5. Respondents seeking measures. Figure 5.4. Rating of environmental measures. Figure 5.5. Respondents seeking measures. Figure 5.6. Uses for measures.

44 majority of respondents did not report a specific use for such measures, beyond approximately 30 respondents who said they would use such data for budgeting and planning purposes. In an open-ended comment section related to the uses of freight performance measures, no dominant consensus of opinion was evident, either. No two comments were the same, although it was clear that issues of on-time delivery and transport costs were of overall importance, as would be pre- dictable in the highly competitive logistics industry. “We pass many of these requirements off to our freight carriers but it’s very important for us to be knowledgeable about these issues when we’re negotiating our annual contracts and fees. These issues are critical for us to be able to leverage our shipments,” said one respondent. Public-Sector Perspectives Public-sector perspectives tend to fall into three categories: Network condition, network performance, and transporta- tion impacts. As will be shown later, public-sector transpor- tation respondents generally rated as most important those measures that capture performance on the network for which they are responsible. Public-sector policy groups were most interested in measures related to their policy purviews, be they environmental, safety, military, regulatory, or trans- portation related. State Perspectives Surveys were distributed to all 50 state DOTs. Targeted were officials within the state freight offices, of which approximately 22 exist. In state transportation agencies that do not have freight offices, the surveys were sent to the DOT’s planning officials. The state DOTs generally expressed a keen desire for freight performance measures, with some strong exceptions. State officials overall expressed greatest interest in measures that captured information regarding the performance of local and regional freight networks, such as highway, railway, and port systems, with lesser interest expressed in aviation and inland waterway systems (Figure 5.7). This probably is attributable to their lack of responsibility for those systems, and their lack of eligible funds to invest in them. The states generally indicated that they would use the performance measures as one input for a wide array of pur- poses, including project selection, funds allocation, legis- lative communication, system monitoring, and long-range planning. For the most part, the states indicated a higher interest in performance measures at the regional and local levels, and on an annual or quarterly basis. Performance measures regarding the national freight network and daily freight system performance generally were not ranked as highly by the states. The exception was for travel-time Figure 5.7. Public-sector ranking of measures.

45 data, which some indicated they would like on a daily basis. Because the states indicated they would use the performance measures for planning and project-selection purposes, the need for daily operational measures probably is less acute for them than it would be for logistics providers, who are concerned about daily freight routing decisions. The states were asked to rate potential measures on a sim- ple scale of 0–3, with 3 indicating they would find a poten- tial measure to be “very” important to them. They also were asked to indicate any difference in preference if the measure were available at a local, regional, or national level. The highest overall scores were for measures addressing conges- tion and reliability at the local and regional level. Both were scored at a value of 2.5 or higher out of a possible highest score of three. As can be seen in the chart, the lowest overall scores were for the Costs of Logistics as a Percent of Gross Domestic Product, train speeds nationally, and performance regarding the emissions, pollution, and energy impacts of freight. The Costs of Logistics as a Percent of Gross Domestic Product had an overall value of only 1.2 from the state respondents, while the environmental and energy measures scored 1.8. However, the states indicated a higher interest in the energy and environmental measures if they were avail- able at the local level. The Costs of Logistics Measure may also have been affected by its availability only at a national level. The score for that measure was notable because that category was among the highest rated by the private-sector respondents. It should be noted that respondents were com- menting upon their need for and use of specific freight per- formance measures. They were not asked to comment upon the importance of national freight data sets, from which they could pull local freight data. The difference in the importance of local versus national measures was clear-cut between the state respondents and the later private-sector respondents. The state respondents highly ranked all measures if the measures were local or regional. The private sector highly ranked most measures as long as they were national. The private sector appeared to be influenced by its involvement with long international and intercontinental supply chains. The state officials were influ- enced by their local and state responsibilities. One strong sentiment expressed by at least two states was opposition to any national set of performance measures. Some state respondents expressed strong concern lest any set of measures be used to inaccurately measure states and to make arbitrary national fund allocation decisions. This concern has been strongest among officials of some of the Great Plains states, who stated that their low populations and large distances create unique transportation conditions. When national statistics for congestion, crashes, and other traditional indicators of “need” are examined, they said, the Great Plains states can appear to have little need and may therefore not receive adequate federal investment. These states have strongly urged that any performance measures be state specific and developed by the states in a fashion that best meets their individual needs. Their concerns have been incorporated by AASHTO in its official positions regarding performance measures. AASHTO advocates that no national targets be set, instead allowing states to set targets that meet their needs. Federal Agency Perspectives Interviews were conducted with six federal agencies to assess the agencies’ use and need for freight performance measures. The interviews sought to obtain perspectives upon the agencies’ need for performance indicators beyond the indicators that the agencies already compile to satisfy federal statutes. The five interviewees were either current or former employees of one of the following entities: • U.S. Department of Transportation, Federal Highway Admin istration (FHWA) • U.S. Department of Transportation, Federal Motor Carrier Safety Administration (FMCSA) • U.S. Department of Commerce (DOC), International Trade Administration • U.S. Army Corps of Engineers (USACE) • U.S. Environmental Protection Agency (EPA), Office of Transportation and Air Quality • The U.S. Army All the officials interviewed indicated that their federal agencies had sought freight performance measures. However, each agency sought different measures, and ones unique to its responsibilities. The FHWA sought highway travel time and reliability data while the FMCSA sought measures related to the number and efficacy of truck safety inspection programs. The EPA was predictably interested in emissions from freight operations, whereas the USACE was interested in the condi- tion and performance of the maritime system. The U.S. Army reported that its interests could not be summarized because they vary considerably. The respondent noted that the freight needs in a battlefield environment would be much different than those for a stateside, noncombat administrative func- tion. He reported that beyond very generalized categories, it would not be realistic to select only a handful of perfor- mance measures that would provide insight for all military situations. The federal agencies were asked to rate various categories of measures. They clearly rated highly those measures that predicted future freight volumes, as seen in Figure 5.8.Figure 5.7. Public-sector ranking of measures.

