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14 Source: Christensen Associates. Figure 2-1. The role of freight transportation in efficient production and distribution. likely to be affected by diminished freight transportation Examples of the role of transportation in the supply chains reliability (U.S. General Accountability Office 2008, 21). of various commodities can be found in a series of case Figure 2-1 illustrates the vital link between freight transporta studies on the EnvisionFreight website at http://www.Envision tion in supply chains and economic performance. Improve Freight.com/value/. These include short commodity, imported ments in freight transportation efficiency, reliability, and level containerized goods, and grain. of service have numerous economic benefits for production efficiency, optimization of distribution networks, and product The U.S. Freight choice and cost to consumers. As improvements are made in Transportation System transportation infrastructure, producers are able to central ize their production operations and site their operations in In 2008, 4.5 million people were employed in trans lower-cost areas, because the uncertainties concerning the portation and warehousing industries in the United States, movement of goods to customers are reduced. Improvements a little over 3 percent of total U.S. employment. Trucking in transportation infrastructure also allow a more efficient was the largest employer within the for-hire transportation design of the distribution network. The cost of inventories section with almost 1.4 million employed. The railroad indus can be reduced as the needed hedge against transportation try employed 231,000, and water transportation employed uncertainties is reduced. This also allows firms to change their 67,000. Another key component of logistics services and sup inventories quickly in response to customers' changing needs ply chains, warehousing and storage, employed 672,000 (U.S. or desires. This ultimately leads to lower cost and greater Department of Transportation RITA/BTS 2010, Table 3-19b). product variety for customers. The latest available data (2007) show that there were almost Figures 2-2 through 2-4 provide examples of the role of 220,000 employer establishments in the transportation and transportation product supply chains. Figure 2-2 shows the warehousing sector of the U.S. economy with revenues of al various stages of automotive manufacturing. Connections most $640 billion and annual payrolls of more than $173 bil between the stages consist of some mode of transportation. In lion. In addition, there were more than 1 million non-employer the case of auto manufacturing, truck and rail are the primary establishments with revenues of almost $67 billion (U.S. Census modes of transportation between the stages of production. Bureau 2007). Figure 2-3 shows the top ports through which imported A study prepared for FHWA reports that transportation containerized goods enter the United States. These goods, costs accounted for 63 percent of 2002 logistics costs, inven which range from consumer goods to parts and unfinished tory carrying costs (including warehousing, interest costs, goods for further processing, reach inland destinations via taxes, obsolescence, depreciation, and insurance) accounted truck, rail, and/or water over the domestic transportation for 33 percent, and administration accounted for 4 percent. In infrastructure. 2002, transportation costs were composed of intercity truck Figure 2-4 illustrates the role of transportation in the (50 percent), local truck (27 percent), railroad (6 percent), export of grain from the production stage to its arrival in the logistics administration (6 percent), water (4 percent), air destination country. In this supply chain, truck, rail, barge, (4 percent), oil pipelines (1 percent), and shipper-related costs and ship are the modes of transportation that are typically (1 percent). Relative to the overall economy, total logistics involved. costs were equal to almost 9 percent of U.S. gross domestic

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15 Automotive Manufacturing Motor Vehicle Body Other Motor Vehicle Motor Vehicle Motor Vehicle Parts & Trailer Supply Chain Manufacturing Manufacturing Manufacturing Players Motor Vehicle Automobile & Light- Gasoline Engine & Plastic Parts Motor Vehicle Body Duty Motor Vehicle Engine Parts Manufacturing Seating & Interior Heavy-Duty Truck Truck Trailer Tire Manufacturing Trim Steering & Suspension Components Brake System Metal Stamping Electrical & Electronic Equipment Transmission & Power Train Parts Source: Christensen Associates. Figure 2-2. Automotive manufacturing supply chain. product (GDP) in 2002 (MarcoSys Research and Technol tracks, and 26,000 miles of navigable inland waterways (U.S. ogy 2005, 7-8). An update of these figures indicates total Department of Transportation RITA/BTS 2010, Table 2-1-1). logistics costs climbed to 10.1 percent of GDP in 2007 and Other important components of the freight transportation fell to 7.7 percent of GDP in 2009 (Material Handling & network include air freight and pipelines. Logistics 2010). An illustration of the importance of U.S. freight trans The U.S. surface freight transportation network includes portation corridors and transportation modes is found in Fig 4,016,741 miles of highways, 94,942 miles of Class I freight ure 2-5, which shows freight tonnage on U.S. highways, railroads, railroad tracks, 46,474 miles of regional and shortline railroad and inland waterways. Figure 2-5 illustrates two key features of

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16 Figure 2-3. Top 25 container ports for U.S. international maritime freight, 2008 (U.S. Department of Transportation RITA/BTS 2009a). today's transportation network. First, the figure illustrates how supply chains extend across the country and into other parts of the world via key ports such as Los Angeles/Long Beach and New York/New Jersey, which are gateways to foreign trade as well as the origins and destinations of substantial shipments throughout the United States. Second, the figure shows that a substantial amount of freight is transported along a handful of key corridors. In addition to the rail traffic coming out of the Power River Basin in Wyoming and water traffic along the Mississippi and Ohio rivers, there are dense corridors of high way traffic throughout the eastern part of the United States and along the West Coast. Figure 2-5 also illustrates the importance of the Chicago area as a key U.S. freight transportation hub. In terms of volume of freight hauled by transportation mode, Figure 2-6 illustrates the growing importance of truck and rail relative to other modes of freight transportation, Source: Christensen Associates. because their shares of domestic ton-miles of freight in Figure 2-4. Typical modal flow of grain creased significantly between 1980 and 2007. Associated with exports. the increased proportions of rail and truck ton-miles were

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17 Figure 2-5. Tonnage on U.S. highways, railroads, and inland waterways (U.S. Department of Transportation FHWA FM&O 2007). 45.0% 39.5% 40.0% 35.0% 28.6% 27.4% 30.0% 27.1% 26.9% 25.0% 18.5% 19.6% 20.0% 12.0% 15.0% 10.0% 5.0% 0.1% 0.3% 0.0% Air Truck Rail Water Pipeline 1980 2007 Figure 2-6. Shares of domestic ton-miles by mode, 1980 and 2007 (U.S. Department of Transportation RITA/BTS 2010, Table 1-46b).