Guidebook for Understanding Urban Goods Movement (2012)

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In the span of 50 years (1870 to 1920), the number of Americans in cities grew from 10 million to 54 million. By 1920, more Americans lived in cities than in rural areas. 6 The relationship between urban development and freight transportation is a chicken-and-egg question. Do commerce and transportation lead to urban development or do concentrated pop- ulations beget commerce and transportation? In fact, the answer to these questions has changed over the history of America’s urban evolution. A Brief History of Urban Development and Freight in America The first American urban settlements were based on the available means to transport mer- chandise and foster trade (i.e., coastal ports and river towns). Early settlements (and later the first true U.S. cities) followed the trade routes enabled by water transport gateways and later by railroad expansion. In early America, city centers were the fashionable location to live, offering easy access to tradesmen, shops, warehouses, and ship docks. In colonial America’s large cities (e.g., Boston, Philadelphia, and New York), the urban core also offered amenities such as enter- tainment, water pumps, refuse collection, and postal services. Because early freight and service delivery modes were pedestrian or horse-powered, prominent citizens tended to live near ser- vices in the city center. In the late 1800s, the Industrial Revolution changed the face of American cities. Industry developed alongside transportation gateways, fostering trade routes for agriculture and natural resources. New industries lured people to cities with the promise of jobs. As the industry of city centers became noisier and more polluted, technology advancements in passenger travel allowed citizens to move out of the urban core and still access jobs. Trains, trolleys, street cars, and later cars, allowed urban areas to expand beyond walking distance to employment centers—resulting in the rise of suburbs. Following World War II (WWII), the GI bill made suburban housing affordable, allowing suburban populations to explode. The Interstate Highway System (IHS) gave workers an easy commute between downtown and the burgeoning suburbs. Employers now followed their employees, because the suburbs offered cheap land, lower taxes, and less crime. Suburban truck trips also grew as factory supplies from distant suppliers flowed through traditional urban gate- ways via rail hubs or ports then traveled the “last mile” to factories by truck. As a result, urban traffic and traffic congestion exploded as well, signaling the beginning of a growing problem that continues to plague many American cities today—congestion. In WWII, logistics (having the right materials in the right place at the right time) played a key role in the Allied victory. After the war, logistics management entered the mainstream of Amer- ican business practice. Early logistics management focused on delivering finished products to C H A P T E R 2 Background: The Importance of Goods Movement in the Urban Environment

Background: The Importance of Goods Movement in the Urban Environment 7 consumers, most now living in cities. By 1990, three-quarters of Americans lived in an urban location. Today, in the 20 largest U.S. metropolitan areas, on average, 41 percent of the popula- tion live in the city and 59 percent live in the surrounding suburbs. Urban Goods Movement in the Twenty-First Century The world has becoming highly urbanized. Humanity is in the midst of a long-term migra- tion leading to greater concentrations of people in compact, densely populated urban areas. In the United States, the Census Bureau defines an urbanized area as An area consisting of a central place(s) and adjacent territory with a general population density of at least 1,000 people per square mile of land area that together have a minimum residential population of at least 50,000 people. The U.S. Census Bureau uses published criteria to determine the qualification and bound- aries of urban areas. In the rest of the world, the definition of urban varies, but regardless of how urban is defined, the migration to more concentrated areas is a significant trend that poses huge societal chal- lenges, not the least of these being how to efficiently accommodate the need to move both peo- ple and goods in densely populated, compact environments. It is worth noting that the United States, while far from the most urbanized country in the world, is well ahead of the world aver- age, see Exhibit 2-1. Today over 83 percent of the U.S. population live and work in urbanized areas. In the next 40 years, U.S. urban areas are expected to grow by 80 to 100 million people. Cities are quickly becoming the most concentrated, dense consumer markets in history (Laeser, Kolko, and Saiz 2000). Meanwhile, the capacity of urban transportation infrastructure has increased only modestly. Urban design and regulations affecting how freight moves in mod- ern cities have failed to keep pace with the growing demand for goods and services, and the trans- portation systems that support modern logistics and supply chain management. Source: Data from United Nations World Population Prospects, 2009 Revision. Data online at http.//www.un.org/esa/population/unpop.htm. Graphics by Wilbur Smith Associates. Exhibit 2-1. World and U.S. population—percent urban.