46 9 very generalized categories, it would not be realistic to select only a handful of performance measures that would provide insight for all military situations. The federal agencies were asked to rate various categories of measures. They clearly rated highly those measures that predicted future freight volumes, as seen in Figure 5.8. Figure 5.2. Federal agencies’ preference. Each agency is affected by freight, and therefore future freight volume holds important implications for each agency’s programs, investments, or regulatory strategies. All the agencies rated future freight demand as very important to them. Trucking Industry Perspectives Eight interviews with trucking company managers and executives were conducted to ascertain that industry’s perspective on measures. Insights were sought on both the measures they use and their interest in potential publicly provided measures. Such a small sample size was not intended to be representative of the entire industry but rather to be illustrative of how a small cross section of the industry used performance measures. As noted by the company representatives, they rely heavily on performance measures but only on those that provide specific and highly granular insight into the operations of their company, their suppliers, their fleets, and their employees. All eight indicated that their companies rely on performance measures, with the primary use of them being, in the order of frequency: • Efficiency, Profitability and Cost Savings (13) • Customer Service (5) • Competitiveness (3) • Compliance (1) Figure 5.8. Federal agencies’ pr ference. Each agency is affected by freight, and therefore future freight volume holds important implications for each agency’s programs, investments, or regulatory strategies. All the agencies rated future freight demand as very important to them. Trucking Industry Perspectives Eight interviews with trucking company managers and executives were conducted to ascertain that industry’s per- spective on measures. Insights wer sought on both the measures they use and their interest in potential publicly pro- vided measures. Such a small sample size was not intended to be representative of the entire industry but rather to be illustrative of how a small cross section of the industry used performance measures. As noted by the company representatives, they rely heavily on performance measures but only on those that provide spe- cific and highly granular insight into the operations of their company, their suppliers, their fleets, and their employees. All eight indicated that their companies rely on perfor- mance measures, with the primary use of them being, in the order of frequency: • Efficiency, Profitability, and Cost Savings (13) • Customer Service (5) • Competitiveness (3) • Compliance (1) • Pricing (1) • Routing (1) The use of performance measures to make business prac- tices more “efficient” was by far the strongest motivator. Thirteen of the top motivators fell into the Efficiency, Prof- itability, and Cost Savings category and included rationales such as: 1. To improve efficiency and bottom-line return on re- sources; 2. To increase operational efficiency; 3. To increase productivity; 4. To control costs; 5. To increase and measure profitability; a d 6. To measur employee perf rmance. The most important measures used by the companies were: • Labor productivity; • On-time pickup and delivery; • Revenue yield by shipment or by mile; • Shipments per truck/ truck productivity; • Fuel economy; • Profit or loss per truck; • Equipment utilization; • Maintenance costs; • Out-of-route and loaded miles; • Loading and unloading times; and • Border crossing time/delays. Railroad Industry Perspectives Railroad stakeholders, their goals and objectives, and their subsequent interest in railroad freight performance measures have evolved over the more than 150 years that railroads developed, were regulated, and then were largely deregulated.

47 As a result, a rich array of railroad freight performance data is available, particularly at the national or corporate level. The basic data available that already are used for performance or statistical measurement include: • Data on overall rail volumes, both for passenger and freight, by railroad and by type of commodity on a weekly, monthly, and annual basis; • Extensive information on rail safety, including not only highway–rail crashes but also injuries and fatalities to trespassers, railroad employees, and others on railroad property; • Information on hazardous material cargoes, in terms of volumes and releases—including various categories of re- leases caused by accidental spills or crash-caused releases; • Environmental and energy data, including the volume of fuel used, which can then be extrapolated into GHE, NO x , and other air pollutants; and • Extensive financial data, including not only total revenues, profits, return on income, and return on equity but also whether railroads have earned their cost of capital. What is not as readily available is information at a local level or at an individual producer level. For instance, Class I railroads have significantly increased their revenue and prof- itability by hauling larger volumes over longer distances to improve their efficiencies and economies of scale. Just between 2006 and 2007, average length of haul rose from 905.6 miles per train to 912.8 miles,1 a trend that has been evident for sev- eral decades. This reflects their increased hauling of massive volumes of coal from Wyoming and their increased move- ment of high-valued intermodal containers containing Asian imports. These relatively long-haul movements may have reduced the volume of long-haul truck moves on highways, with commensurate savings in fuel, emissions, infrastructure deterioration, and crashes. However, the increased model of “hook and haul” of large-unit trains has resulted in some loss of service to local shippers. This has become a significant issue in some markets, such as among grain producers who are captive to one railroad. Local producers of commodi- ties such as grain, timber, ethanol, chemicals, and minerals often desire rail service as an alternative to truck or to water. While extensive data exist regarding what railroads haul, less information is available about what service they have dis- continued, particularly at the local, regional, or individual producer level. This type of local service information is of acute interest to many public officials, as well as to the private producers who desire rail service. Likewise, local transportation planners have complained about a lack of information regarding very localized rail operations that may affect plans for passenger rail service, commuter rail service, highway–railroad crossings, and other local transportation projects. Highway designers have voiced repeatedly the need for information regarding the rail- road’s long-term track-expansion plans and how those plans may affect the repair or construction of highway–railroad overpasses.2 Thus, although extensive performance and statistical data exist regarding national and regional railroad performance, the information needs of individual shippers and local stake- holders are not so well met. It should be noted, however, that the same is true regarding the other modes of travel. The ser- vice patterns, prices, and frequencies of inland barge compa- nies, air freight carriers, and truckers likewise constitute pro- prietary information that is seldom shared with the public and local policy makers. Maritime Industry Perspectives The U.S. Marine Transportation System (MTS) is a vast, diverse system of waterways and ports stretching along all U.S. coasts, Hawaii, and Puerto Rico and deep into the con- tinental interior along the Mississippi, Missouri, and Ohio river systems. The physical network consists of more than 1,000 harbor channels; 25,000 miles of inland, intercoastal, and coastal waterways; 300 ports; and 3,700 terminals.3 This system is responsible for approximately $673 billions’ worth of goods movement or 5.2 percent of the nation’s total value of freight and 8.6 percent of all tons shipped.4 In addition to its physical diversity, the MTS involves multiple stakeholders—private ship owners, public and pri- vate terminal operators, labor unions, the owners of modal connections into port facilities, and local, state, and federal government agencies that regulate and promote waterborne traffic. In recent years, this government network has been substantially augmented by security forces concerned about drugs, terrorism, and immigration. These governmental functions are in addition to the historic national regulatory function of capturing import duties and tariffs. It is also important to recognize that there are many dif- ferent types of ports, further complicating measurement and comparison efforts. The equipment of ports that primarily handle containers is different from that of ports or terminals that handle bulk commodities such as petroleum, chemicals, grain, aggregates, minerals, or coal. Inland waterway ports tend to be commodity specific to serve local industries such as steel production, mining, grain production, or mineral extraction. The size and scale of ports differ considerably, as do the ports’ connections to local highways, railroads, and pipelines. The geographic location of ports varies consider- ably, with some of them on the coasts but others miles inland on river channels. These variations compound the differences Figure 5.8. Federal agencies’ preference.