8 Guidebook for Understanding Urban Goods Movement How Goods Move In the latter half of the twentieth century, logistics management became a legitimate business function that continued to evolve toward a more integrated chain linking previously separate functions: material sourcing and procurement, manufacturing, inventory management, distri- bution, and transportation. As the science of logistics evolved into what is today supply chain management, businesses refocused from just delivering products to reducing inventory and con- tributing to a company’s bottom line. With the emergence of worldwide production markets for consumer products, supply chains have taken on more prominence in business strategy. Today, businesses define how goods move by the nature of their supply chains: people, processes, and physical entities linked together by information and transportation. This “logistics revolution” over the past three decades has rede- fined many business sectors. Wal-Mart is an often noted example of a business that redefined the retail industry primarily because of its superior supply chain management practices. Supply-chaining is a method of collaborating horizontally—among suppliers, retailers, and customers— to create value. Supply-chaining is both enabled by the flattening of the world and a hugely important flat- tener itself, because the more they grow and proliferate, the more they force the adoption of common standards between companies (so that every link of every supply chain can interface with the next), the more they eliminate friction at borders, the more they encourage global collaboration. —Thomas Freidman, The World Is Flat: A Brief History of the 21st Century One step undertaken for this project involved research about urban supply chains. Additional information about urban supply chains, including product supply chain illustrations, is provided at the end of this chapter. (See Exhibit 2-2.) Who Is Moving Your Goods? Most goods and services are moved by private-sector companies; however, some government- supplied services include the transport of goods such as waste removal and military operations. The first distinction for private-sector freight services is private and for hire. Businesses that operate their own transportation fleets to carry their own products or services are classified as private carriers. Most private carriers operate truck fleets; however, some industries (such as mining companies, agricultural businesses, or producers of time-sensitive products) may also operate their own railroad assets, barges, or aircraft. Some of the largest private truck fleets are operated by utilities, food services, business or home services (e.g., cable providers), and con- struction and sanitation businesses. Many of these large private carriers also operate primarily in urban environments. Businesses that exist for the sole purpose of providing transportation services are classified as for-hire carriers. For-hire carriers include trucking companies, railroads, ship or barge opera- tors, and air cargo providers that move freight for various businesses and industries. The trend in the United States of moving toward a trade-based economy also shaped public policy toward freight transportation. Intermodalism—the ability to smoothly transition freight shipments from one mode to another—became a centerpiece of U.S. transport policy when Con- gress passed the Intermodal Surface Transportation Efficiency Act (ISTEA) in 1991. The success of intermodal freight transportation results from economic synergies gained by integrating the best attributes of each individual mode. Working together, each mode per- forms most efficiently the task it does best. Typically, railroad or barge transportation costs less and is more fuel-efficient than trucking over long distances (e.g., the movements between

seaports and the urban area). Railroads frequently move shipments between urban centers, or between an international gateway and an urban center. Trucks then deliver the shipment directly to the receiver’s facility. Motor carriers, with their greater flexibility and universal access to industrial and commercial locations, are used for the last mile of the journey. Joint services offered by more than one mode take advantage of each mode’s inherent economy but are much more complicated than single-mode movements because of the specialized equipment, terminals, and coordination among multiple parties. Exhibit 2-3 illustrates the relationship between costs and service levels associated with a spectrum of common freight transport modes. Speed to market is one of the most important factors in supply chain design and execution, as it influences mode selection by commodity type. Every supply chain differs in its need to economize on cost while at the same time arranging to consistently deliver the freight at the right time to the right destination in good condition. Some commodities must get to the mar- ket very fast before the product’s perishable lifespan expires. Usually, the higher the price and the fresher the product, the faster it must get to market. Fresh food must get to market while it is fresh and safe for consumption, usually just a few days. A pharmaceutical must arrive in days before its potency date expires. Furthermore, sometimes seemingly plain commodities have high speed to market goals; for example ready-mix concrete must be poured within hours of being mixed at the plant. Background: The Importance of Goods Movement in the Urban Environment 9 Source: Wilbur Smith Associates. Exhibit 2-2. Supply chain process.

10 Guidebook for Understanding Urban Goods Movement Exhibit 2-3. Modal services versus cost continuum. Cost Source: Adapted from Lanigan, Zumerchik, and Rodrigue, “Automated Transfer Management Systems to Improve Intermodal Efficiency of Rail Freight Distribution.” The changes at work in the Ameri- can economy are profound. The agri- cultural and manu- facturing economy of the twentieth century has evolved. Services are now the fastest growing sector of the economy. Logis- tics and transporta- tion sectors are sec- ond. The American economy demands increasing volumes of trade if it is to continue to grow. The economic sec- tors that remain robust will require far more trade and travel per unit of output than was required 30 years ago. —Transportation Invest- ment in Our Future: America’s Freight Challenge, AASHTO, May 2007. What Moves: Supplying Urban Populations The 2007 Commodity Flow Survey (CFS) was summarized to examine information on goods moving to and from major urban areas across the U.S. CFS isolation of commodity types for urban areas is limited to outbound (originated) traffic, whereas much of the complexity in urban activity is in the more fragmented inbound deliveries, which are heavily oriented to trucks. How- ever, understanding this limitation, outbound commodities carried by truck were ranked by weight and value and are presented in Exhibit 2-4. The data from the CFS is presented for com- modities grouped by Standard Classification of Transported Goods (SCTG) groupings. At the 2-digit level, there are 42 SCTG categories. Exhibit 2-4 shows that, by weight, the top 10 SCTG categories account for 75 percent of all urban outbound truck volume. By value, a largely different top 10 account for 62 percent of all outbound truck volume. Gasoline, prepared foods, mixed goods, and semi-finished metals are commodity groups included in the top ten by both weight and value. Other important commod- ity groups include construction materials, electronics, vehicles, and pharmaceuticals. Mixed freight includes shipments for grocery and convenience stores and supplies for restau- rants and other retail establishments that receive trucks containing a mix of goods from vari- ous suppliers. Often, full lots of a particular good are delivered to a distribution center by train or truck, then broken and mixed with other goods to be delivered by truck to a specific retail destination. Why Freight Moves: Supporting the New Economy In recent decades, the make-up of the U.S. economy has undergone a significant structural shift: In the early 1980s, manufacturing was the leading sector of the U.S. economy. By 2007, manufacturing accounted for less than 20 percent of the economy, while the services sector accounted for 79 percent. The ability to efficiently transport goods and services has played a sig- nificant role in this transformation. The logistics revolution described earlier, combined with public and private transportation investment, has allowed American business to reduce inven-

tories, while simultaneously achieving greater economies of scale in a global trade environment. These dual efficiency gains for American business have relied on efficient transportation ser- vices: Inventory reduction typically requires more frequent shipments to reduce the possibility of stock shortfalls, leading to more transportation services. Lower transportation costs also allow firms to consolidate production and distribution facilities from many to fewer, but consolida- tion implies a longer average length of shipment haul and the economies of scale are achieved only at the cost of more transportation services (Lakshmanan and Anderson 2002). Exhibit 2-5 displays the trend in average length of haul by mode from the past three Commod- ity Flow Surveys (CFS). Overall, more goods are traveling longer distances. According to the 2007 Background: The Importance of Goods Movement in the Urban Environment 11 SCTG Code Commodity Description Tons (000) Cumulative % of Total Rank by Tons Value ($ Mil) Rank by Value 12 Gravel and crushed stone 779,127 20% 1 $8,730 32 31 Nonmetallic mineral products 646,897 37% 2 $108,723 15 17 Gasoline and aviation turbine fuel 294,769 45% 3 $225,504 9 7 Other prepared foodstuffs and fats and oils 227,273 51% 4 $249,878 7 43 Mixed freight 196,949 56% 5 $529,597 1 19 Coal and petroleum products 179,002 60% 6 $81,138 21 32 Base metal in primary or semi- finished forms/shapes 175,495 65% 7 $263,623 6 18 Fuel oils 139,133 69% 8 $86,340 18 11 Natural sands 131,760 72% 9 $1,912 36 26 Wood products 104,701 75% 10 $82,378 20 SCTG Code Commodity Description Value ($ Mil) Cumulative % of Total Rank by Value Tons (000) Rank by Tons 43 Mixed freight $529,597 11% 1 196,949 5 35 Electronic & other electrical equip & components & office equip $384,523 19% 2 23,358 27 36 Motorized and other vehicles (including parts) $365,873 26% 3 61,193 17 21 Pharmaceutical products $316,624 33% 4 6,790 34 34 Machinery $274,449 38% 5 26,188 25 32 Base metal in primary or semi- finished forms/shapes $263,623 43% 6 175,495 7 7 Other prepared foodstuffs and fats and oils $249,878 49% 7 227,273 4 24 Plastics and rubber $235,417 53% 8 80,394 11 17 Gasoline and aviation turbine fuel Source: 2007 Commodity Flow Survey. $225,504 58% 9 294,769 3 33 Articles of base metal $196,247 62% 10 60,399 18 Exhibit 2-4. Top urban truck commodities—outbound by tonnage and value.