48 in issues such as port throughput, port connectivity, port effi- ciency, and port costs per unit shipped. While many individual stakeholders regularly apply per- formance metrics to their particular function within the MTS, to date there has been no successful effort to charac- terize or measure the performance of the system as a whole. For example, a report by MARAD concluded that the federal agency could not apprise Congress of the nation’s ports’ abil- ity to handle a large military deployment because of a lack of common measures.5 It noted that the significant diversity in ports, the types of cargo they handle, their inland connec- tions, and the geographic configuration of their harbors and channels all created great diversity. The ports as an industry have a few common denominators but none that are uni- formly monitored or reported, MARAD stated. MARAD concluded in its congressional report: In preparing this report, MARAD reviewed articles and studies from the academic and scientific communities that set forth methodologies for measuring port efficiency. The litera- ture reviewed supported MARAD’s finding that there is no wide- spread agreement on an approach to measuring the efficiency of a port as a link in the logistics chain. A 2004 article in Mari- time Policy & Management states: “Measures of port efficiency or performance indicators use a diverse range of techniques for assessment and analysis, but although many analytical tools and instruments exist, a problem arises when one tries to apply them to a range of ports and terminals. Ports are very dissimilar and even within a single port the current or potential activities can be broad in scope and nature, so that the choice of an appropriate tool of analysis is difficult. Organizational dissimilarity consti- tutes a serious limitation to enquiry, not only concerning what to measure but also how to measure. Furthermore, the concept of effi ciency is vague and proves difficult to apply in a typical port organization extending across production, trading and service industries.” MARAD was unable to provide the requested comparison [to Congress] of the most congested ports in terms of operational efficiency due to a lack of consistent national port efficiency data. Given the diverse characteristics of U.S. ports, comparing port efficiency would require the creation of new methodolo- gies and the collection of data that were not available for this report. Internally, port operations have generated some standards measures, but these are mainly of interest to the internal, business operations of the port. They tend to regard how efficiently port crews operate, whether labor rules restrict effi- ciency in loading and unloading, and whether internal con- figuration of ports, parking lots, cranes, and storage areas are efficient.6 These measures are unlikely to be appropriate for a national set of performance measures because they tend to be proprietary, would be difficult to collect, and may not influ- ence public policy but rather internal port and terminal oper- ations. Each port is a unique business, operating over unique infrastructure, and a measure appropriate for one may not be relevant to another. Ultimately, ports are pro viders of trans- portation services, and the fundamental common metric is “customer satisfaction.” The American Association of Port Authorities addresses this issue on its website: AAPA continuously receives requests on how ports rank nationally and internationally. The question is ambiguous, how- ever, since ports can be compared in many different ways—by volume or value of trade, number of cruise passengers, revenues, and storage capacity, as examples. Moreover, sheer size of a port, in terms of traffic flow, says nothing about productivity, efficiency, or responsiveness to customers. These are just some of the criteria that a shipper might consider in evaluating port performance. Additional Practitioners In an effort to solicit additional responses from the pri- vate sector and from researchers who have worked with the private sector, approximately 10 additional practitioners who have been active in NCFRP programs were contacted. Seven of them responded to the survey and provided addi- tional insight into the freight performance–measure issue. They were a mix of private-sector logistics professionals, researchers, and government officials. As can be seen in Figure 5.9, this group gave consistently higher scores to all of the proposed performance measures than did the state officials. This may reflect a self-selection influence in that these individuals were specifically selected because of their interest in freight research. This group ranked all measures with an average score of 3.05, while the state offi- cials’ average score was 2.14 for the value of all the measures, out of a scale of 0–4. Also perhaps reflecting the national perspective of this group, the national measures were consistently ranked higher than they were by the state officials. In fact, national versus local measures switched rankings between the two popula- tions. For this group, national measures were ranked highest in six of the top eight highest-ranked measures. For the state officials, national measures did not appear even in the top 10. All the top measures ranked for state officials consisted of local or regional measures. As can be seen, the top performance measures for this group were related to congestion, infrastructure condition, and environmental externalities of freight. However, it should be noted that eight categories were listed and three choices were available for each category—a national, regional, or local category for that measure. In nearly all cases, this group rated the national measure more valuable than the same mea- sure provided at the regional or local level. Again, this empha- sizes this population’s national perspective.

49 When asked the open-ended question of what regulatory issues were most important, no two respondents identified the same issue. The issues cited were funding for the highway trust fund; open access to rail lines; supply chain security; Figure 5.9. Stakeholders’ preferences. greenhouse gas (GHG) emissions; California Air Board leg- islation; truck size and weight; hours of service; and wetland regulations. Endnotes 1 AAR Statistics, http://www.aar.org/~/media/AAR/Industry%20Info/ Statistics.ashx (accessed on February 27, 2009). 2 Strategic Highway Research Program 2 Project R16, Railroad–DOT Institu- tional Mitigation Strategies, unpublished study. 3 MARAD. An Assessment of the U.S. Marine Transportation System, 1999, p. 43. 4 RITA. Freight in America, 2006, p. 7. 5 MARAD. 6 Chung, Kek Choo. Port Performance Indicators. In Infrastructure Notes, pre- pared for the Transportation, Water and Urban Development Department of the World Bank, December 1993, http://siteresources.worldbank.org/ INTTRANSPORT/Resources/336291-1119275973157/td-ps6.pdf (accessed May 24, 2010).

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TRB’s National Cooperative Freight Research Program (NCFRP) Report 10: Performance Measures for Freight Transportation explores a set of measures to gauge the performance of the freight transportation system.

The measures are presented in the form of a freight system report card, which reports information in three formats, each increasingly detailed, to serve the needs of a wide variety of users from decision makers at all levels to anyone interested in assessing the performance of the nation’s freight transportation system.

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