CFS, the average length of haul in trucking has increased nearly 24 percent over 2002. Currently, the average truck shipment moves 206 miles. While long-haul trucking services skew this statis- tic, in many cases urban land-use decisions also have pushed motor carrier terminals and deliv- ery hubs further out on the urban fringe, increasing the distance required to supply businesses in the urban core. Transportation planners typically characterize how freight moves by the mode or modes used to get goods from a gateway or point of production to the point of consumption. Urban goods travel by air, water, pipeline, and rail, but most often by truck. Selecting the mode for how freight moves is a function of time requirements, network availability, and total logistics costs. To deter- mine total logistics cost, several factors come into play: length of haul, weight, packaging and product handling, number and size of shipments, customer preference, and shipment value. Much of the freight moving in urban areas is characterized by short lengths of haul. Opera- tionally, urban delivery services are challenged with making just-in-time (JIT) deliveries while navigating congested highways, parking restrictions, and route restrictions. To accommodate these operational challenges, many businesses and industries place warehouses or distribution facilities in or near urban areas in order to meet delivery schedules and employ smaller vehicles that can negotiate urban streets and docking sites. Zoning and land-use restrictions have signif- icant influence on the location of these facilities. Most freight transportation within urban areas is provided by trucks and vans, especially for the final stages of goods moving to consumption. Manufacturing plants and distribution facili- ties in metropolitan areas may receive large shipments by rail, ship, barge, jet, or pipeline, which are then delivered by truck for the so-called “last mile” of the delivery. Similarly, while down- town office buildings may be reached by package couriers using cars, bikes, or transit, these couriers are often operating from depots supplied by trucks. Urban truck traffic is composed of various movement types: 12 Guidebook for Understanding Urban Goods Movement Source: USDOT, Research and Innovative Technology Administration (RITA), Bureau of Transportation Statistics (BTS). Notes: The Commodity Flow Survey (CFS) is a partnership between BTS and the U.S. Census Bureau. (Data compiled by Wilbur Smith Associates.) Exhibit 2-5. Average length of haul of selected modes.

• Long-haul trucks with both origins and destinations outside the urban area, that are simply passing through the urban highway network; • Long-haul trucks with a pick-up or delivery in the region, to the opposing delivery or pick-up point outside the region; • Truck drayage—the short-haul truck port of intermodal container movements to and from railroad intermodal yards and marine container ports; • Local trucks moving goods among facilities on pick-up and delivery (P&D) runs within the region; • Construction vehicles (e.g., cement mixers, dump trucks, construction cranes); • Utility and other residential service vehicles (e.g., refuse trucks); • Van lines delivering freight and goods with special requirements; and • Package services. Generally, many of these movements are business-to-business activities involving the arterial route networks in the urban environment. However, there is an increasing trend toward home deliveries brought about by the rise in e-commerce. Home deliveries require trucks to access the smaller thoroughfares and neighborhood streets. Freight movements in urban areas also correlate directly to the type and level of economic activity in a region. Population density is one of the primary drivers of freight density and geog- raphy, plus connectivity drives many of the modal service options available to a community. Urban areas are characterized by high densities of residents and employment centers for service industries, warehouses, distribution centers, retail establishments, hospitals, and institutions. As urban areas grow, they tend to evolve from being producers of goods to being consumers of goods. Goods intended for personal consumption account for a large number of urban freight movements. Internal urban trade between warehouses, distribution centers, retail stores, and, ultimately, to residents who consume the goods also contributes heavily to traffic. Urban busi- nesses require office products and supplies, and they in turn send materials and products to local, domestic, and—sometimes—international markets. Originally, the primary east-west orientation of both the Interstate Highway System and Class I railroad network followed the pattern established by Manifest Destiny and the westward expansion of the U.S. population. In 1959, the first containerized cargo called on the Port of Los Angeles, marking the start of the containerized cargo revolution. During the 1960s, as con- tainerization grew and large ships were unable to pass through the Panama Canal, the San Pedro Ports of Los Angeles and Long Beach became the primary gateway for consumer goods being delivered to cities across America by train and truck. The highway and railroad “landbridge” from West Coast ports to the rest of the country further opened Asian economies to U.S. con- sumer markets. In 2001, the Panamanian government embarked on an expansion of the Panama Canal to remain competitively positioned to capture increased international trade between Asia and U.S. East Coast ports. Currently, container ships passing through the canal are classified as “Pana- max” and are limited to 965 feet in length, 106 feet in width, with a 40-foot draft. Panamax con- tainer ships carry approximately 4,500 to 5,000 twenty-foot equivalent unit (TEU) containers. The Panama Canal Expansion Project is estimated to cost $5.2 billion and is expected to be completed in 2014. Once finished, the new locks will accommodate ships up to 1,200 feet long, 160 feet wide, with a draft of 50 feet. Super post-Panamax container ships will be able to carry 13,000 TEUs. It is anticipated that the Panama Canal Expansion Project will be a game changer that will re-route significant volumes of container traffic from West Coast gateways to East Coast gateways. Background: The Importance of Goods Movement in the Urban Environment 13

Congestion and Cost The ability to transport various consumer goods in huge quantities, in a timely fashion, con- veniently positioned near urban populations is one of the exceptional quality-of-life attributes of living in a twenty-first-century urban environment. Whether in New York City, NY, or New London, WI, most urban consumers can travel just a short distance in time and space to find a vast selection of goods from around the world. However, with convenience and choice, come congestion and cost; and, typically, the higher the population density, the greater the congestion and cost. The annual Urban Mobility Report by the Texas Transportation Institute (Lomax et al. 2010) estimated that congestion in the largest urban areas of the United States during 2009 cost the trucking industry $33 billion in delay time and wasted fuel. Where Freight Moves in the City—“The Last Mile” Materials and goods move from a place of origin to a place of production, processing, ware- housing, or distribution, and then to a place of consumption. What distinguishes urban goods movement from other freight movement is the “last mile”—or more correctly the first, last, and transfer miles, all heavily concentrated in metropolitan areas. Urban freight movements are about making efficient trips with frequently smaller shipments and smaller vehicles to dense mixed-use areas. These movements include pickups and deliveries that are vertical as well as hor- izontal; goods must travel vertically to high-rise office buildings and rooftop restaurants, and they travel horizontally on cross-town trips to meet delivery and pick-up schedules through the most difficult congestion in the country. Urban freight deliveries to inner city businesses, restaurants, residences, offices, and depart- ment stores share similar patterns. Getting the goods to their final destination often means nego- tiating dated high-rise buildings with limited docking sites, delivery bays, and freight elevators, many constructed in the nineteenth century. Narrow streets, tight turning radii, and low clear- ances are common obstacles for delivery drivers. From a planning perspective, both horizontal and vertical “final mile” inefficiencies should be quantified and addressed. Common horizontal inefficiencies include the lack of curbside space that increases congestion as delivery trucks circle or block traffic while waiting for a parking space. City parking ordinances that restrict the length of time a vehicle can park at busy commercial curbsides, enforcement of commercial parking zones, and variable time of day parking fees can help address these issues. Updating design standards to match loading docks to modern truck configurations can also improve delivery vehicle access. Vertical obsta- cles (such as inadequate freight elevators) can be addressed by updating and enforcing these standards. To accommodate the often tight confines of road geometrics in dense “last mile” urban areas, trucking companies often use smaller or more agile truck configurations. Maybe the most well- known truck configuration in the United States today is a 5-axle tractor-semi-trailer (TST) com- bination vehicle, or so-called “18-wheeler.” The typical 5-axle TST has a gross vehicle weight capacity of 80,000 pounds with a 53-foot semi-trailer, and is often equipped with a sleeper cab. The 5-axle TST is commonly used in line-haul operations, where goods are moved from an ori- gin to a warehousing facility in or near the urban area. For last-mile deliveries, companies often transload goods to delivery vehicles like those shown in Exhibit 2-6, single-unit trucks of two or three axles with a relatively short wheelbase, or 4-axle TST combinations with 45- or 48-foot semi-trailers. 14 Guidebook for Understanding Urban Goods Movement

Background: The Importance of Goods Movement in the Urban Environment 15 Source: Wilbur Smith Associates Exhibit 2-6. Conventional truck configurations.